Japan ETF ($EWJ) is poised to breakout

• Neutral signal generated on close of August 15
• Buy signal generated on close of July 11
• Neutral signal generated on close of July 5
• Sell signal generated on close of June 24

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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:

• Sold AGQ for a 19% loss on the morning gap down. Sold $TAN for 15% and +40% gains on both entries.

stock position notes:

• $BDBD stop triggered and we are out. $XOOM buy entry triggered.

ETF, stock, and broad market commentary:

Stocks followed through on Monday’s bullish reversal action, fueling a powerful advance in the leading broad market averages. The NASDAQ Composite, Russell 2000, and S&P Mid-cap 400 closed with gains of at least 1.2%, and all three averages closed at a new 52-week high. The S&P 500 rallied only 0.8%, but is now clearly back above the 50-day MA. Turnover was slightly lighter on both exchanges, but still above the 50-day moving average of volume. The light volume prevented the NASDAQ from logging an official accumulation day, but at this point in the rally we are much more concerned with heavy volume down days than lighter volume up days.

Yesterday, on the open, we sold our full position in $TAN and locked in a 40% gain from our first entry and a 15% gain on the second entry. Unfortunately, $AGQ also gapped down below our stop, and we were stopped out with a 19% loss. However, the position size in $AGQ was intentionally light, as we were looking for a quick counter-trend pop.

Both buy setups in $FXO and $TNA triggered yesterday, with $TNA breaking out and closing at the highs of the day with a 3.5% gain.

We have one new official buy setup on today’s watchlist in the iShares MSCI Japan Index ($EWJ). After several months of basing action, $EWJ is poised to breakout, with the price action tightening up a bit over the past two weeks above the 50-day MA. Currently, $EWJ is in pullback mode, trading just above the rising 20-day EMA. Note that the 20-day EMA has crossed above the 50-day MA, and has turned up for a few weeks now.

Waiting to buy $EWJ on a breakout to new highs is tough to pull off, as we are basically trading a full day behind by the time the US market opens. Because of this, we prefer to buy $EWJ on weakness, and with the 20 and 50-day MAs just below, this might be the right time do it. Trade details can be found in the watchlist section above.

As for a target, the monthly chart of $EWJ shows clear resistance from prior highs in 2006 and 2007 around the $14 to $15 area, and that is where we will look to exit if possible. The potential reward on the trade is around 20%, and our stop is just under 5% away, which gives us a respectable 4 to 1 reward to risk ratio.

On the stock side, the $XOOM buy entry triggered, but we were stopped out of our $BDBD entry below the 50-day MA. However, yesterday proved to be a strong day for our stock holdings, as one position is showing an unrealized gain of 40% ($YELP), with three other positions up at least 20% ($BITA, $LOCK, and $SLCA). $AMBA is up 15% in just a few days from our entry and is in great shape as well.

Please note that we removed the target that was set around $73 in $YELP. $YELP appears to be consolidating in a right range, and could explode higher soon. As such, we feel that it is best to let the potential breakout do its thing.

After doubling from its last base breakout, $SFUN has been consolidating in a tight range near the highs. This stock has plenty more left in the tank, and could run another 50% or more. Although we’d like to see some sort of reversal bar shakeout develop within the next few days, we simply can’t take the chance and miss the next move out. Because of this, we are placing $SFUN on the watchlist as an official buy over the two-day high with a tight stop below Tuesday’s low (5% stop).

Along with the $SFUN buy setup, we are monitoring $NOAH, $EVR, and $P for potential entry points this week.