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Bullish base forming in the Home Construction ETF (ITB) - April 29, 2011

Apr. 29, 2011 10:03 AM ETRBL, ITB
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The Wagner Daily - April 29, 2011
Concise technical analysis and picks of the leading global ETFs


Stocks closed higher on Thursday as volume declined. For the third consecutive session all five major indices posted gains. Yesterday's move was led by the Dow Jones Industrial Average. The blue chip index gained 0.6% for the day. The small-cap Russell 2000 and the S&P 500 both managed 0.4% advances while the S&P MidCap 400 tacked on 0.2% by the close. The Nasdaq spent most of the day in negative territory but "caught a bid" late in the session to close fractionally higher.

Market internals were mixed on Thursday. Volume fell by almost 5% on the Nasdaq but was fractionally higher on the NYSE. Advancing volume once again outpaced declining volume on both indices. The advancing volume to declining volume ratio ended the session at 1.6 to 1 on the NYSE and 1.2 to 1 on the Nasdaq. Due to the decrease in volume Thursday would not be classified as an accumulation day for the broad market. Nonetheless, consolidation following a significant rally is generally considered bullish.

Since undercutting the 50-day MA on April 18th, the SPDR S&P Russia ETF (RBL) has spent the past 6 days consolidating at its 20-day EMA. Over the past three days while RBL has been consolidating, the accumulation/distribution technical indicator had been rising which suggests RBL is being accumulated (bullish divergence). Yesterday, RBL formed an inside candle (Yesterday's trading range remained within Wednesday's trading range) as volume contracted. During an uptrend, this combination of price and volume action is generally considered bullish. A move back above the April 27th high of $39.76 may provide a buy trigger for RBL. We are monitoring this setup closely for a possible entry.

The iShares Dow Jones US Home Construction ETF (ITB) recently reclaimed its 50-day MA on a big spike in volume. Over the past four days ITB has retested and is now consolidating above this key mark. A volume propelled move back above yesterday's high of $13.55 could present a buying opportunity for this ETF.

The market has been demonstrating bullish resiliency as it refuses to sell off since last week's reversal. Several days of sideways action or a modest pullback would not be unexpected given the recent advance.

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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