Oscillating between positive and negative territory throughout the day, the major indices traded in a whippy and indecisive fashion throughout the entire day. Thirty minutes before the closing bell, stocks were poised to finish moderately lower, but a curious wave of buying in the final fifteen minutes of trading lifted the main stock market indexes to the plus column. The Dow Jones Industrial Average finished 0.4% higher and the S&P 500 advanced 0.3%. The Nasdaq Composite eked out a gain of 0.1%. Small and mid-cap stocks again showed relative strength. The Russell 2000 and S&P Midcap 400 indices rallied 0.9% and 0.8% respectively. All the major indices finished near their intraday highs.
Total volume in both the NYSE and Nasdaq edged 3% above the previous day’s levels, as trading in both exchanges came in right around average levels. In the NYSE, advancing volume exceeded declining volume by a margin of 2 to 1. The Nasdaq adv/dec volume ratio was marginally positive, at 3 to 2.
Early last week, we began developing a watchlist of strong ETFs we were monitoring for potential buy entry on a correction to short-term support levels. Specifically, we were looking for either a “correction by time” (consolidation) or “correction by price” (pullback) that enabled those ETFs to at least come into very short-term support of their 10-day moving averages. Preferably, we wanted to see a retracement to more significant support of their 20-day exponential moving averages, a reliable level that usually triggers a resumption of the dominant trend in steadily trending stocks and ETFs. Since then, most ETFs on our watchlist have traded in a sideways range, correcting by time. Now, many have come into support of their 10-day moving averages, while the 20-day exponential moving averages have been rising closer to their current prices. Because we have been focusing our efforts on the developing action in many commodity and currency ETFs, we’ve not entered any of those industry sector and international ETFs on our watchlist. However, now that there’s at least been a bit of price consolidation, let’s take an updated look at some of those charts.
On each of the daily charts below, we’ve circled (in pink color) support of the 20-day exponential moving averages, and have highlighted any other areas of support, such as recent breakout levels, that could present low-risk entry points. If one is looking for a new entry into any of these ETFs, the charts below show where a positive reward-risk ratio on these trades could be found. The purple dotted lines are the 10-day moving averages, the beige lines are the 20-day exponential moving averages, and the teal lines are key support of the 50-day moving averages. If any of these ETFs retrace to their “buy zones” in the coming days, note we will only make an “official” trade entry if a detailed Intraday Trade Alert is sent to subscribers informing of such. Still, advanced traders may want to set price alerts on their trading platforms to instantly be notified of any ETFs that enter into potential buy areas:
Obviously, the possibility exists these ETFs will make another leg up without pulling back to their 20-day EMAs, or without consolidating long enough for their 20-day EMAs to rise up to meet the current prices. But if that happens, we’re not worried about it. We’ve learned from years of experience that chasing the bid of stocks and ETFs extended well beyond proper buy points is a strategy that statistically loses more than it wins. One possible exception is for day traders, or others who are comfortable quickly closing a trade, if necessary, within a day or two after entry. Remember, this newsletter is generally focused on holding trades for an average of one to three weeks (sometimes longer for winning trades). Even if these extended ETFs continue higher without pulling back first, we’re already positioned in several promising commodity and currency ETFs that were bought near low-risk entry points.
PowerShares Oil Fund (DBO)
Shares = 200
Trigger = 26.85 (above the August 4 high)
Stop = 23.88 (below the July 29 “swing low”)
Target = 32.90 (projected target of “inverse head and shoulders” follow-through)
Dividend Date = n/a
Notes = As commodities heat up across the board, crude oil appears poised for a nice run. On the chart above, notice that DBO just completed the formation of a bullish “inverse head and shoulders” pattern, and has moved above the “neckline.” Yesterday, DBO closed right at resistance of its June 2009 high. If it breaks through that level, we anticipate substantial upside follow-through in the short to intermediate-term. There are several other crude oil ETFs as well, including the popular U.S. Oil Fund (USO). However, DBO has been showing slight relative strength to some of the others. USO, for example, is still below its June 2009 high, while DBO is already testing it.
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.
- No changes to the open positions above.
- 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.
- 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.
Edited by Deron Wagner,
MTG Founder and