The Wagner Daily - March 29, 2011
Concise technical analysis and picks of the leading global ETFs
Stocks opened modestly higher but struggled for most of the session before selling off sharply into the close. All of the major indices ended the day in the red. The Nasdaq and small-cap Russell 2000 both slid 0.5% day over day. The S&P MidCap 400, S&P 500 and Dow Jones Industrial average shed 0.4%, 0.3% and 0.2% respectively.
Trade was light on Monday. Turnover declined by 10% on the Nasdaq and 5.4% on the NYSE. Declining volume slightly outpaced advancing volume by a factor of 1.6 to 1 on the NYSE and 1.5 To 1 on the Nasdaq. Despite the market being down yesterday, market internals did not provide any sign of institutional distribution.
The Oil Service HOLDRS ETF (NYSEARCA:OIH) hit our buy trigger yesterday and we entered the trade. OIH broke out from a five day consolidation base and rallied strongly for most of the day. However late day selling pressure left this ETF well off its intraday high, but above the breakout. For our subscribing members, trade details are posted in the open positions section of the newsletter.
The Direxion Financial Bear 3X Shares (NYSEARCA:FAZ) has been showing signs of institutional accumulation during the recent selloff. As the price of this ETF has been declining, the accumulation/distribution histogram has been in an uptrend. This divergence suggests that FAZ may soon see a reversal in price action. A volume fueled move above the two day high of $41.61 may provide a buy trigger for FAZ. We will be monitoring FAZ closely for a potential long entry.
The iShares Dow Jones US Medical Devices ETF (NYSEARCA:IHI) has been consolidating in a tight formation for the past six days. Yesterday's inside candle (traded within the intraday range of previous day's candlestick) suggests a breakout may be at hand. A move above the two day high near $63.80 may provide a purchase opportunity in IHI.
The Nasdaq continues to exhibit relative weakness to the broad market. This Nasdaq was the only major index to close below its 50-day moving average yesterday. If the Nasdaq is unable to reclaim this key support level, the next significant move in the market could very well be lower.
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: email@example.com.
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