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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
My company:
Morpheus Trading Group
My blog:
Morpheus Trading Group - swing trading blog
My book:
Advanced Technical Analysis of ETFs
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  • 2 Hot Stocks To Buy While The S&P And Nasdaq Take A Rest

    Although the main stock market indexes have been in pullback mode the past few days, overall market conditions remain bullish.

    As such, the current pullback presents a lower-risk buying opportunity for top stocks and ETFs that have been showing relative strength with tight chart patterns.

    Two such swing trade buy setups we are stalking for potential buy entry in The Wagner Daily over the coming days are biotechnology firm Cytokinetics ($CYTK) and software development company Rubicon ($RUBI).

    Let's take a quick look at why these equities may be excellent stocks to buy in the coming days...

    Small-cap poised for big breakout ($CYTK)

    $CYTK is a small-cap biotech stock that is setting up for a base breakout from a first-stage base (see How to Make Money in Stocks: A Winning System in Good Times and Bad by William O Neil for a great explanation of base reading and stage counts). Take a look:

    $CYTK stock chart

    $CYTK grabbed our attention when it gapped sharply higher about three weeks ago, on volume that was more than 400% greater than the stock's average daily volume (see black rectangle on the chart).

    Since then, $CYTK has been trading in a tight, sideways range above its 50-day moving average, with both the 10 and 20-day moving averages sitting above the 50-day moving average.

    The combination of the high volume gap, price action above 50-day MA, and the 20-day MA trading above 50-day MA means the stock possesses 3 of the top 5 qualities of the best stock breakouts.

    If the price of $CYTK rallies above the March 4 high (marked by the horizontal line), the stock could attract enough buying interest to enable it to break out above its tight, three-week range.

    Regular subscribers to our nightly stock picking newsletter should note our preset buy trigger, stop, and target prices for this trade setup in the "Watchlist" section at the top of today's report.

    If $CYTK meets our exact criteria for buy entry, we will buy the stock with reduced share size because it is not an A-rated setup.

    Liquidity in this small-cap stock is also a bit on the light side, which we compensate for by lowering our share size.

    Crossing The Rubicon ($RUBI)

    To "cross the Rubicon" means to pass a point of no return.

    Given the solid, earnings-driven breakout from a first stage base two weeks ago, it indeed appears The Rubicon Project ($RUBI) has definitively passed the point of no return (to its prior trading range).

    After gently retracing from the February 25 high of its recent breakout and trading in a tight range for more than a week, the 10-day moving average has caught up to the price.

    As with the $CYTK setup, the stock also shares the key breakout attributes of a high volume gap, trading above the 50-day MA, with the 20-day MA above the 50-day MA:

    $RUBI PULLBACK ENTRY

    For this momentum trade setup, we are looking for potential buy entry on a slight pullback from the March 4 move (the price must drop to the exact buy limit order listed in today's Wagner Daily in order to trigger the trade).

    RUBI is not an A-rated stock, but does have strong revenues and two quarters in a row of improving EPS growth.

    Although we are primarily technical traders, most leading stocks in the market share these two fundamental traits.

    Key Support Levels To Watch (S&P 500)

    Our trading system forces us to focus much more on the performance of leading stocks, rather than the price action of the main stock market indexes.

    Nevertheless, because we are trend traders, it is always beneficial to make sure the broad-based indexes remain healthy as well (put the wind at your back).

    Despite the substantial pullback of the past few days, the S&P 500 technically remains healthy.

    As shown on the chart below, the benchmark index bounced off near-term support of both its 20-day MA and prior highs yesterday (March 4):

    $SPY chart - March 2015

    Given the bullish intraday price reversal that converged with two near-term support levels, the March 4 low of 2,087 now becomes a key price level to watch.

    If the 2,087 support level fails to hold, next support is near the 2,065 level, which represents convergence of the rising 50-day moving average and the 10-week moving average (similar to 50-day moving average).

    As long as the S&P 500 remains above that 2,065 level and leading stocks continue to hold up, the current pullback in the market must be viewed as a buying opportunity.

    Having an objective, rule-based market timing system (such as this one) is a great way to ensure you remain positioned to take advantage of profitable opportunities when the time is right (and on the sidelines otherwise).

    Follow Us: Follow us on Google+ Follow us on Twitter Join us on Facebook Our trading blog - RSS feed

    Original Source

    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.

    © 2002-2015 Morpheus Trading, LLC
    Reproduction without permission is strictly prohibited.

    Mar 05 7:44 AM | Link | Comment!
  • Why Ride The Roller Coaster When You Can Buy A Gold ETF?

    I grew up in York, Pennsylvania, which is only about a thirty minute drive to Hershey, home of America's favorite chocolates.

    As a teenager, I used to love visiting Hersheypark, a pretty cool amusement park on the Hershey grounds, specifically to ride the roller coasters.

    As a middle-aged adult with responsibilities, I rarely get the pleasure to visit Hersheypark these days, but lately I've been getting plenty of thrills and chills from the stock market alone.

    Lately, the S&P 500 Index has been a roller coaster with lots of hills and valleys, but ultimately looping back around to the starting point (though may soon break out above the range if current price holds).

    Although day to day volatility has been pretty substantial in the S&P 500, the benchmark index has merely been oscillating up and down in a wide, sideways range over the course of several months:

    (click to enlarge)

    When stocks are so indecisive on a day to day basis, it may be a decent market environment for daytraders who exit all their positions by every day's close.

    But it has admittedly been a challenging environment for trend traders who typically hold stocks for weeks to months.

    Gold - Low-Correlation Trading Solution

    Without even looking at a chart, I can tell you one of the best things about trading a Gold ETF or the spot gold futures is that the shiny yellow metal is typically not closely tied to the day to day movement in the stock market.

    As such, the challenge of the roller coast stock charts becomes a moot point and it only comes down to a matter of making sure gold is sitting a technically buyable level.

    Is it?

    Right now, select gold ETFs are indeed presenting low-risk buy entry points, but the patterns will soon lose their bullishness IF gold shares do not catch a bid and start rallying again within the next few days.

    The two main ETFs we trade are SPDR Gold Trust ($GLD), which tracks the price of spot gold futures, and Junior Gold Miners ($GDXJ), which is comprised of a basket of smaller gold mining stocks.

    Between the two, $GDXJ has clearly been showing relative strength to $GLD, so the Junior Gold Miners ETF has better odds of rallying to a new swing high before $GLD. Take a look:

    150209GDXJ

    In late December, $GDXJ made a sharp move off the lows that lasted three weeks.

    Since peaking in late January, the ETF has been in pullback mode, and is now holding above its 50-day moving average (teal line), but stuck just below resistance of its 20-day exponential moving average (beige line).

    After $GDXJ pops back above its 20-day EMA (above the $27.60 area), buyers should step in due to break of key moving average resistance, as well as a break of the downtrend line from the January high.

    Don't Cross That Line

    The first pullback to a rising 50-day moving average after a couple months of bottoming action is bullish, and typically presents a low-risk buy entry point.

    In this case, further support is provided by the highs of the last base (resistance always becomes support after the resistance is broken).

    However, all bets for another rally are off if $GDXJ fails to hold above its 50-day MA, which is definitely the "line in the sand" with this setup.

    Furthermore, this trade setup will no longer be appealing if $GDXJ does not wake up and rally above the highs of its recent range within the next few days.

    Pullbacks off the highs that are succeeded by tight-ranged price action should snap back quickly after shaking out the "weak hands."

    Go Confidently, But With Vigilance

    Given the lack of follow-through in the stock market lately, we are pleased that the chart pattern of this low-correlation ETF is presenting traders with such a low-risk buy entry point.

    Still, we must remain vigilant with all new trades now, and not be afraid to quickly scratch the trade, or bail for a small loss, if this gold mining ETF does not catch a bid soon.

    If you're tired of riding the stock market roller coaster and are looking for sound, short-term trading alternatives, subscribe now to receive our exact entry, stop, and target prices for this $GDXJ trade setup (and others like it, sent to you every night).

    Follow Us: Follow us on Google+ Follow us on Twitter Join us on Facebook Our trading blog - RSS feed

    Original Source
    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.

    © 2002-2013 Morpheus Trading, LLC
    Reproduction without permission is strictly prohibited.

    Feb 13 10:53 AM | Link | Comment!
  • How Patience For A Pullback Led To A 35% Gain Over Six Weeks

    It's been a wild ride in the stock market since the new year began, which caused our market timing model to shift into "neutral" mode several weeks ago.

    But although we've been laying low while waiting for a clear trend to be established, we recently scored a solid 35% gain when we closed our position in TrueCar ($TRUE).

    Since there is always great educational value in objectively assessing the factors that led to a winning trade, let's review the trade setup that prompted our buy entry, as well as the criteria that determined when to sell and lock in profits.

    Wait, Don't Chase

    $TRUE initially caught our attention when the price doubled in less than two months last summer.

    But since we always wait for the price to come to us, rather than chasing the price higher, we simply placed the stock on our internal watchlist and waited for a substantial pullback to support.

    The inevitable pullback that eventually followed caused $TRUE to retrace about 30% off its high (an acceptable pullback for a strong stock), while coming into major support of its prior highs that preceded the summer breakout.

    When scanning for pullbacks on weekly charts, the prior highs of a legitimate base typically provides strong support because a prior resistance level becomes the new support level after the resistance is broken.

    As such, we began stalking $TRUE for a potential pullback buy entry point as it pulled into major support of its prior highs, as shown on the weekly chart below:

    1

    After holding at the $16 level for roughly two weeks, buyers started returning to $TRUE, enabling the stock to close back above its 10-day moving average, a reliable indicator of near-term support/resistance, on November 11.

    Over the two days that followed, $TRUE held onto that support level, as its 10-day moving average began turning up (a bullish sign).

    Also, the price moved back above resistance of its downtrend line that had formed off the October high. Take a look:

    1

    Because we wanted to ensure a low-risk buy entry point, we bought $TRUE on November 14 at $17.19.

    With that entry point, we were looking for the price to push higher, while holding above its 10-day moving average.

    Upon entry, we placed our initial stop price below key support of the prior swing low of $15.71 from late October.

    The daily chart below shows our buy entry point, as well as the subsequent exit point that led to a 35% gain just six weeks later:

    1

    On November 24, $TRUE pushed back above key, intermediate-term resistance of its 50-day moving average, but an ugly, one-day shakeout four days later caused the stock to dip back below its 50-day MA on an intraday basis.

    Nevertheless, we had the luxury of being able to remain patient when that shakeout occurred because our early pullback buy entry still enabled the trade to remain above our entry price.

    Since our entry was so low, we felt we could stick with the position through a potential pullback, as long as it did not break the 50-day MA on heavy volume.

    Further, since we bought $TRUE at an ideal, low-risk entry point, we utilized a "set it and forget it" approach to stop placement.

    Shakeout, Then Breakout

    After the December 1 shakeout below the 50-day MA, buyers immediately returned to the scene, enabling $TRUE to quickly zoom all the way up to the $23 level before reversing with a bearish engulfing candlestick (with light volume) on December 12.

    After bouncing off the 50-day MA in the mid-December pullback, $TRUE rallied back to new swing highs, but then printed two days of stalling action by closing well below the highs of the day.

    Because such price action occurred after an extended, four-week rally, we made a judgment call to raise the stop to just below the two-day lows, which would enable us to lock in a very large gain in the event of another pullback.

    Tightening the stop turned out to be a prudent move, as our new stop got hit on December 29, causing us to sell the stock at $23.30 for a 35% price gain from our $17.19 buy entry point.

    Although there hasn't been much bullish follow-through in the top stocks lately, we continue working hard with nightly scanning for the next potential market leader that will soon enable us to make another nice profit, as we did with $TRUE.

    To ensure you don't miss our next big winner, sign up now for your risk-free trial subscription to The Wagner Daily, our nightly stock picking newsletter with live mentorship room.

    Follow Us: Follow us on Google+ Follow us on Twitter Join us on Facebook Our trading blog - RSS feed

    Original Source

    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.

    © 2002-2015 Morpheus Trading, LLC
    Reproduction without permission is strictly prohibited.

    Jan 29 8:47 AM | Link | Comment!
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