More Reward, Less Risk


Stocks rallied sharply on Tuesday and closed near session highs. All of the major indices added more than 1.5%. The Nasdaq put in an impressive performance led largely by the recent good fortune of AAPL and GOOG. The tech rich index led the advance as it posted a 2.2% gain on the Day. The small-cap Russell 2000 also added 2.2% while both the Dow Jones Industrial Average and the S&P 500 tacked on 1.63% by the closing bell. The S&P MidCap 400 ended the day higher by 1.9%.

Internals ended the day mixed. Volume ended the session higher on the Nasdaq by 7.2% but fractionally lower on the NYSE. Advancing volume overpowered declining volume on both exchanges. The spread ratio ended the session at a healthy 5.5 to 1 on the NYSE and 5.3 to 1 on the Nasdaq. Despite the slightly lower volume on the NYSE it would be hard to argue that Tuesday was not an accumulation day for the broad market. Based on the strength of the price action it seems likely that institutional investors were actively engaged in Tuesday’s advance and we would classify the move as an accumulation day for the market.

After a sharp undercut of its 20-day and 50-day moving averages, the PowerShares Dynamic Food & Beverage ETF (PBJ) reversed and rallied decisively back into its three week trading range yesterday. As a result PBJ is now well positioned for a possible breakout move to new highs. A rally above the four day high of $20.43 could present a buy entry in this ETF. Ideally we would like to see several days to several weeks of consolidation or a pullback to enter a position in PBJ. We will be monitoring this ETF closely for a possible buy trigger.

The iShares Nasdaq Biotechnology ETF (IBB) has held excellent relative strength to the market during the recent rounds of selling in the broad market. On Monday IBB formed a reversal candle after undercutting support at its 20-day and 50-day moving averages. A volume fueled rally back above the four month high of $110.02 could present a buying opportunity in this ETF.

The whipsaw action in the market has made it difficult to identify quality setups that offer a reasonable risk/reward ratio. During times of high volatility we find it advisable to wait for the market to “settle down” and be patient in order to identify quality setups. A period of tight consolidation is generally needed for the market to make a sustainable advance.

Today’s Watchlist:

There are no new 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

    position summary

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  • URE buy entry triggered. Per intraday alert, sold SH ahead of the stop due to the strong morning action in the market.
  • 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