Commentary:
Stocks were up sharply on Wednesday on expanding volume. All five major indices closed significantly higher. The small-cap Russell 2000 and the Nasdaq surged by 2.6% and 2.1% respectively. The S&P MidCap 400 almost eclipsed the 2% mark as it posted an impressive 1.8% gain on the day. The Dow Jones Industrial Average tacked on 1.5% while closing at a new 52 week high. The S&P 500 ended the session up 1.4%.
Market internals were positive across the board on Wednesday. Advancing volume was significantly higher than declining volume on both the NYSE and the Nasdaq. The advancing volume to declining volume ratio ended the day at 3.2 to 1 on the NYSE and 5.4 to 1 on the Nasdaq. Turnover spiked by 25% on the Nasdaq and 13% on the NYSE. Wednesday’s strong internals point clearly at significant institutional involvement in yesterday’s rally.
Given the massive gap formed yesterday, setups that meet our technical criteria a virtually nonexistent. Therefore, we will be spending the majority of our time waiting for setups to form. We are not inclined to chase the market just because it is going up (or down). A winning trade is composed of two parts: 1.The setup meets the trading rules and 2. The risk-reward ratio is in our favor. Just because a potential trade is moving in the direction expected does not mean the trade should be entered.
The Market Vectors Junior Gold Miner ETF (GDXJ) has been setting a sequence of higher lows and most recently, has made two significant undercuts of the 20-day EMA. This type of shakeout price action often precedes a breakout move as it washes out the weak hands and attracts shorting activity. An ideal long entry in GDXJ would be a pullback near $41.00, as this would fill the gap and bring GDXJ into a key support level. Alternatively, GDXJ could also offer a buy signal if it were to consolidate for several days between $40.75 and $41.75 and then rally above yesterday’s high of $42.12. We will be carefully monitoring this ETF for a potential long entry.
The Market Vectors Coal ETF (KOL) has undercut its 50-day MA two of the past three days. Yesterday, this ETF reversed sharply off this key moving average. Several days to several weeks of consolidation in the seven day trading range, followed by a volume fueled move back above the April 15th high of $49.60 may provide a buy entry signal for KOL.
Yesterday’s action was a clear follow through day for the market. The move was impressive and broad based with even lagging sectors posting gains. Based on Wednesday’s move, we would not be surprised to see all of the major indices test the 52 week highs.
Note – As a reminder, the U.S. markets will be closed on Friday, April 22nd. As such, there will be no newsletter on Friday. The next scheduled publication date for The Wagner Daily is Monday, April 25th.
Today’s Watchlist:
There are no official setups this morning. 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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Notes:
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Per intraday alert, we exited both SSG and QID below the opening five minute low.
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As traders we must always maintain the ability to take a step back during a trading slump and objectively evaluate what is going awry. All traders face this demon more often than they would like to admit. Our recent open positions in SSG and QID provide a valuable lesson in position management. We were in the money with good risk reward ratios on both trades but allowed winners to become losers. We could have managed the situation better. Over the past several weeks the market has clearly lacked follow through on both the long and short side. When the market is indecisive it is generally wise to reduce share size and/or tighten stops, manage positions more proactively (raise/lower stops, take profits). In a choppy market, when quality setups are unable to follow through within several days, it is often advisable to exit or lighten up on the trade. If we had we done so then our recent trade results would have been markedly better. Another important component to trade management is what we refer to the SOH or “sit on your hands” strategy. It often makes sense to stop trading altogether, evaluate market conditions and wait patiently for setups to develop.
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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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For those of you whose ISPs occasionally deliver your e-mail with a delay, make sure you’re signed up to receive our free text message alerts sent to your mobile phone. This provides a great way to have redundancy on all Intraday Trade Alerts. Send your request to [email protected] if not already set up for this value-added feature we provide to subscribers.
Edited by Deron Wagner,
MTG Founder and Head Trader