Semis ready to another wave up? ($SMH)

market timing model:

– Signal generated on the close of April 30

We are now in confirmed buy mode, which means that we can go on margin if needed.

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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 watchlist

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closed positions:

open position summary

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ETF position notes:

  • $XLE buy setup triggered on the open.

stock position notes:

  • $YELP and $NOW buy setups triggered.

ETF, stock, and broad market commentary:

After a decent morning advance, stocks sold off in the afternoon with most averages closing just about flat on the day. Turnover eased on both exchanges, which is a good sign, as stalling action accompanied by higher volume is known as churning (selling in to strength).

Energy Select Sector SPDR ($XLE) was added to the model portfolio yesterday, as it triggered a buy entry on the open. $XLE followed through on last week’s breakout with a solid 1.5% move yesterday. iShares MSCI Indonesia ($EIDO) broke out to new highs yesterday as well, and is in good shape.

Claymore/AlphaShares China Real Estate ETF ($TAO) is forming a cup and handle type pattern on the daily chart below. We are already long $TAO (with partial size) from a pullback to the 10-day MA on May 1. On a recent pullback, $TAO held support of the rising 20-day EMA and has pushed higher.

$TAO Cup and handle

The pullback from February to April formed the cup portion of the pattern, while the recent consolidation off the highs of May is the handle. We plan to add to our position in $TAO on a breakout unless the the price action consolidates for another week below 23.50, which could then lead to a lower entry point.

Since selling Market Vectors Semiconductor ETF ($SMH) at $38.44 on May 13, the price action has chopped around in a tight range near the highs of the last move up. The shallow correction is a bullish sign, indicating that the uptrend is very strong.

$SMH Short-term consolidation

With $SMH holding the 10-day MA, the current consolidation might be all we get in terms of a pullback off the high. If so, we do not want to miss the next wave up, so we are adding $SMH to the watchlist as a potential breakout entry. If $SMH pulls back in before breaking out, then we could possibly see a pullback entry develop.

$AMBA blasted to new highs on big volume. The strong demand at the breakout was a very bullish sign, as the best breakouts are always accompanied by big volume.


Along with $XLE, we added two new stocks to the model portfolio in $NOW and $YELP. $YELP started out with a bang, but lacked any follow through and sold off late in the day. As long as $YELP holds above $30 during the next two days, then the price action could potentially reverse and take out Monday’s high later this week. $NOW is in good shape as long it remains above the 20-day EMA.

The $URI buy stop was removed from the watchlist because we are waiting for a lower risk entry point to develop. Our $SLCA buy limit order is still live.

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