The Wagner Daily - April 15, 2011
Concise technical analysis and picks of the leading global ETFs
Equities gapped down at the open and spent most of the session in lower territory. However, on a late burst of buying the major indices clawed their way back to finish mixed on the day. The small-cap Russell 2000 tacked on 0.6%, while the Dow Jones Industrial Average advanced by a modest 0.1%. The S&P 500 and the S&P MidCap 400 both ended the day fractionally higher. The Nasdaq closed fractionally in the red.
For the second consecutive day market internals ended the session mixed. Volume was modestly lower across the board. Volume fell by 2.5% on the Nasdaq and 1.7% on the NYSE. Advancing volume was fractionally higher than declining volume on the NYSE. However, the Nasdaq saw declining volume outpace advancing volume by a ratio of 1.5 to 1. The combination of lighter volume and mixed price action points to the absence of institutional involvement in the market on Thursday.
In yesterday's newsletter we discussed the possibility that the First Trust Global Wind Energy ETF (NYSEARCA:FAN) could be in the process of forming a bullish mini cup and handle-like technical pattern. Given Thursday's price action in Fan it appears that this technical pattern can be eliminated from consideration. However, FAN still appears ready to move to higher ground. On an impressive spike in volume this ETF made a massive undercut of its four day support level, touched the 20-day EMA and ended the day firmly back in the trading range. Given this price and volume action we are placing FAN on the watchlist. A move of this magnitude not only sweeps the weak hands from the market, but also can lead to a short squeeze. Anyone bearish on this ETF would probably be apt to cover the position if FAN moves above the four day high of $11.97. For our subscribing members, trade details are available in the watchlist segment of the newsletter.
The iShares Dow Jones Medical Devices ETF gapped down yesterday but reversed quickly to close at its intraday high. Further, this move occurred on strong volume and this sector has exhibited relative strength over the past several weeks. A move above the April 11th high of $66.08 could provide a long entry trigger for this ETF.
Earnings season is upon us and caution is warranted. In afterhours trade Google dropped 5.0%, but as of this writing the Nasdaq Futures were slightly higher. Given the recent selling pressure in AAPL and Thursday's post closing hit to Google, Friday could provide a good indication of the market's overall strength.
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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