market timing model:
Confirmed Buy – Signal generated on the close of September 4 (click here for more details) (we are on a buy signal from the close of Aug. 16)
today’s watchlist (potential trade entries):
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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 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 pink shaded cells below. 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:
- JJG triggered its stop and we are out.
stock position notes:
- REGN triggered the adjusted stop and we are out with a +$600 gain.
- ELLI buy setup triggered. ELLI is listed twice because it has two different stops.
- EQIX triggered its stop and we are out.
- Please note that we are selling 50 shares of ACAT on the open (CO=close on open).
- We raised the stop in TSO to just below breakeven.
ETF and broad market commentary:
Stocks attempted to rebound from Monday’s decline in yesterday’s session, as the major indices grinded higher in the morning. However, the buying interest was short-lived, causing the main stock market indexes to drift back down in the afternoon. The broad market still finished marginally higher, but near their lows of the day. The Dow Jones Industrial Average ($DJIA) rose 0.5% and the S&P 500 ($COMPX) gained 0.3%, but the Nasdaq Composite ($COMPX) was unchanged. The small-cap Russell 2000 ($RUT) eked out a gain of 0.1% and the S&P Midcap 400 ($MID) advanced 0.3%.
Total volume in the NYSE increased 5% above the previous day’s level, while turnover in the Nasdaq edged 1% higher. Usually, higher volume gains in the broad market would be a bullish sign of institutional buying. However, we are reluctant to label yesterday as an “accumulation day.” Even though stocks registered modest gains, the major indices surrendered most of their intraday gains and closed near their session lows. As such, it’s probably more accurate to label yesterday as a day of “churning,” which is often a sign of stealth institutional selling into strength. Nevertheless, at least stocks managed to avert a “distribution day” (higher volume losses).
Yesterday, our position in iPath DJ Grains ($JJG) hit its protective stop, just below the August 28 “swing low,” knocking us out of the trade with a small loss. We initially entered the trade because we liked the bullish “pennant” formation that was forming at multi-year highs. Despite getting stopped out of the trade yesterday, the technical trade setup still looks pretty good, and there are still favorable odds that the continuation chart pattern will follow through with a breakout to new highs. However, it now appears as though JJG will first “undercut” support of its 50-day moving average before breaking out. A quick probe below the 50-day moving average, combined with the formation of a bullish reversal candlestick, would present us with an even lower risk re-entry point than our initial entry price. If that scenario happens, we plan on re-entering the trade above the high of the reversal bar. Take a look at the daily chart below:
By entering the initial JJG trade with only partial share size, and keeping a tight stop just below support of the August 28 low, our loss in this trade was limited to only about 25% of the dollar amount of the gains in each of our two most recent two winning ETF trades ($DGP and $IBB). Losing trades are obviously an unavoidable part of the business of trading, but they are absolutely nothing to be concerned with as long as you follow a disciplined trading system that enables your winning trades to typically be at least 2 to 3 times the size of your average losing trades (2 to 1 reward-risk ratio). If JJG provides us with the re-entry scenario discussed above, we will have an even more clearly defined stop price to work with. Further, the odds of the trade working in our favor would be higher due to the “shakeout” price action below the 50-day MA.
The ProShares Ultra Russell 2000 Index ($UWM) is the only other open ETF position currently in our model portfolio. It has been holding up pretty well the past two days, but we are raising the stop price going into today’s session because a break below the three-day low could lead to a swift retracement down to its 20-day exponential moving average. This is because, as shown on the chart below, the Russell 2000 (and UWM) is now testing pivotal resistance of its 52-week high from March of 2012. With our new stop price in UWM, we will still lock in a small gain even if the ETF hits our protective stop:
As mentioned in yesterday’s commentary, we are not spotting low-risk ETF trade setups for potential swing trade entry at this time. We are monitoring iShares Hong Kong Index ($EWH) for a possible Trend Reversal buy entry, and also continuing to monitor both $DGP and $IBB for possible re-entry on a Pullback, or following the formation of a “bull flag” pattern. As always, we will alert you of any other potential ETF trade opportunities that meet the rules of our disciplined trade signals for buy entry.
stock commentary:
Not much in the way of new setups from tonight’s scans so we are going to do a quick review of each open position:
- ACAT – Due to yesterday’s high volume selloff we are reducing are share size slightly. We are selling 50 shares on Wednesday’s open to bring our size down to 12%. This leaves us with just over a half position in case the price action recovers and heads higher.
- LNKD – Continues to act well, we plan to hold through this pullback and sell into strength on the next move out.
- ELLI – We do not love Tuesday’s stalling action, but our stop is aleady split in two and our share size is reduced.
- ALNY – Looking pretty good so far but may need one more shakeout lower before it rips higher.
- DVA – Ugly action the past few days. Not much to say other than our stop remains the same.
- TSO – We raised the stop to guard against a breakdown from a failed gap up. This trade is a GONG setup (GONG = Go or no go), which means if it doesn’t take off right away we should give it very little breathing room.
If you are a new subscriber, please e-mail [email protected] with any questions regarding our trading strategy, money management, or how to make the most out of this report.
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.