today’s watchlist (potential trade entries):
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 on two separate $50,000 model portfolios (one for ETFs and one for stocks). Changes to open positions since the previous report are listed in a pink shaded cell below. New entries are shaded in green cells. Be sure to read the Wagner Daily subscriber guide for important, automatic rules on trade entries and exits.
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ETF position notes:
- XRT setup was cancelled as we were unable to locate shares to short with our broker. For those who were able to enter, the setup is unofficial, but remains valid with no change in the stop. RETS also remains in play (unofficially) with no change to the stop.
stock position notes:
- No trades were made.
ETF and broad market commentary:
Stocks gapped down at the open, recovered during the morning session but then sold off into the close. Trade was light. All five major indices closed in the red. The selling was fairly even across the board with higher beta issues feeling slightly more pressure. The small-cap Russell 2000 lost 1.4% while the S&P MidCap 400 faded 1.2%. Both the Nasdaq and the S&P 500 closed lower by 1.1%. The Dow Jones Industrial Average ended the day off by 1.0%.
For the second time in as many days, market internals ended mixed. Volume increased on the NYSE fractionally but decreased on the Nasdaq by 3.6%. However declining volume overpowered advancing volume on the NYSE by a ratio of 7.2 to 1 and on the Nasdaq by a factor of 2.6 to 1.
Since setting a new swing high on May 9th, the Direxion Daily Semiconductor 3x Bear ETF (SOXS) has been riding support along its 10-day moving average. Yesterday, on a pickup in volume, SOXS recovered to close near session highs. A move above the three day high of $41.36 could present a buying opportunity in this ETF. We are placing SOXS on the watchlist. Trade details are posted in the watchlist segment of the newsletter.
Our watchlist candidate, XRT, triggered yesterday but since it was hard to borrow, we cancelled the setup. With the exception of the small-cap Russell 2000, the major indices are now all perched just above key support. The Russell lost support of its five day low yesterday and appears to be headed lower. Keep an eye on TZA as a potential long candidate above yesterday’s high of $20.87. If the market cannot recover quickly off of the current levels, a big round of selling could ensue.
Our timing model remains on a sell signal with the market beginning to break down after a few days of rest at the lows of the move. The price action could turn pretty ugly if the market is unable to catch a bid.
CRM is a short setup we will be monitoring over the next few months for low-risk entry points. This stock is a former leader that was crushed in late 2011, and has since run up about 70% to the prior high before stalling out a reversing sharply. This stock will be in plenty of trouble over the next six months if it is unable to hold above the 200-day MA.
The daily chart shows that CRM is not actionable setup at current levels, so we must be patient and wait for some sort of bounce in to resistance. We’d love to see a bounce to the 50-day MA on light volume is another week or two.
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