Since selling off to “undercut” support of its 50-day moving average two weeks ago, the inversely correlated ProShares UltraShort Euro ($EUO) has been trading in a tightening, sideways range, holding above support of its primary uptrend line and 50-day moving average. As the daily chart pattern below illustrates, the primary uptrend has been in place for many months, while $EUO has been in a four-week retracement off its July high:
This type of chart pattern shown above is normal, healthy, and indicative of what a steadily uptrending stock or ETF typically looks like. When one trendline is moving in one direction (the ascending dashed blue line) and another trendline is moving in the opposite direction (the descending dotted red line), the longer-term trendline typically wins out. This is why we always say that the longer a trend has been in place, the more likely the trend will remain intact. In this case, odds favor a resumption of the dominant uptrend in $EUO. Further, because this is a Pullback Buy setup, the reward to risk ratio of the trade setup is favorable. For this pullback entry on our ETF trading watchlist, regular subscribers of our Wagner Daily swing trading newsletter (details here) should note our exact entry, trigger, and stop prices based on our technical trading strategy.
Going into today’s session, keep a close eye on the performance of $QQQ, which is an ETF proxy for the Nasdaq 100 Index. Last Friday’s gain put $QQQ within close striking distance of testing major resistance of its late March/early April highs. This does not mean we should suddenly be selling our long positions (since our market timing model is now in a “buy mode”), but a pullback as the index runs into this resistance level would not be surprising. We will possibly analyze $QQQ in our technical ETF commentary later this week, depending on its price action over the next few days.
The commentary above is an excerpt from today’s issue of The Wagner Daily, our nightly stock and ETF trading newsletter. More details and signup available at https://www.morpheustrading.com.
