Commentary:
With an increasingly more frequent display of resilience, stocks reversed early losses yesterday morning, finishing the day firmly higher across the board. The main stock market indexes opened more than one percent lower, but the bulls quickly stepped up to the plate, enabling stocks to settle into an upward trend throughout the rest of the day. The Dow Jones Industrial Average opened 1.6% lower, but rallied more than 3% intraday, finishing with a closing gain of 2.0%. Shaking off similar early losses, the S&P 500 and Nasdaq reversed to gain 1.7% and 1.5% respectively. Small and mid-cap stocks failed to show leadership this time. The Russell 2000 climbed 1.5%, but the S&P Midcap 400 advanced just 1.1%. All the major indices closed near their best levels of the day.
Total volume in the Nasdaq increased 6% above the previous day’s level, enabling the index to record its second straight “accumulation day.” Turnover in the NYSE, however, was 8% lighter. With only one day of higher volume losses (“distribution day”) in recent weeks, and the presence of several sessions of higher volume gains, the Nasdaq is gradually looking more bullish “under the hood.” The volume patterns in the NYSE have also been improving, but the S&P 500 has had two “distribution days,” and a few less “accumulation days.” This volume analysis tells us, without even looking at a chart, that the Nasdaq remains stronger than the S&P and Dow. This same analysis last month is the reason we bought (and later sold for a large gain) a broad-based Nasdaq ETF (QLD), rather than an ETF that tracks the S&P or Dow.
Over the next several days, the current chart pattern of the Oil Service Sector ($OSX) may present buying opportunities in select Energy ETFs. We’ve annotated the daily chart of the $OSX Index below:
There are several reasons we like the chart of the $OSX Index right now. First, the index is forming the right shoulder of an inverse “head and shoulders,” a bullish chart pattern. Second, the $OSX corrected down to support of its 50-day MA this week, then formed a bullish reversal candle yesterday. The intraday probe below the 50-day MA is bullish because it washes out the “weak hands.” A rally above yesterday’s high, in today’s session, should send the index on its way to breaking out above the neckline. If it does, follow-through in the inverse head and shoulders pattern could send the $OSX sharply higher.
If the $OSX Index shows strength in the coming days, the corresponding ETF with the most similar chart pattern is Oil Service HOLDR (OIH). However, there are several other Energy ETFs that are also poised to make another leg higher after pulling back this week. Here are a few others to consider, depending on which shows the most relative strength on the breakout: Direxion Energy Bull 3x (ERX), iShares Energy (IYE), SPDR Energy (XLE), and ProShares Ultra Oil & Gas (DIG).
Going into yesterday, we were already long U.S. Oil Fund (USO) and U.S. Gasoline Fund (UGA), both of which successfully tested support of their 50-day moving averages in yesterday’s session. Additionally, we bought ERX just before yesterday’s close, when it moved above its 20-EMA on the hourly chart, in anticipation of a “gap up” in the sector today. With crude oil futures trading approximately 5% higher in the pre-market, it looks as though all three of our energy-related ETFs should open significantly higher today. This would enable us to trail our stops higher, just below support of the newly formed “swing lows.” The iShares Medical Devices (IHI), which we analyzed yesterday, remains on our watchlist as well. We’ll continue to present new setups as the market’s consolidation develops.
Today’s Watchlist:
There are no new ETF setups in the pre-market, but IHI, RKH, and EWZ are a few ETFs on our watchlist. If we enter anything new, we’ll promptly send an Intraday Trade Alert with details.
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. Please review the Wagner Daily Subscriber Guide for important, automatic rules on trigger and stop prices.
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Open positions (coming into today):
- Per Intraday Trade Alert, we bought ERX late yesterday afternoon. No changes to stops on open positions, most of which are trading near our entry prices.
- Reminder to subscribers – Intraday Trade Alerts to your e-mail and/or mobile phone are normally only sent to indicate a CHANGE to the pre-market plan that is detailed in each morning’s Wagner Daily. We sometimes send a courtesy alert just to confirm action that was already detailed in the pre-market newsletter, but this is not always the case. If no alert is received to the contrary, one should always assume we’re honoring all stops and trigger prices listed in each morning’s Wagner Daily. But whenever CHANGES to the pre-market stops or trigger prices are necessary, alerts are sent on an AS-NEEDED basis. Just a reminder of the purpose of Intraday Trade Alerts.
- For those of you whose ISPs occasionally deliver your e-mail with a delay, make sure you’re signed up to receive our free text message alerts sent to your mobile phone. This provides a great way to have redundancy on all Intraday Trade Alerts. Send your request to [email protected] if not already set up for this value-added feature we provide to subscribers.
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TAN long (500 shares from March 31 entry) – bought 7.05, stop 5.88, target 9.75, unrealized points = + 0.05, unrealized P/L = + $25
HHH long (200 shares from March 23 entry) – bought 35.25, stop 32.49, target 41.80, unrealized points = + 0.02, unrealized P/L = + $4
UGA long (175 shares from March 4 entry) – bought 23.41, stop 20.49, target 31.30, unrealized points = (0.09), unrealized P/L = ($16)
ERX long (150 shares from April 1 entry) – bought 24.52, stop 20.40, target 39.90, unrealized points = (0.28), unrealized P/L = ($42)
USO long (150 shares from March 17 entry) – bought 29.08, stop 25.18, target 38.70, unrealized points = (0.50), unrealized P/L = ($75)
SLV long (400 shares from March 5 entry) – bought 13.14, stop 12.25, target 16.35, unrealized points = (0.30), unrealized P/L = ($120)
UDN long (700 shares from March 25 entry) – bought 25.70, stop 24.84, target 27.45, unrealized points = (0.54), unrealized P/L = ($378)
Closed positions (since last report):
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(none)
Current equity exposure ($100,000 max. buying power):
- $45,356
Notes:
Edited by Deron Wagner,
MTG Founder and
Head Trader