The Wagner Daily - November 16, 2010
Concise technical analysis and picks of the leading global ETFs
On Monday stocks opened the day with promise but slid in late trading. After an opening gap up, the major indices chopped their way to session highs. At one point in the session the Dow was up as much as 0.8%. However, by 2:00 pm the markets slid helplessly into the close. Monday ended with slightly mixed results. The S&P MidCap 400 logged a 0.2% gain on the day, while both Dow Jones Industrial Average and the small-cap Russell 2000 eked out 0.1% advances. The Nasdaq and the S&P 500 dropped 0.2% and 0.1% respectively.
Turnover on Monday was noticeably down. Volume on the Nasdaq slid by 14.9% for the session. NYSE volume dropped 16.5% on the day. Declining volume slightly outpaced advancing volume on both indices. The ratio on the NYSE was 1.1 to 1 and on the Nasdaq 1.2 to 1. Overall, Monday's action was unspectacular as there were no signs of Institutional involvement.
Yesterday, our target of $37.85 was met in TBT and we exited the trade with a 12% (4-pt) gain. The model account netted more than $1,700 from this position. The chart of TBT posted below provides the technical analysis behind our target price. Note the horizontal resistance established by connecting the swing highs set in July. By exiting the position at this price, we sold into strength. TBT may very well see the overhead 200-day MA, but by selling into the rally we were more likely to get a good fill, since this ETF could easily pull back from resistance before making a run at the 200-day MA.
The Market Vectors Coal ETF (NYSEARCA:KOL) is well positioned to continue its recent advance. In the past several trading days KOL rallied above January 15th swing high. This move was accompanied by strong increase in volume. KOL meets many of the entry requirements that we discussed in Monday's newsletter. It is important to note that, as a commodity related play, this ETF does not share a high correlation to the market. Given the recent indecisiveness with the major indices, KOL provides a higher probability of being a successful trade should the market continue its decline. In addition, it is exhibiting overall relative strength. We are carefully watching for an entry point in this trade and will provide an intraday alert if we enter a position.
AMJ was discussed as a possible long entry in the November 15th newsletter. Due to its relative strength against a flat market yesterday, we are now putting AMJ on the watchlist. For our subscribing members, trade details can be found in the watchlist segment of the newsletter.
The markets appear to be at an inflection point. In the midst of options expiration week we are inclined to remain cautious, and base our trading on the technical criteria discussed in Monday's newsletter.
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: firstname.lastname@example.org.
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