Bullish consolidation in the Transportation ETF (IYT)


Monday was a good day for Wall Street. Stocks advanced sharply on a massive, late day surge in volume. By the closing bell all five major indices were up by 1.0% or more. Technology led the advance. The small-cap Russell 2000 and the tech rich Nasdaq posted significant gains of 1.6% and 1.4% respectively. The Dow Jones Industrial Average, S&P 500 and S&P MidCap 400 all ended the day higher by just over 1.0%.

Market internals were decidedly positive on Monday. Volume skyrocketed on both major exchanges. On the Nasdaq turnover ended the session higher by 46.4% and on the NYSE it improved by an even more impressive 60.0%. Advancing volume exceeded declining volume by factor of 4.3 to 1 on the Big Board and 2.1 to 1 on the Nasdaq. The combination of positive price action and sharply higher volume points to significant institutional participation in Monday’s rally. Based on this data Monday would be accurately classified as an accumulation day for the market.

For the past month the iShares Dow Jones Transportation Index ETF (IYT) has been consolidating along its 20-day and 50-day moving averages. During this timeframe IYT has also formed a sequence of lower highs resulting in an interim downtrend line. Ideally we would like to see IYT consolidate for several days to several weeks in a very tight range. This type of price action followed by a volume fueled move above the downtrend line could present a buying opportunity in this ETF.

The PowerShares DB Agricultural ETF (DBA) has been struggling to regain its 20-day EMA since mid March. A volume assisted move back below the three day low of $32.63 could present a shorting opportunity in this ETF.

With yesterday’s sharp price move in the market, several of our short term momentum indicators suggest the market may be close to an overbought state. Consequently we are not inclined to enter new long positions as we do not consider it prudent to chase the market. Should the market be posturing to set new highs, we prefer to wait for a pullback followed by consolidation to enter new long positions.

Today’s Watchlist:

There are no new official 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

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  • PPH hit our buy trigger but we decided to quickly exit the position because we didn’t like the early session price action in the broad market. Late in the session the remaining 100 shares of our IWM trade hit its adjusted (post gap) stop and we exited the trade. We removed DTO from the watchlist but we will continue to monitor the action for a potential entry point.

  • 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.
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      Edited by Deron Wagner,
      MTG Founder and
      Head Trader