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PETM, TOL, RYL, DVA, ONXX, ALXN, Z, and CAB are a few stocks we are monitoring for an entry next week. Z is interesting because it is a recent IPO with huge short interest at 77% of the shares in float, which makes it a potential short squeeze candidate. A short squeeze occurs when a heavily shorted stock breaks out and the short sellers are forced to buy back the stock to cover, which in turn creates plenty of fuel for the breakout (especially when the shorts refuse to take a loss).

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In the August 21 issue of The Wagner Daily (subscribers may log into the online archives to review it), we pointed out that the S&P 500 and Nasdaq indices had run into pivotal resistance of their four-year highs. That they, we suggested that at least a near-term pullback would likely occur before these indexes broke out to new highs. So far, that is exactly what is happening. Let’s take an updated look at what has occurred in both indexes since then.

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In yesterday’s commentary, we said there were three ETFs on our “unofficial” watchlist that we were monitoring for potential buy entry in the near-term. They were: SPDR Gold Trust ($GLD), iPath Grains ETN ($JJG), and S&P Health Care SPDR ($XLV). Of these three, we are now adding to of them to our “official” ETF trading watchlist for potential buy entry today. The first is $GLD, which has now formed a tight “bull flag” formation over the past four days. But rather than buying $GLD, we are targeting the leveraged Gold Double Long ETN ($DGP) for buy entry instead.

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One ETF on our radar screen for potential buy entry this week is SPDR Gold Trust ($GLD), a commodity ETF that tracks the price of spot gold futures. We have not discussed this ETF for a long time because it has been in correction mode, retracing from its all-time high, for nearly a year. It has also been rather flat for the past several months. However, upon closer examination of the big picture, we see that momentum of $GLD may now be reversing, which could provide for a solid swing trading opportunity on the long side.

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Along with iShares Nasdaq Biotech ($IBB), which we are already long, the S&P Healthcare SPDR ($XLV) is one of the few industry sector ETFs showing relative strength to the main stock market indexes because it has been consolidating near its all-time high for the past four weeks. Starting with the daily chart interval, notice that $XLV has been clinging to support of its 20-day exponential moving average for the past week, even as the major indices have been pulling back off their highs over the past several days.

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The iShares Nasdaq Biotech ETF ($IBB), which we have been long in our model trading portfolio since August 14, showed relative strength by rallying 0.9% yesterday. More importantly, it closed just above an area of near-term price resistance. In case you missed our original August 14 buy entry, the chart pattern of $IBB shows the ETF is now presenting a secondary buy setup (or a point to add additional shares). The first chart below is of the hourly timeframe, which shows yesterday’s breakout above the near-term horizontal price resistance…

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In yesterday’s commentary, we said that, “The S&P 500, Dow Jones Industrial Average, and Nasdaq 100 indices have reached pivotal ‘make it or break it’ levels that may lead to a tug-of-war between bulls and bears and a bit of volatility in the coming days.” Indeed, a tug-of-war and increased volatility was exactly the theme of yesterday’s trading session. Given that the major indices were testing major pivotal resistance of their multi-year highs yesterday, we were not surprised to see a pullback. That’s why we also said yesterday that, “a moderate pullback or ‘shakeout’ in the interim (of stocks moving higher) would not be surprising.” Nevertheless, it was not good that the Nasdaq, S&P, and Dow each formed an ugly chart pattern known as a “bearish engulfing candlestick” on their daily charts yesterday. This occurs when the price of an index, ETF, or stock opens above the previous day’s high, but sells off to close below the prior day’s low.

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The S&P 500, Dow Jones Industrial Average, and Nasdaq 100 indices have reached pivotal “make it or break it” levels that may lead to a tug-of-war between bulls and bears and a bit of volatility in the coming days. Specifically, each of these indexes are now testing key resistance of their multi-year highs that were formed in March or April of this year. Let’s start with a look at the daily chart pattern of the S&P 500 SPDR ($SPY), a popular ETF trading proxy for the benchmark S&P 500 Index…

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Since selling off to “undercut” support of its 50-day moving average two weeks ago, the inversely correlated ProShares UltraShort Euro ($EUO) has been trading in a tightening, sideways range, holding above support of its primary uptrend line and 50-day moving average. As the daily chart below illustrates, the primary uptrend has been in place for many months, while $EUO has been in a four-week retracement off its July high…

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