Potential Short Setup in Gold ($GLD)

market timing model:

– Signal generated on the close of April 24 (click here for more details)

today’s watchlist (potential trade entries):

$todays watchlist
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open positions:

Below is an overview of all open positions, as well as a report on all positions that were closed only since the previous day’s newsletter. Net P/L figures are based a $100,000 model portfolio. Changes to open positions since the previous report are listed in pink shaded cells below. Be sure to read the Wagner Daily subscriber guide for important, automatic rules on trade entries and exits.

$todays watchlistHaving trouble seeing the open positions graphic above? Click here to view it directly on your web browser instead.

closed positions:

open position summary
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ETF position notes:

  • No setups triggered.

stock position notes:

  • $AMBA, $URI, and $BLOX buy setups triggered. Sold $CLDX on the open to lock in a $600 gain on 3000 shares.

ETF, stock, and broad market commentary:

After trending higher for much of the day, stocks retreated in the final 90 minutes of trading, closing well off the highs of the session. Turnover increased on both the Nasdaq and NYSE. The higher volume and weak closing action points to a bit of churning (bearish stalling action at/near the highs) in the major averages. With the S&P 500 and Nasdaq nearing prior highs, a bit of stalling action is not out of the ordinary. However, if the market follows through to the downside with multiple, heavy volume distribution days, then that would obviously be cause for concern.

After an ugly, two day meltdown in the SPDR Gold Trust ETF ($GLD), the price action has bounced higher the past two weeks and over-cut the 10-day moving average. Thursday’s candle may have wiped out some of the “late to the party” short sellers, who attempted to go short beneath the low of 4/22 on 4/23. Thursday’s gap up may have forced anyone who was on the fence about covering to throw in the towel by the close.

$GLD bounce to 10-day MA

Thursday’s candle presents us with a low-risk reversal entry, if the price action can take out Thursday’s low. By shorting the breakdown, we avoid shorting in to strength, which is very tough to do when there is very little overhead resistance.

Whenever possible, we prefer to use an inverse ETF to play the short side to allow those with qualified accounts to participate in the trade. Rather than short $GLD, we will be buying the Deutsche Bank AG DB Gold Double Short ($DZZ). The setup is detailed on the chart below:

$DZZ buy setup

$SMH has follow through nicely to the upside the past few days, and we are now up about 4% on our average entry price of 35.28. $UNG’s volatility yesterday was due to the weekly natural gas inventory report, but as long as $UNG holds at or around the 20-day EMA the action is still bullish. $EIDO remains above the breakout pivot but has failed to extend much from our entry point. The best breakouts tend to pull away from the pivot level quickly, so $EIDO may need a bit more time to consolidate.

On the stock side, we sold 300 shares of $CLDX, locking in a $645 gain on an 18% move. We still have 200 shares remaining, which we plan to hold as long as the price action remains above the 10-day MA.

We added three new stock positions yesterday in $BLOX, $URI, and $AMBA. $URI we plan to “slow play”, as it is a big institutional leader. $AMBA closed up 7% on big volume, which is a great sign. $BLOX failed to extend much beyond our buy point, but volume was strong.

We have one new setup on today’s watchlist in $NEO. Our holding period for trades depends on the type of stock we are buying. For example, $LNKD, $URI, and $AMBA are A-rated stocks, which we prefer to hold for more than 4 weeks if all goes well. $CLDX and $NEO are examples of stocks that we want to hold for a quick 1-3 week move. $NEO printed a bullish reversal candle on higher volume yesterday, which gives us a clear setup. The entry is above the reversal candle high, and the stop is beneath the low of the same day. Because $NEO’s liquidity is not A-rated, it is a setup that we are comfortable taking only small size in, and that is why our share size is very light and the risk is only $250. That being said, these smaller stocks can be quite explosive, so a small position can still provide us with a decent gain.

$NEO Breakout

relative strength combo watchlist:

Our Relative Strength Combo Watchlist makes it easy for subscribers to import data into their own scanning software, such as Tradestation, Interactive Brokers, and TC2000. This list is comprised of the strongest stocks (technically and fundamentally) in the market over the past six to 12 months. The scan is updated every Sunday, and this week’s RS Combo Watchlist can be downloaded by logging in to the Members Area of our web site.

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