Current signal generated on close of July 11.
Portfolio exposure should at least be 75% to 100% long or more (if you can go on margin).
Past signals:
- Neutral signal generated on close of July 5
- Sell signal generated on close of June 24
today’s watchlist (potential trade entries):
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open positions:
Below is an overview of all open positions, as well as a report on all positions that were closed only since the previous day’s newsletter. Changes to open positions since the previous report are listed in pink shaded cells below. Be sure to read the Wagner Daily subscriber guide for important, automatic rules on trade entries and exits. Click here to learn the best way to calculate your share size.
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closed positions:
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ETF position notes:
- Canceled the $IGE setup.
stock position notes:
- No trades were made.
ETF, stock, and broad market commentary:
The broad market finished the week on a slightly negative note last Friday, as the main stock market indexes each slipped between 0.3% to 0.5%. However, turnover was lighter across the board. That was positive, as it indicated a lack of institutional selling pressure. For the week, all the major indices lost ground, but stocks still remain near their highs.
In the August 7 issue of The Wagner Daily, we highlighted a potential trade setup that was developing in Direxion Daily China Bull 3x ($YINN), an international ETF tied of the performance of the Chinese stock market (and leveraged to move at 3x the underlying securities). To refresh your mind, here is the technical explanation of the setup, as well as the charts we showed at that time:
As shown on the weekly chart below, notice that $YINN has just broken out above major resistance of its prior highs from January 2013, after four consecutive weeks of massive gains. Now, the ETF is starting to pull back from its recent parabolic run:
The horizontal line that marks prior resistance of the January 2013 highs should now serve as the new support level on the pullback. However, $YINN will likely “undercut” that support level, which would shake out the “weak hands.”
Next, take a look at the shorter-term daily chart:
Despite the current pullback off the highs, $YINN is still trading above both its 10 and 20-day moving averages. This is a sign of major relative strength.
Since horizontal price support (from the weekly chart) is around the $21.65 and the 10-day moving average is presently at $21.39, we would anticipate a pullback to the $21 – $21.50 area (an “undercut” of support).
Presently, $YINN is not actionable. However, it’s a good one to put one your radar screen. As for entry, we ideally would like to see the formation of a bullish reversal candle coincide with a pullback that undercuts support. If that happens, it would provide us with a low-risk buy entry point above the high of the reversal candle. But for now, we will just have to wait and see how the price action develops.
As expected, $YINN pulled back to a low of $20.90 in the first session that followed our initial analysis. This is shown on the current daily chart below:
Because of the pullback to $20.90, the trade setup technically met our criteria by retracing to “undercut” support. However, we did not immediately buy $YINN the following day because there was no bullish reversal candle.
Nevertheless, because of the strong gap up on August 8 and the tight, sideways action that followed on August 9, this ETF swing trade setup is indeed now actionable.
As listed on today’s watchlist, we will buy $YINN on a rally above the two-day high. Our initial stop price is below the late July consolidation, which is the most recent confirmed “swing low” support level. Note that we are only targeting this trade with 50% share size because it’s just a bit more extended away from its 20 and 50-day moving averages than we would like to see.
We cancelled the $IGE setup, we are happy with our energy exposure in $USO and $FCG for now. We raised the stop in $FDN and $IHI to just below prior swing lows to lock in partial profits.
On the stock side, we have no new setups today, but the $MELI buy stop remains live.
After an ugly reaction to earnings two weeks ago, $SLCA has held above the 10-week MA, which is a good sign, as this is exactly where support had to kick in for the trade to remain in decent shape.
$SLCA now has two downtrend line breaks that have held on the weekly chart, along with two higher swing lows within the base (if recent swing low holds). The setup has taken some time to develop, but this is why we have a starter position only. As the pattern improves, we will look for low risk entry points to add to the position.