today’s watchlist (potential trade entries):

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 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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closed positions:

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ETF position notes:

• XME setup was cancelled.

stock position notes:

• Second half of the MDVN buy setup triggered. The MDVN entry price has been changed to reflect the average of both entries.

SPECIAL NOTE: Just to clarify, in case there was any confusion, there will NOT be a reduction in the number of trade setups provided with our service. The plays will simply be listed in the “today’s watchlist” section every day, rather than entered without notice in the middle of the trading day. As always, the number of plays the newsletter is in will be based on market conditions. 

ETF and broad market commentary:

For a second time in as many days, stocks closed lower on higher trade. The tech-rich Nasdaq led the decline as it posted a loss of 0.8%. The S&P 500 and the small-cap Russell 2000 both fell 0.6%, while the Dow Jones Industrial Average slid 0.5%. For the second day in a row, the S&P MidCap 400 dropped 0.4%.

Market internals were bearish on Thursday. Volume Jumped on the Nasdaq by 24.8% and on the NYSE by 15.0%. Declining volume was fractionally higher than advancing volume on the Nasdaq, while on the NYSE declining volume outpaced advancing volume by a factor of 1.9 to 1. Yesterday’s burst in volume points to institutional distribution on both exchanges.

Yesterday, on a pickup in volume, the Direxion Semiconductor Bear 3x ETF (SOXS) formed a reversal candle as it undercut its 20-day EMA and 50-day MA but eventually closed near session highs. Reversal candles serve to shake out the weak hands in a trade and sweep poorly positioned stops. Now that a shakeout has occurred, SOXS offers a buying opportunity above the four day high of $35.42. We are placing SOXS on the watchlist. Details for this setup can be found in the watchlist section of the newsletter.

Since gapping below its 200-day MA on April 9th, the S&P Select Energy SPDR Fund (XLE) has been consolidating below this key mark and has formed a bearish pennant like formation. A volume fueled move below the three day low of $68.81 could provide a short entry trigger for XLE. We will be monitoring XLE closely for a possible short entry.

Whenever we look to short ETFs, we only choose those that are thickly traded. Typically, we look for issues that trade more than 2 million shares per day. Such was the case with XME, as it trades 4 million shares a day. However, when we attempted to short XME yesterday, we were unable to borrow shares. Consequently, we cancelled the trade as an official play but for those of you who were able to obtain shares, it remains a legitimate trade. The alternative to XME, DUST did not trigger but we are officially putting it on the watchlist. The market appears “heavy” and is giving signs that we may be headed lower. Yesterday’s big volume and the fact that the Nasdaq closed near session lows, does not bode well for the market’s overall health. However, we are at major support of the 50-day MA on both the S&P and the Nasdaq. As such, we must be mindful that reversals often occur with an undercut of key support levels. Further, we are still in a longer term bull market despite the recent selling pressure.

stock commentary:

Although the second buy entry in MDVN took off early, the action fell sharply and closed with an ugly reversal bar. The stop remains tight due to weak market conditions and the lack of follow through from both entry points. The other long position in TISA showed great relative strength yesterday, which is exactly what we want to see over the next week or two while the market is under selling pressure. We added one new position to the watchlist in XLNX, which is a short entry beneath the low of yesterday’s reversal candle.

If you are a new subscriber, please e-mail rick@morpheustrading.com with any questions regarding our trading strategy, money management, or how to make the most out of this report.