Commentary:
Stocks kicked off the month of May with a choppy, uneventful session of trading last Friday, though the Nasdaq secured its eighth straight weekly gain. The major indices opened near the flat line, then oscillated in a directionless, sideways manner throughout the entire day. A late-day push in the final thirty minutes of trading enabled most of the main stock market indexes to finish modestly higher. The S&P 500 and Dow Jones Industrial Average logged identical gains of 0.5%, as the Nasdaq Composite ticked just 0.1% higher. Small and mid-caps took a breather. The Russell 2000 and S&P Midcap 400 indices dipped 0.1% and 0.4% respectively. The S&P and Dow finished near their intraday highs, but the Nasdaq closed just above the middle of the day’s range.
Turnover eased across the board, causing trading in both the NYSE and Nasdaq to dip back below 50-day average levels. Total volume in the NYSE was 25% lighter than the previous day’s level, while volume in the Nasdaq receded 23%. In both exchanges, advancing volume fractionally exceeded declining volume. Overall, it was a lethargic, lackadaisical session.
Unlike most ETFs that are comprised of individual stocks, PowerShares Agriculture Fund (DBA) is a commodity ETF whose holdings consist of corn, soybean, sugar, and wheat futures contracts. While many industry sectors were flat to modestly higher last week, DBA outperformed with a 5.5% gain. More importantly, it broke out above resistance of a four-month downtrend line. Higher than average volume over the past two days helped confirm the breakout. This week, we’re monitoring DBA for potential buy entry on a pullback, ideally to near the area of its breakout level. The daily chart of DBA is shown below:
On April 30, leading solar energy player First Solar (FSLR) announced quarterly earnings that impressed Wall Street, causing the stock to subsequently gap 23% higher in the following session. This also had a positive effect on the entire clean energy sector and associated ETFs. This week, we’re looking for follow-through strength in solar energy, which should lead to breakouts in several related ETFs. Specifically, we’re monitoring Market Vectors Solar Energy (KWT) and Claymore Global Solar Energy (TAN) for possible breakout entries. The daily charts of both ETFs are shown below:
Last week, we pointed out the Nasdaq 100 and Nasdaq Composite indices became the first of the major indices to run into “brick wall” resistance of their 200-day moving averages. Whether or not this will lead to a substantial pullback this time around remains to be seen, but the 200-day MA resistance definitely remains a technical point of contention to be aware of this week. But regardless of whether or not we see a pullback, after eight consecutive weeks of gains in the Nasdaq, the overall risk/reward for new buy entries in the broad-based ETFs is not that favorable at current levels. There are select ETFs to be considered on a breakout, such as KWT and TAN above, but most of the setups we’re stalking require pullbacks to key support levels, such as their 20 or 50-day moving averages. As those strong ETFs begin to retrace, or at least consolidate for a few weeks, we’ll be looking for new buy entries on the subsequent trend resumption.
Today’s Watchlist:
There are no new setups in the pre-market today. If we enter anything new, we’ll promptly send an Intraday Trade Alert.
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 SKF last Friday afternoon. As mentioned in the alert, this is intended to be a quick momentum trade, based on the breakout above the hourly downtrend line. We intend to be in this trade no more than a few days.
- 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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SKF long (75 shares from May 1 entry) – bought 57.96, stop 52.45, no target (will trail stop), unrealized points = +0.45, unrealized P/L = + $34
QID long (250 shares from April 29 entry) – bought 37.84, stop 35.65, no target (will trail stop), unrealized points = (0.83), unrealized P/L = ($208)
FXY long (250 shares from April 24 entry) – bought 102.41, stop 99.48, target 112.20, unrealized points = (2.12), unrealized P/L = ($530)
Closed positions (since last report):
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(none)
Current equity exposure ($100,000 max. buying power):
- $38,706
Notes:
Edited by Deron Wagner,
MTG Founder and
Head Trader