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Potential breakout setup in (PIZ) - January 18, 2011

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The Wagner Daily - January 18, 2011
Concise technical analysis and picks of the leading global ETFs


Stocks traded strongly on Friday, as all major indices finished higher on the session. Tech stocks led the charge, with the Philadelphia Semiconductor Index finishing at its highest level since late 2007. The small-cap Russell 2000 posted a 0.9% advance, while the technology rich Nasdaq closed up 0.7% in Friday's action. The S&P 500 and the S&P 400 also registered increases of 0.7% yesterday. The Dow Jones Industrial Average lagged all indices but still rose by 0.5% on Friday.

Market internals were bullish across the board yesterday. Turnover was up by an impressive 13.3% on the Big Board and by over 5% on the Nasdaq. Advancing volume outpaced declining volume on the Nasdaq by a factor of 1.9 to 1, while the ratio on the NYSE was slightly better at 2.3 to 1. Friday's market internals suggest institutional accumulation.

The PowerShares DWA Developing Markets Technical Leaders ETF (NASDAQ:PIZ) has been in tight consolidation zone since its breakout in early December. A move back above the three day high of $23.41 provides a possible buy trigger for PIZ.

For the past six weeks the SPDR S&P Select Consumer Discretionary ETF (NYSEARCA:XLY) has been consolidating in a narrow trading range between $37.00 and $38.00. A volume assisted rally above the six week high of $38.06 could very well present a buying opportunity in this ETF. We are patiently monitoring XLY for a potential entry.

On Friday, the PowerShares Emerging Markets Sovereign Debt ETF (NYSEARCA:PCY) gapped down and is now testing a seven day support level. A break below Friday's low of $26.59 may present an opportunity to short this ETF.

Both our long and short positions performed well on Friday. However, we are paying particularly close attention to our short trades since the broad market has broken out to a multi-year high. We still like the trades, but even weak ETFs are susceptible to being pulled along with a strong move in the market.

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

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:

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