A Bit Over-Cooked: (BZQ)


Wall Street took a beating on Tuesday as stocks plummeted on brisk trade. Four of the five major indices shed over 2.5% on the session. Higher beta issues led the decline. The small-cap Russell 2000 and the S&P MidCap 400 dropped a whopping 3.3% and 3.0% respectively. The Nasdaq followed closely as is shed 2.75%. The S&P 500 plunged 2.6% as the Dow slid 2.2%.

Market internals were decisively bearish. Volume climbed on the Nasdaq by 7.4% and on the NYSE by 12.9%. For the third time in as many days declining volume outpaced advancing volume. However, yesterday’s action brought a major spike in down volume. By the closing bell the declining volume to advancing volume ratio stood at 16.6 to 1 on the Big Board and 15.5 to 1 on the Nasdaq. The spike in volume on both exchanges and the breadth of the selling points clearly to institutional distribution.

Via an intraday alert we entered a long position in the ProShares Ultrashort MSCI Brazil ETF (BZQ). Since April, this inverse ETF has attempted to break above resistance at $17.25 on three occasions. Further, during this timeframe the Accumulation/Distribution line has been in an uptrend as BZA has been consolidating. This bullish divergence suggests that institutions have been accumulating BZQ during this period of consolidation. This was an important signal that BZQ may be ready to set a new swing high and possibly reverse its downtrend. We are now on the fourth test of this resistance level and the odds now favor a move higher. Trade details are available for our subscribing members in the open positions section of the newsletter.

Whenever the market sees a significant selloff/rally it is useful to identify key support/resistance levels. Below are charts of the major indices that we follow along with a chart of the NYSE. Notice that all of the major indices are at key support levels with the Nasdaq showing some relative strength. The Nasdaq is just below its 200-day moving average while the other indices are prior swing lows. Notice that the NYSE has formed a head and shoulders like pattern.

Over the past two weeks while others have been losing substantial sums, we are currently in positive trades and have protected capital by staying mostly in cash in this uncertain environment. In last Friday’s newsletter we stated, “Since this week’s reversal was swift and sharp, our research has not presented us with quality risk reward setups to enter short positions. Rather than chase the market we prefer to take the cautious approach and wait for the next opportunities to present themselves.” Yesterday opportunity presented itself and we added to our position in SLV and opened a new trade in BZQ. Currently we are in the money on both trades.

The S&P 500 and the NYSE have now closed down each of the past 8 days. The Nasdaq has closed down or flat for the past seven days. All of the momentum indicators that we follow place the broad market squarely in an oversold status. The selloff could continue for several days but we will be looking to take profits at the first sign of a reversal.

Today’s Watchlist:

There are no new setups for today. As always, we will send an intraday alert if any new trades are made.

Daily Performance Report:

Below is an overview of all open positions, as well as a performance report on all positions that were closed only since the previous day’s newsletter. Net P/L figures are based on the $50,000 Wagner Daily model account size. Changes to open positions since the previous report are listed in red text below. Please review the Wagner Daily Subscriber Guide for important, automatic rules on trigger and stop prices

    position summary

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  • Per intraday alert, added 100 shares to our SLV position five minutes after the open. We also bought BZQ.
  • Reminder to subscribers – Intraday Trade Alerts to your e-mail and/or mobile phone are normally only sent to indicate a CHANGE to the pre-market plan that is detailed in each morning’s Wagner Daily. We sometimes send a courtesy alert just to confirm action that was already detailed in the pre-market newsletter, but this is not always the case. If no alert is received to the contrary, one should always assume we’re honoring all stops and trigger prices listed in each morning’s Wagner Daily. But whenever CHANGES to the pre-market stops or trigger prices are necessary, alerts are sent on an AS-NEEDED basis. Just a reminder of the purpose of Intraday Trade Alerts.
  • For those of you whose ISPs occasionally deliver your e-mail with a delay, make sure you’re signed up to receive our free text message alerts sent to your mobile phone. This provides a great way to have redundancy on all Intraday Trade Alerts. Send your request to [email protected] if not already set up for this value-added feature we provide to subscribers.

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      Edited by Deron Wagner,
      MTG Founder and
      Head Trader