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Potential breakout entry in Energy ETF (ERX) - April 5, 2011

Apr. 05, 2011 9:14 AM ETQID, KOL, ERX
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The Wagner Daily - April 5, 2011
Concise technical analysis and picks of the leading global ETFs


Stocks ended Monday's lackluster session mixed, as volume declined. The Nasdaq was the only major index to end the day lower, as it closed fractionally below the flatline. The S&P 500 ended the day fractionally above the flatline. The S&P MidCap 400 and the Dow Jones Industrial Average realized modest gains of 0.1% and 0.2% respectively. The small-cap Russell 2000 was the only major index to post an appreciable gain. The small cap index ended the day 0.5% higher.

Turnover was down on Monday. Volume on the Nasdaq fell by 19%, while on the NYSE it was down 11.1% yesterday. The advancing to declining volume ratio, for all intents and purposes, ended the day at par on both indices.

On Monday we sent an intraday alert providing the trade details for a possible long entry in the Nasdaq 100 UltraShort ETF (QID). We stated, "The Nasdaq appears to be forming a "lower high" on its daily chart, indicating a possibility of a move back down to the recent lows. A QID buy entry above Friday's high gives us a positive reward/risk ratio on the setup. Shortly after sending this alert, QID hit our trigger. Trade details are available for our subscribers in the open positions segment of the newsletter.

The Market Vectors Coal ETF (KOL) has recent rallied to a new 52 week high. Given the relative strength of this ETF, a pullback near $50.00 may present a buying opportunity in this ETF. We will be monitoring KOL closely for a potential entry.

Direxion Energy Bull 3X Shares ETF (ERX) has been consolidating for three days in a tight pennant like formation. A move above the two day high of $92.44 could present a buy entry trigger for this ETF. We will be following ERX for a possible buy entry.

Sector rotation continued yesterday. Semiconductors and technology were weak, as healthcare, emerging markets and energy remained strong. It appears that money may be starting to rotate out of financial stocks. The sector appears weak as the XLF has been struggling to reclaim its 50-day MA.

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.

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