--> All Eyes on the Russell (SOXL, XLF)

All Eyes on the Russell (SOXL, XLF)

ETFs and market commentary:

Stocks recovered from early session losses to end mixed on Monday. The Dow Jones Industrial Average closed fractionally lower, while both the S&P MidCap 400 and small-cap Russell 2000 ended the session flat. Both the Nasdaq and S&P 500 eked out 0.1% gains. The homebuilder, banking and transportation sectors showed strength on Monday, while the gold miner and oil services sectors struggled.

Market internals ended the session positive. Volume jumped by 8.1% on the Nasdaq and 19.9% on the NYSE. Advancing volume outpaced declining volume by a ratio of 1.2 to 1 on the NYSE and 1.4 to 1 on the Nasdaq. Despite the bullish market internals, price action was not strong enough to justify labeling yesterday as an accumulation day for the broad market.

Yesterday, on a spike in volume, the Direxion Daily Semiconductor 3x Bull ETF (SOXL) formed a reversal candle for the second time in four days, as it tested support below its 20-day EMA. Further, this price action occurred on an uptick in volume and SOXL closed in the upper 40% of the day’s range. A rally above the four day high of $41.47 could provide a buy entry trigger for SOXL. We will be monitoring SOXL carefully for a potential long entry.

As with many ETFs yesterday, the SPDR Select Sector Financial ETF (XLF) formed a bullish reversal candle and closed near session highs. XLF is now perfectly positioned to break to higher ground. A move above $14.87 appears to be the perfect long entry trigger for this ETF. Is it? The answer is yes, and no. XLF could very easily surge to a new closing high if it clears $14.87. However, we are always cautious of entries that are “too good to be true”. When an entry is obvious, all eyes are trained on the setup. We have found that when a setup is “too obvious”, false breakouts often occur. Consequently, if we enter an obvious breakout trade such as XLF, we do so with the full understanding that a false breakout is a distinct possibility. This prepares us psychologically to accept the pullback as part of the trade. We also use false breakout candles as the pivot for a more reliable trade entry.

IYM came within one cent of hitting its stop yesterday but eventually recovered to close near session highs. PPH also reversed strongly from early session losses to set a fresh 52-week closing high. IAU closed slightly lower, as it continues to consolidate following last week’s breakout. Yesterday’s price action resulted in the formation of bullish reversal candles on all of the major indices. We will be watching the small-cap Russell 2000 carefully on Tuesday, as a breakout by this index could spark a broad market rally.

Today’s ETF Watchlist:


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 DailySubscriber Guide for important, automatic rules on trigger and stop prices

position summary

Having trouble seeing the position summary graphic above? Click here to view it directly on your Internet browser instead.

Notes:

  • There are no new official setups for today. 
  • 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.

Stocks:

The lack of follow through in stocks breaking out remains a concern. Other than N, we’ve had very little follow through in recent entries. Ideally we’d like to see two to three days of explosive price action from our buy point to give a stock decent separation from the pivot. For the past few weeks, it seems that the majority of stocks have only offered maybe a day or half a day of explosive action before chopping around for a few days.

There are no additions to today’s watchlist but please note the changes in red below.

Today’sStock Watchlist:


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 model account size. Changes to open positions since the previous report are listed in red text below.

Having trouble seeing the position summary graphic above? Click here to view it directly on your Internet browser instead.

Notes:

  • Lowered the stop in GBX to adjust to yesterday’s low.


Relative Strength Watchlist:

The Relative Strength (or RS) Watchlist makes it easy for subscribers to import data into their own scanning software, such as Tradestation, Interactive Brokers, and TC2000. The list is comprised of the strongest 100 (or so) stocks in the market over the past six to 12 months. The scan is based on the following criteria and is updated every Monday:

  • Stock is in a well defined uptrend, trading above both the 50-day and 200-day moving averages, with the 50-day moving average above the 200-day moving average (both moving averages should be in an uptrend as well).
  • Today’s close is less than 20% off the 52-week high
  • Close is greater than $5.
  • Volume is greater than 200,000 shares per day (using a 50-day volume moving average).

Click here to view this week’s Relative Strength Watchlist in excel

Click here to view this week’s Relative Strength Watchlist as a text file

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