Commentary:
After beginning the week in pullback mode, stocks concluded the holiday-shortened week with a broad-based round of impressive gains. The Nasdaq Composite tacked on 3.9%, the S&P 500 3.8%, and the Dow Jones Industrial Average 3.1%. Small and mid-cap stocks rocketed higher. The Russell 2000 and S&P Midcap 400 indices ramped up 5.8% and 5.5% respectively. A majority of last Thursday’s gains resulted from an opening gap up in the broad market. The major indices subsequently drifted sideways throughout the remainder of the day, though a late-day push enabled stocks to finish at their intraday highs.
Driven by positive, surprise news in the banking sector, total volume in the NYSE rocketed 39% higher. Turnover in the Nasdaq increased 17% above the previous day’s level. Trading in the NYSE rose back above 50-day average levels, but Nasdaq volume remained lighter than average. Regardless, both the S&P and Nasdaq clearly registered a bullish “accumulation day,” a very positive follow-up to a few days of price retracement. Considering the session preceded a three-day weekend, the large gains combined with overall volume levels equated to a rather bullish session.
Last Thursday, the Internet HOLDR (HHH) rallied to close firmly above its 200-day moving average, a long-term indicator of support or resistance, for the first time since December of 2007. Clearly, this indicates a change in the long-term bias of the sector. The breakout of HHH to close above the 200-day MA, as well as its highest level of the year, is shown below:
Presently, our long position in HHH is showing an unrealized gain of 3.2 points (nearly 10%) since our March 23 entry. We bought HHH a few weeks ago because it was one of the first ETFs to show relative strength by rallying to its 2009 high. Though the breakout above the 200-day MA makes HHH one of the few candidates for longer-term investing, we entered the trade as a short to intermediate-term position. As such, our original price target is just a few points higher. The stop is currently just below the 50-day MA (the teal line), but we will soon adjust it higher, to be closer to the 20-day EMA (the beige line).
Another of our positions looking good, albeit with a different chart pattern, is Claymore Global Solar Energy (TAN). Last week, it gapped up to break out above the high of a bullish consolidation pattern, and is now testing the area of its 2009 highs. Based on this pattern, and the relative strength of the sector, TAN could become a market-leading ETF in the coming week:
Most of the time, trading ahead of holiday weekends is marked by dull price action and lackadaisical volume levels. But the fact that last Thursday’s session consisted of large gains on solid turnover reminds us that anything can happen ahead of holidays. The strong advance enabled the major indices to close at their highest levels since the current rally began. However, the S&P 500 and Dow Jones Industrials remain below resistance of their prior highs from February 2009. This week, there’s a good chance both the S&P and Dow will test those February highs, which are shown on the two daily charts below:
Since the dashed horizontal lines on the charts above mark significant resistance of the February 2009 highs, you may want to set price alerts on your trading software, so that you’re instantly notified if the S&P and/or Dow test their February 2009 highs. Doing so is important because the February highs could easily give the broad market the perfect excuse for a substantial pullback. In late March, we warned about the Nasdaq 100’s February high leading to a pullback, and that’s exactly what happened on the first test of its February high (the index has since broken out to a new 2009 high). Therefore, a test of the February 2009 highs could provide an ideal exit point to sell any short-term positions into strength, or at least trail protective stops more tightly.
Today’s Watchlist:
There are no new ETF setups in the pre-market, as we now have seven open positions in our portfolio. As always, we’ll send an Intraday Trade Alert if we enter anything new.
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):
- Surprise news from Wells Fargo in last Thursday’s pre-market session sparked a huge opening gap in the banking sector. As such, SKF opened below our stop, thereby triggering the MTG Opening Gap Rules. Though it held above the low of the first 20 minutes throughout most of the day, a late-day surge in financials caused SKF to break down to a new intraday low, stopping us out in the process. Nevertheless, because our share size was properly set to allow for a wide stop, the loss in SKF was still in the vicinity of the capital loss from an average losing trade. Furthermore, SKF moved much lower after hitting our adjusted stop. Although it was a losing trade, the risk-reward of buying SKF was quite positive, and it wasn’t a bad idea to have a single bearish position to hedge our long positions. We do not regret the trade, as we stuck to our plan and managed it properly.
- Per Intraday Trade Alert last Thursday, several stops have been updated.
- 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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HHH long (200 shares from March 23 entry) – bought 35.25, stop 37.24, target 41.80, unrealized points = + 3.23, unrealized P/L = + $646
TAN long (500 shares from March 31 entry) – bought 7.05, stop 7.58, target 9.75, unrealized points = + 0.71, unrealized P/L = + $355
UGA long (175 shares from March 4 entry) – bought 23.41, stop 22.61, target 31.30, unrealized points = + 1.70, unrealized P/L = + $298
ERX long (150 shares from April 1 entry) – bought 24.52, stop 26.48, target 39.90, unrealized points = + 2.68, unrealized P/L = + $402
USO long (150 shares from March 17 entry) – bought 29.08, stop 29.38, target 38.70, unrealized points = + 1.61, unrealized P/L = + $242
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)
SLV long (400 shares from March 5 entry) – bought 13.14, stop 11.71, target 16.35, unrealized points = (0.97), unrealized P/L = ($388)
Closed positions (since last report):
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SKF long (60 shares from April 8 entry) – bought 91.24, sold 75.55, points = (15.69), net P/L = ($943)
Current equity exposure ($100,000 max. buying power):
- $47,134
Notes:
Edited by Deron Wagner,
MTG Founder and
Head Trader