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Following an undercut of its 50-day MA, on July 13th, the S&P Select Financial SPDR Fund (XLF) gapped up and reclaimed support of its 50-day and 20-day moving averages, on a burst of volume. Since that time, XLF has spent the last four sessions consolidating above support of its 20-day EMA. Further, on July 17th, XLF formed a reversal candle on another burst of volume (day-over-day). A move above the July 17th high of $14.78 could provide a buying opportunity in this ETF.

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Since reclaiming its 200-day MA in October of last year, the ProShares UltraShort Euro ETF (EUO) has been in a significant uptrend. EUO is now within striking distance of setting a new 52-week high and could provide a buying opportunity on a correction. A pullback and undercut of the 20-day EMA could present an ideal buy entry point for this ETF. As always, we will be looking for a reversal candle or similar setup, as a potential signal to enter this trade.

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Last Thursday, on a burst of volume, the United States Natural Gas Fund (UNG) formed a bullish reversal candle, as it undercut its 20-day EMA and reversed to close near session highs. This type of price action serves to “shake weak hands out of the trade” and sweep poorly placed stops. We recently exited UNG at breakeven because we didn’t like the price action in the broad market. Since then however, UNG has continued to consolidate above support of its 20-day EMA and now appears ready for a push higher. It is important to remember that every trade stands of its own merits. There is nothing wrong with re-entering a trade if it meets the appropriate criteria. In fact, it would be a poor trading practice to not enter a trade if a legitimate setup triggered. This should not be confused with “revenge trading,” which is the practice of re-establishing a position without a legitimate trigger, in an emotional attempt to prove the market wrong. We are placing UNG on the watchlist. Trade details are available to our clients in the watchlist section of the newsletter.

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Since the market began selling off over a week ago, the iShares Nasdaq Biotechnology ETF (IBB) has show considerable realative strength to the broad market. While the Nasdaq was losing support of both its 20-day and 50-day moving averages, IBB only undercut its 20-day EMA. Further, IBB quickly regained support of the 20-day EMA after undercutting it sharply yesterday. IBB ended the day near session highs. A volume fueled move above $131.01 could present a buying opportunity in this ETF. We are monitoring IBB closely for a possible long entry.

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As the S&P 500 has pulled back and undercut its 50-day MA over the past five days, the iShares Dow Jones US Real Estate Index ETF (IYR) has consolidated near its 52-week high and held support of its 10-day moving average. This demonstration of relative strength suggests that if the market reverses higher, IYR could be one of the first ETFs to set new highs. We will continue to monitor IYR for a possible long entry.

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Yesterday, the Vanguard MSCI Emerging Markets ETF (VWO) formed a bearish reversal candle, as it gapped up at the open, but sold off throughout the day, to close near session lows. Further, the selling pressure was accompanied by higher volume and VWO ended the session below support of its 20-day and 50-day moving averages. A move below yesterday’s low of $38.90 could result in a shorting opportunity in this ETF. Trade details are available to our subscribers in the watchlist segment of the newsletter. For those of you trading in qualified accounts, buying EUM above yesterday’s high, would serve as a reasonable proxy for shorting VWO.

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Since the market appears to be in consolidation mode, it’s probably a good time to do a review support and resistance levels in the broad market. The following chart of the Powershares Nasdaq Trust (QQQ) shows that the price action in this ETF has been contained by a tight trend channel (Red lines) since the June 4th swing low. Trend channels provide an excellent gauge for determining support and resistance levels. The trend channel suggests that QQQ should find support near $62.40 and resistance near $66.00. Other key support levels include the convergence of the 20-day and 50-day moving averages ($63.30 – $63.50), the 200-day moving average ($60.92), the June 28th swing low ($61.54) and the June 4th swing low ($60.04).

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From March through Late June of this year, the S&P Select Consumer Staples SPDR ETF (XLP) consolidated, forming a potential support base for a breakout. On June 29th, XLP broke out from this base to set a new 52 week high. Further, this breakout occurred on a substantial uptick in volume. Over the past two sessions, XLP has pulled back and could provide a buying opportunity on an undercut of its 10-day and/or 20-day moving averages. We are monitoring this ETF closely for the formation of a reversal candle that could serve as an entry pivot in XLP.

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Since hitting an all time high last September, the SPDR Gold Trust ETF (GLD) has been in an intermediate downtrend. However, notice that on the weekly chart, GLD has formed numerous reversal candles, as it has established a support level near $148.00. If GLD can find its way back above $160.00, it will likely test resistance at its downtrend line. A break of the downtrend line could result in a significant move higher in GLD. Although this ETF has some work to do in order to reclaim its uptrend, it does appear to have found strong support at $148.00. Further, the significant number of reversal candles on the weekly chart suggests that GLD may soon make a move to resume the long term uptrend.

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