The Wagner Daily – $HRMY Cup with Handle: Buy on Breakout

The Wagner Daily – July 06, 2022

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MTG Market Timing Model –  SELL (Nasdaq Composite below the 20-day EMA)

Our timing model was designed to keep our trades in line with the prevailing market trend, not to call tops or catch bottoms in S&P 500 or Nasdaq Composite.

today’s watchlist (potential trade entries):

open positions:

closed positions:

position notes:

• No trades triggered.

Commentary:

Tuesday’s bullish reversal action was a positive sign for the current rally. Although the Nasdaq Composite did not reclaim the 20-day EMA, it did close with a +1.8% gain on higher volume (follow-through day-like action). Biotechs led the market higher with beaten-up growth also catching a bid ($ARKK +9%).

Nasdaq Composite is working on a higher low though it will have to clear the 20ema and hold to take out the swing high.

Biotech ETF $XBI rallied 6% and is acting like a new market leader. The price set a second higher high and higher low with the 20-day EMA crossing above the 50-day MA.

The target is the $90 area, which is a measured move of 25% (the first advance off the lows was $25%). That said, we definitely want to lock in partial gains at the 2 to 1 reward-to-risk ratio (10-12% gain).

The chart below shows the bull flag-like action off the lows with an orderly pullback.

The market timing model will not go into buy mode until the S&P 500 or Nasdaq Composite closes 1% or more above the 20-day EMA. However, we are treating Tuesday’s action as a buy signal in leading stocks such as biotechs.  

There are two new official setups for Wednesday in $EVH and $HRMY. Both charts below are daily, but the monthly time frame is worth a look as both are sitting just below all-time highs after a year or more of chop.

The $EVH buy stop is based on a downtrend line break with at least three touches on the trendline. Note the relative strength line that has moved out ahead of price (bullish divergence).

We are going with a 5% starter position and a standard 6% stop.

$HRMY’s cup with handle pattern already triggered a buy entry over the handle high at $47. The current pause is a second handle with a buy stop above the swing high. Note the RS line to new highs ahead of the price.

We are going with a 5% starter position and a standard 6% stop.

Unofficial Setups – For experienced traders only, no guidance is given for these setups.

• Longs – $JKS – breakout 69.80, $VRTX breakout 293.51
• Shorts – none

See you in the chat room,

Rick 

This list is a good starting point for monitoring the health of the market for those who have limited time.

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