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Deron Wagner is the founder and portfolio manager of Morpheus Trading Group. His daily focus is managing and trading the Morpheus Capital Hedge Fund, which he founded in April of 2004. He also teaches his swing trading strategy with The Wagner Daily newsletter, which provides exact entry, exit,... More
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Advanced Technical Analysis of ETFs
  • Trend reversal in iShares Nasdaq Biotech (IBB) - September 20, 2010 0 comments
    Sep 20, 2010 9:15 AM | about stocks: YCS, IBB
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    September 20, 2010

    Stocks gapped up sharply on options expiration day, but were met with immediate selling pressure. Overall, trading was mixed on the day. All but one of the major indices saw the intraday high within 20 minutes of the opening bell. The small-cap Russell 2000 was the sole holdout, as it briefly found a new high at the 2:30 pm reversal period. Despite the abrupt opening reversal, the markets maintained a tight trading range throughout the session and all closed up for the day. However, there was divergence among the indices. The Nasdaq and the small-cap Russell 2000 led the way with each posting a 0.5% increase. The S&P MidCap 400 realized a 0.3% advance, while both the S&P 500 and the Dow Jones Industrial Average managed meager 0.1% gains on the day. Further, the three leaders closed near their highs of the day. In contrast, the Dow closed in the middle of its range, while the S&P 500 closed below the fifty percent mark.

    As is often the case, options expiration brought a significant spike in volume on both the NYSE and Nasdaq. NYSE volume spiked 72% while the Nasdaq saw a 36% surge. On both exchanges, volume was well above 50-day average levels. Market internals were mixed, with declining volume exceeding advancing volume by 1.3 to 1 on the NYSE. Nasdaq advance/decline volume ratio was slightly positive at 1.2 to 1.

    The Ultra Short Yen Proshares (NYSEARCA:YCS) is showing distinct signs of what may be a trend reversal. YCS has been in a major downtrend since May of this year. But, last Wednesday, this ETF gapped up almost 6.0% on an explosion of volume. It is now consolidating at the breakout and just below the 50-day moving average. Further, the downtrend line drawn through the May 5th and September 3rd highs has been breached. A break above the 50-day moving average or a pullback into the 20-day exponential moving average provide potential "buy" entry signals. We are monitoring for a potential entry.


    Last Monday (September 13), we offered the following commentary on the iShares Nasdaq Biotechnology Index Fund (NASDAQ:IBB): "IBB appears to be forming a distinct inverse head and shoulders pattern . The left shoulder low was set on June 8th, the head on July 1st, and the right shoulder on August the 25th (see chart below). On Friday, it broke above the 200-period simple moving average on increasing volume. A volume-fueled move above the neckline high of $84.81 would confirm the pattern. The predicted rally, measured from the bottom of the head to the neckline, would suggest an advance to near the March 24th high of $93.53." Below is the chart that accompanied the commentary:


    IBB has been consolidating above its neckline for five consecutive days. A break above $86.00 would now trigger the entry. Regular subscribers to The Wagner Daily will see our detailed trigger, stop, and target prices on "Today's Watchlist" below:




    The commentary above is an abbreviated version of our daily ETF trading newsletter, The Wagner Daily. Subscribers to the full version receive specific ETF trade setups with detailed trigger, stop, and target prices, as well as daily updates on all open positions. Intraday Trade Alerts are also sent via e-mail and/or text message, on as-needed basis. For your free 1-month trial to the full version of The Wagner Daily, or to learn about our other services, please visit morpheustrading.com.

    Deron Wagner is the Founder and Head Portfolio Manager of Morpheus Trading Group, a capital management and trader education firm launched in 2001. Wagner is the author of the best-selling book, Trading ETFs: Gaining An Edge With Technical Analysis (Bloomberg Press, August 2008), and also appears in the popular DVD video, Sector Trading Strategies (Marketplace Books, June 2002). He is also co-author of both The Long-Term Day Trader (Career Press, April 2000) and The After-Hours Trader (McGraw Hill, August 2000). Past television appearances include CNBC, ABC, and Yahoo! FinanceVision. Wagner is a frequent guest speaker at various trading and financial conferences around the world, and can be reached by sending e-mail to: deron@morpheustrading.com.




    DISCLAIMER: There is a risk for substantial losses trading securities and commodities. This material is for information purposes only and should not be construed as an offer or solicitation of an offer to buy or sell any securities. Morpheus Trading, LLC (hereinafter "The Company") is not a licensed broker, broker-dealer, market maker, investment banker, investment advisor, analyst or underwriter. This discussion contains forward-looking statements that involve risks and uncertainties. A stock's actual results could differ materially from descriptions given. The companies discussed in this report have not approved any statements made by The Company. Please consult a broker or financial planner before purchasing or selling any securities discussed in The Wagner Daily (hereinafter "The Newsletter"). The Company has not been compensated by any of the companies listed herein, or by their affiliates, agents, officers or employees for the preparation and distribution of any materials in The Newsletter. The Company and/or its affiliates, officers, directors and employees may or may not buy, sell or have positions in the securities discussed in The Newsletter and may profit in the event the shares of the companies discussed in The Newsletter rise or fall in value. Past performance never guarantees future results.

    Charts created by TradeStation (tradestation.com).

    © 2002-2010 Morpheus Trading, LLC
    Reproduction without permission is strictly prohibited.
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