The Wagner Daily – February 25, 2022
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The Wagner Daily – February 25, 2022
Proven swing trading strategy, top ETF & stock picks, and market timing model…since 2002
MTG Market Timing Model – SELL (day 1 of a new rally attempt)
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):
closed positions:
position notes:
- No trades triggered.
In last night’s report, we discussed the possibility of a gap-down reversal with US futures down more than 2% in after-hours trading. The combination of a big gap down after a two-week selloff below a major swing low and news of Russia attacking Ukraine, set the stage for a reversal, but certainly didn’t expect to see such a strong advance.
Thursday’s powerful reversal action is day one of a new rally attempt that was led by a big recovery in growth.
The Nasdaq Composite gained +3.3% on volume but closed an impressive 7% off the day’s low in what was almost a bullish engulfing day!
Growth ETFs ripped higher with $ARKK +7.8% and $IWP +4.3%. $ARKK closed 13% off the day’s low and with a bullish engulfing candle!
Whenever the market (ideally the Nasdaq) attempts to bottom out, we look for a few things:
- Higher lows, market should hold the low set on day one of the new rally attempt
- Market reclaims 10-day SMA and eventually reclaims the 20-day EMA (within a few weeks)
- Follow through day (buy signal) prints on day 4 or later of a new rally attempt (may occur before or after the index reclaims the 20-day EMA)
- New leadership emerges to confirm the fresh new buy signal
Although the well-known follow-through day is still a valid buy signal, we do place more weight on the index reclaiming the 20-day EMA. Good things tend to happen once an index is above the 20-day EMA, so there is no need to rush to buy.
Below are a few examples of bottoming action on the daily chart of the Nasdaq since 2016. Not every bottom will play this way so these charts are just a guide.
In 2016, Nasdaq reclaimed the 20-day EMA in four sessions.
There are no new official setups for Friday as there are no low-risk entries (based on the daily chart) on either side of the market after Thursday’s action.
For those who prefer to be a bit more active with their trading, our living trading room on slack is where we discuss setups that develop on the fly, such as a gap-down reversal or a tight consolidation on the 15 or 60-minute charts.
Our short-term plan is to wait for some sort of low-risk buy point such as a tight-ranged inside day to form in faster-moving stocks that are bouncing from deeply oversold levels. If the rally attempt begins to show signs of sticking, then we’ll turn our focus to the more classic IBD/CANSLIM patterns such as the cup with handle, flat base, or double bottom.
Unofficial Setups – For experienced traders only, no guidance is given for these setups.
- Longs – none
- 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.
https://morpheustrading.com/services/swing-trade-alerts
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