On the morning of May 23, one day after the first significant broad market decline in more than a month, we targeted both Guggenheim Solar ETF ($TAN) and Market Vectors Semiconductor ($SMH) for potential pullback buy entry in our Wagner Daily newsletter (these two ETFs were actually pointed out as potential pullback entries in this May 22 blog post one day earlier).
Because bearish follow-through momentum from the May 22 sell-off carried through into the May 23 open (as anticipated), both ETF swing trade setups triggered for "official" pullback buy entry, and have been acting well since then.
As of this moment, the rather volatile $TAN is already showing an unrealized gain of 8.9% since our May 23 buy entry of $23.45 (where we grabbed some shares on a pullback to the 10-day MA). From here, we would ideally like to see the ETF build a base of consolidation near the highs, then breakout to a new high within the next several weeks.
The other trade we entered on the May 23 open was $SMH, which we swiped at $37.68 as it pulled back to test substantial near-term support of its 20-day exponential moving average (for the first time since its breakout).
The following day, $SMH formed a bullish "hammer" candlestick and closed above its 20-day EMA for the second straight day. The daily chart below illustrates this (based on most recent closing price of May 24):
Based on the healthy pullback of $SMH that is holding the 20-day EMA, the ETF should be well positioned to climb back to the highs as long as the broad market holds steady.
If we get a little bit of help from the market, in the form of a bounce this week, $SMH should be among the first industry sector ETFs to outperform due to the relative strength $SMH was exhibiting on the way up. An added bonus is that we are now back into this ETF at a much lower price than our most recent exit at $38.44, when we sold $SMH for a 9% gain on May 13.
On May 6, iShares Malaysia Index Fund ($EWM) gapped up 6% to a fresh all-time high. Since this was a confirmed breakaway gap, we have been stalking this ETF for the past several weeks, waiting for a base of consolidation to form and the moving averages to rise up and provide support.
Last Friday (May 24), $EWM gapped down to "undercut" support of its 20-day exponential moving average:
From here, we will be watching to see if $EWM forms some sort of bullish reversal bar and closes back above the 20-day EMA. If it does, it could present a possible buying opportunity the following day (above the prior day's high). For now, it is not actionable on today's watchlist, but we will be sure to notify subscribers of our nightly swing trade newsletter if/when we decide to buy as an "official" swing trade on our watchlist.
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