market timing model: SELL

Current signal generated on close of Feb. 3.

Portfolio exposure can be anywhere from 0% to 60% long (or more), depending on how open positions have held up.

Past signals:

Neutral signal generated on close of January 24.

• Buy signal generated on close of November 13
• Buy signal generated on close of September 9
• 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

 (click here for more details) 

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.

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closed positions:

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ETF position notes:

• No trades were made.

stock position notes:

• No trades were made. Note the adjusted stop in $LNKD and new entry price in $FB.

ETF, stock, and broad market commentary:

Stocks put in a solid session of gains on Thursday, with all major averages up at least 1.0% and closing near the highs of the day.

However, total volume failed to confirm the move, as it was lighter on both exchanges. The volume patterns remain quite bearish on the Nasdaq and NYSE, as we have yet to see to see a true accumulation day in quite some time.

Our current long position in the shipping ETF ($SEA) closed back above the 50-day MA on heavy volume. If it can close above the 50-day MA on Friday, then it will have formed a bullish reversal candle on the weekly chart.

In terms of new setups, we do not have anything actionable on the long or short side today. We are monitoring the inverted UltraShort Brazil ETF ($BZQ) for a pullback entry over the next few weeks.

We are also looking at a biotech ETF ($PBE), which looks to be forming a tight base at the highs after stalling just above $42.

The price action is holding up around the 20-day EMA, and if the action continues to chop around, then the 50-day MA may soon provide support as well. On the weekly chart (not listed below), the 10-week MA is already at $39.

Earlier in the week, we showed you a short-entry based on stocks breaking down from 52-week highs after an explosive multi-year advance. In today’s report, we are briefly going to cover another short setup where we look for stocks setting new 52-week lows. We call this action a Downtrend of Death or (DOD).

BlackBerry ($BBRY) from 2010 to 2012, is a perfect example of a downtrend of death. This chart isn’t really to show you the exact entry points on where to short, but to give you and idea of the type of pattern we are looking for.

A true downtrend of death candidate (DOD) is one where the price action just gets killed below a 52-week low, with the 10-day MA knifing through the 40-week MA. The key isn’t really to catch the first selloff, but to keep monitoring the action for short-term rallies.

The idea is that there is so much downward momentum that BBRY can barely hold above the 10-week MA for a week or two before selling off once again.

The best short entries will still be on the first bounce after a break of the 10-week MA, as we still want to avoid shorting a breakdown at an obvious swing low.

On the stock side, $LNKD reported earnings after the close and dropped to $190 before reversing sharply back up to $205, where it basically chopped around until the 8 p.m. close.

The monthly chart of $LNKD is in great shape. However, if the morning action breaks the two-week low and holds, then odds are that $LNKD may have much more work to do before heading higher. If $LNKD holds up tomorrow morning, then a move above $230 could spark a ton of buying interest.

We lowered the entry price in $FB to just above Thursday’s high. We also lowered the stop in $LNKD back below the two-week low.

We like $HIMX as a potential unofficial trade tomorrow if it can clear $14.30, with a stop below 13.05. The reason why we are not listing as an official setup is because it reports earnings late next week.

A quick note on the timing model. Just because we are on a sell signal does not mean that we can’t buy stocks or ETFs. Our timing model is a guide, not a set of concrete rules. That being said, we know that when in sell mode, establishing 3-5 new positions in a week without any improvement in the model is a bit too risky. However, adding 1 or 2 new positions with light size is fine.