Commentary:

Stocks finished up last week on a quiet note, as the major indices held on to their impressive gains from the rally that began on October 28. The major indices sold off modestly in the morning and traded sideways throughout the afternoon, but buyers stepped in during the final thirty minutes and enabled the broad market to close mostly flat. Both the S&P 500 and Dow Jones Industrials finished unchanged, while the Nasdaq Composite advanced 0.4%. The Russell 2000 and S&P 400 Midcap indices each dropped less than 0.1%.

Total volume in both the NYSE and Nasdaq declined by approximately 25% last Friday, indicating traders and investors took a break from the markets. Given that the major indices were mostly unchanged, it could be considered a positive that volume declined as well. If volume had increased on a day of flat market activity, it would have indicated bearish “churning” activity that often precedes a reversal. But, so far, there have been no signs of traders selling into the recent strength.

Not surprisingly, industry sector performance was rather mixed last Friday as well. However, the Biotech Index ($BTK) showed relative strength and gained 0.8%. This caused BBH, which we bought on November 3, to rise another 2 points. As anticipated, it finished the week at a new 5-year high closing price of $201. Due to a complete lack of overhead resistance, we expect further gains in the coming week, so we will trail a stop to protect profit and maximize the gain along the way:

Another ETF that is looking good for a potential breakout is QQQQ (Nasdaq 100 Index). After gapping up above its three-month downtrend line on November 3, it followed up with another day of gains on November 4 and closed right at a pivotal breakout level on its weekly chart. QQQQ has essentially been consolidating since July and is only a few cents away from setting a new 52-week closing high. The red horizontal line on the weekly chart below marks the prior 52-week closing high of $40.13, which QQQQ tested but closed below last Friday:

Because QQQQ is only a few cents from a new 52-week high, be careful about the possibility of a false breakout. Institutions know that many people have buy stops just over the $40 level here, so we would not be surprised to see whippy action in an attempt to “run the stops.” However, high volume and strong market internals would likely confirm whether a breakout is for real or merely a probe above the highs. It may pay to wait for a confirmed close above this resistance level, then wait to buy the first subsequent pullback. This provides you with a lower risk entry point than buying the initial breakout attempt.

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Today’s Watchlist:

We are stalking QQQQ for a potential long entry today, as it closed near the breakout level on its weekly chart. However, we feel it is likely to consolidate a few days here before breaking out to a new high. We will be monitoring QQQQ and will send an intraday e-mail alert if/when we decide to enter it today. For now, we will focus on managing our new long position in BBH.

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Daily Performance Report:

Below is an overview of all open positions, as well as a performance report on all positions that were closed only since the previous day’s newsletter. Net P/L figures are based on the $50,000 Wagner Daily model account size. Changes to open positions since the previous report are listed in red text below:

Open positions (coming into today):
BBH long (150 shares from Nov. 3 entry) –
bought 197.30, stop 192.70, target new high (will trail stop), unrealized points = 3.70, unrealized P/L = + $555

Closed positions (since last report):

(none)

Current equity exposure ($100,000 max. buying power):

$30,150

Notes:


We remain long BBH with the same stop, which we will trail higher upon the first “swing low” being determined.

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here for glossary and explanation of terms used in The Wagner Daily

Click here to view MTG’s past performance results (updated monthly).

Edited by Deron Wagner,
MTG Founder and
Head Trader