Not surprisingly, Friday’s trading session ended the week much like all the other days — very choppy, narrow trading range, and a lack of follow-through that made anything other than quick scalping difficult to do. The one difference from Friday’s session over the rest of the week was that volume was a lot stronger, but that is likely attributed to Quadruple Witching options expiration day, which typically sees a spike of volume on the open and close. Therefore, I was not too excited about the spike in Friday’s volume.
The key resistance level to watch with SPY today is the upper channel of the downtrend from the highs of December 2, which has served as resistance for three weeks. The resistance is currently at the 90.25 area (897.20 for S&P futures). As we often see with major moving averages, the 40-period MA on the 60 minute chart closely correlates to this trendline. Important support on SPY is at 89.30 (887 area for S&P futures). I have labeled these levels on the chart below:
In addition, QQQ is poised to breakout above its trendline resistance also and briefly probed above that level into the close on Friday. If QQQ gets above Friday’s high of 25.45 (1027 for Naz futures), it will have also broken the upper channel resistance of the three-week downtrend line as well as its 40-MA on the 60 min. chart. Support is just below current price at 25.00 (1010 for Naz futures). The setup in QQQ looks similar to the SPY chart. Take a look:
Overall, many of the daily charts are starting to form rounded bottoms, which usually serves as a support base. Many indices rallied up to their 50-day MAs on Friday, setting up today to be a nice breakout if there is any strength in the market today. Although we think the market could see a little breakout action during the next couple of days, we don’t expect the week to see much more follow through than last week because many investors and traders will not be participating in trading due to the holiday. The week of Christmas is usually marked by light volume and a lack of conviction as most investors wait until after the holidays to take a stance in the market. As such, we recommend you use caution and adjust your trading plan appropriately by reducing your share size and taking profits a little quicker than usual, at least on half your position size.
Remember that the markets close at 1:00 pm EST on Tuesday and are closed the entire day on Wednesday (Christmas Day). We will be publishing The Wagner Daily every day except Wednesday this week and our ETF Real-Time Room will be open during the same hours as the market this week. We will also be presenting a complimentary mini-lesson in our ETF Real-Time Room after the close today entitled “The Power of Trailing Stops” and you are invited to attend. E-mail us for details if you have not already done so.
Today’s watch list:
QQQ – Nasdaq 100 Index Tracking Stock
Trigger = 25.50 (above
Friday’s high and the 50-day MA)
Target = 26.20 (high of Dec. 17)
Stop = 25.15 (below Friday’s close)
Notes = The Qs should see a solid move if it can break above Friday’s high because that also would represent a break of multiple moving average resistance on various time frames, the most important being the 50-day MA.
DIA – DIAMONDS (Dow Jones Industrial Average Tracking Stock)
Trigger = 85.40 (above
Friday’s high and the 50-day MA)
Target = 86.50 (the 20-day MA)
Stop = 84.80 (below Friday’s close)
Notes = Another breakout play if it triggers. Was strong into the close on Friday
BBH – Biotechnology HOLDRS
Trigger = 90.45 (above
the 200-day MA)
Target = 102.00 (highs at end of May)
Stop = 87.75 (below the 50-day MA)
Notes = We are still stalking this one for an entry on a break of the 200-day MA. We liked the relative strength the sector showed on Friday afternoon. The cup and handle pattern with consolidation near the 200-MA is just itching to break out and we want to catch it when it does.
Daily Reality Report:
Because of the increased number of intraday
trades in our new ETF Real-Time Room, we are in the process of modifying the way
we report daily results in order to minimize confusion to subscribers of The
Wagner Daily. We will continue to report and update you on open positions
each morning; you will always know where we stand with any open positions that
were discussed in the newsletter. In addition, all trade statistics will
continue to be compiled as they were before. However, we will be displaying the
summary of all intraday trades (discussed in the ETF Room) only once per week
(in The Wagner Weekly) instead of daily. This is a more efficient and
less confusing way of reporting our trades, especially on days when we enter the
same position two or three times intraday.
Click here to read
the details on how we calculate our Reality Report statistics.
Trades only from The Wagner Daily (ETF
Intraday Real-Time Room trades not reported):
SMH triggered and we entered it on Friday morning per the daily newsletter.
- SMH long –
Bought 23.70, stop raised to 22.95, target 24.85, open points = (0.40), open P/L = ($83)
Glossary and Notes:
Remember that opening gaps that cause stocks
to trigger immediately on the open carry a higher degree of risk because the
gaps (both up and down) often do not hold. Use caution if trading stocks with
large opening gaps.
Trigger = Exact price that stock must trade
through before I will enter the trade. If a long position, I will only enter the
stock if it trades at the trigger price or higher. For a short position, I will
only enter the stock if it trades at the trigger price or lower. It is really
important to only enter the position if the trigger price is hit, otherwise the
trade becomes riskier.
Target = The anticipated price I am
expecting the stock to go to. However, this does not mean that I will
always hold the stock to that price. If conditions warrant, I will sometimes
take profits before that price, in which case I will notify you of the
Stop = The price at which I will have a physical stop
market order set. As a position becomes profitable, this stop price will often
be adjusted to lock in profits. Again, you will always be notified of such
changes in the next daily report or intraday if you subscribe to intraday
SOH = Sit On Hands (Don’t Make Trades)
under Deron’s Report Card is based on the actual price I closed my trade at, not
just the theoretical target or stop price listed for each stock. Open P&L is
based on the closing prices of the most recent trading day.
otherwise noted, average holding time is 2 days to 2 weeks once a position is
triggered. Updates on open positions are provided daily.
Yours in success,
Deron M. Wagner