Potential buy entry in Financial Bear 3x (FAZ)


Stocks opened modestly higher but struggled for most of the session before selling off sharply into the close. All of the major indices ended the day in the red. The Nasdaq and small-cap Russell 2000 both slid 0.5% day over day. The S&P MidCap 400, S&P 500 and Dow Jones Industrial average shed 0.4%, 0.3% and 0.2% respectively.

Trade was light on Monday. Turnover declined by 10% on the Nasdaq and 5.4% on the NYSE. Declining volume slightly outpaced advancing volume by a factor of 1.6 to 1 on the NYSE and 1.5 To 1 on the Nasdaq. Despite the market being down yesterday, market internals did not provide any sign of institutional distribution.

The Oil Service HOLDRS ETF (OIH) hit our buy trigger yesterday and we entered the trade. OIH broke out from a five day consolidation base and rallied strongly for most of the day. However late day selling pressure left this ETF well off its intraday high, but above the breakout. For our subscribing members, trade details are posted in the open positions section of the newsletter.

The Direxion Financial Bear 3X Shares (FAZ) has been showing signs of institutional accumulation during the recent selloff. As the price of this ETF has been declining, the accumulation/distribution histogram has been in an uptrend. This divergence suggests that FAZ may soon see a reversal in price action. A volume fueled move above the two day high of $41.61 may provide a buy trigger for FAZ. We will be monitoring FAZ closely for a potential long entry.

The iShares Dow Jones US Medical Devices ETF (IHI) has been consolidating in a tight formation for the past six days. Yesterday’s inside candle (traded within the intraday range of previous day’s candlestick) suggests a breakout may be at hand. A move above the two day high near $63.80 may provide a purchase opportunity in IHI.

The Nasdaq continues to exhibit relative weakness to the broad market. This Nasdaq was the only major index to close below its 50-day moving average yesterday. If the Nasdaq is unable to reclaim this key support level, the next significant move in the market could very well be lower.

Today’s Watchlist:

There are no new official 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

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  • OIH buy setup triggered. Per intraday alert, we lowered the stop price in XLF.

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      Edited by Deron Wagner,
      MTG Founder and
      Head Trader