Rally Unsustainable Without Volume: (EWM)


Stocks closed higher for a fourth straight day but on lower trade. All five major indices closed near session highs. However, in a reversal over Wednesday’s action, large cap stocks took the leadership role as both the Dow Jones Industrial Average and the S&P 500 added 1.7%. The S&P MidCap 400 put in a solid performance as it tacked on 1.6%. The small-cap Russell 2000 improved by 1.4% while the Nasdaq lagged for the first time in four days but still closed higher by 1.3%.

Market internals were mixed on Thursday. Volume fell considerably on both exchanges. By the closing bell trade on the Nasdaq had tumbled by 15.0% and on the NYSE by 12.0%. Still, advancing volume held the upper hand as it outpaced declining volume by a ratio of 7.8 to 1 on the NYSE and 3.2 to 1 on the Nasdaq. Despite the strength of Thursday’s price action, the light volume suggests that institutional traders were not actively participating in the move. Consequently we would not classify yesterday as an accumulation day on Wall Street.

Via an intraday alert we entered a long position in EUO after the five minute mark yesterday. We liked the entry in this ETF because it gapped down into support near $18.00. Further, given the strength of the recent breakout buyers are likely to be in abundance near major support levels. Trade details are available for our subscribers in the watchlist section of the newsletter.

Over the past week EWM has been exhibiting relative weakness as it lost support of its swing low from August 26th. Over the past two days EWM has formed back to back reversal candles and now appears to have formed a bottom. A rally back into resistance of the August 26th low and the down trending 20-day EMA could provide a shorting opportunity in this ETF.

Based on price action alone yesterday’s rally was impressive. However the poor volume definitely places in question the strength of the rally. As long as institutions continue to sit on the sidelines it is unlikely that any abrupt moves higher are sustainable.

Today’s Watchlist:

There are no new official setups for today. 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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  • Per intraday alert, bought EUO on a pullback.
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      Edited by Deron Wagner,
      MTG Founder and
      Head Trader