The Wagner Daily


A rather “blah” session of trading was the dominant theme yesterday, as the broad market grinded higher throughout the day, but without much conviction. The Nasdaq Composite advanced 0.4%, the Dow Jones Industrial Average 0.3%, and the S&P 500 0.2%. The S&P marginally set a new 52-week closing high by just one point; the Nasdaq remained below its prior closing high by less than a point. The small-cap Russell 2000 and S&P Midcap 400 indices eked out gains of 0.4% and 0.2% respectively. With an uneventful conclusion to the session, the major indices closed around the upper quarter of their intraday ranges.

As with the previous day’s session, lower volume pointed to a lack of institutional support behind the gains. Total volume in the NYSE receded 8%, while trading in the Nasdaq was 3% lighter. Since the U.S. stock market is closed for the Martin Luther King holiday on Monday, traders and investors are apparently waiting on the sidelines ahead of the long weekend. However, because today is monthly options expiration day, volume may pick up slightly in today’s session.

One commodity ETF that may be setting up for a decent swing trade entry is iPath Platinum ETN (PGM). The setup is illustrated on the daily chart below:

Last month, PGM “undercut” support of its 50-day MA, shaking out the bulls, but quickly snapped back above it just a few days later. PGM drifted back down throughout the first half of this month, but is now consolidating in a tight range, right above support of both its 20 and 50-day moving averages. If PGM rallies above its high of the past several days, it will also correlate to a breakout above its downtrend line from the highs of early December. Such a move should spark bullish momentum that enables PGM to resume its dominant uptrend of the past year. With this setup, a protective stop can be neatly place below the lows of its recent consolidation, which is below support of its 20 and 50-day moving averages as well. As always, a bit of “wiggle room” is necessary below the obvious support level, in order to prevent being shaken out by too tight of a stop.

The S&P Retail SPDR (XRT) is consolidating in a tight range, just below resistance of its 52-week high from last October. A rally above its January 7 high will cause XRT to move to a fresh high, thereby triggering a breakout buy entry. An initial protective stop could be placed just below the rising 50-day moving average, which isn’t far below the low of the short-term consolidation:

In addition to the XRT and PGM setups detailed above, there are several other ETFs that remain on our watchlist for potential buy entry. The iShares BRIC Index (BKF) still looks good for breakout entry, above the $47.50 to $48 area. The iShares Real Estate Index Trust (IYR) is also still a potential breakout play above the $46.50 area. The U.S. Oil Fund (USO) is still a valid pullback play for entry just above yesterday’s high, but crude oil has been choppy, and therefore a bit challenging to hold for more than a few days.

In yesterday’s commentary, we pointed out the bullish setup in PowerShares Clean Energy Fund (PBW). Rallying above Wednesday’s high in the morning, PBW triggered our long entry into the trade. However, intraday news that Germany would be substantially cutting back solar energy subsidies for First Solar, Inc. (FSLR) and related companies caused the entire alternative energy sector to abruptly turn tail shortly thereafter. As such, we made a judgment call to sell PBW when it fell to the prior day’s low and failed to hold support of its 20-day exponential moving average. Though our initial stop was substantially wider than where we sold yesterday, we have learned it is usually better to quickly exit positions for a small loss when they reverse immediately after trade entry.

Although we currently have only one open position (UUP long — entered on the pullback to support), there are a handful of other ETFs we’re stalking for possible buy entry. But the reality is that overall momentum in the market has been lacking recently, despite gradual gains in the broad market. We’d like to see some the confirmation of higher volume coming into the markets, as low-volume markets lacking the punch of institutional activity tend to be choppy. When volume and momentum starts returning to the market, we’ll be prepared to take advantage of new opportunities. Yet, until that happens, patience is in order. Being “bored” is frequently a necessary part of the trading business; be careful to avoid overtrading right now.

HOLIDAY SCHEDULE: On Monday, January 18, the U.S. equities markets will be closed in observance of the Martin Luther King holiday. As such, The Wagner Daily will not be published that day. Regular publication will resume on Tuesday, January 19. Enjoy the holiday weekend.

Today’s Watchlist:

iPath Platinum ETN (PGM)

Shares = 200
Trigger = $40.26 (above the four-day high)
Stop = $37.89 (below the 20/50-day MA convergence)
Target = $47.80 (test of resistance from Dec. 2009 high)
Dividend Date = n/a

Notes = See commentary above for explanation of the setup.

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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  • PBW triggered for buy entry yesterday, but we made a judgment call to exit the trade later in the day (per Intraday Trade Alert). Realized small loss on PBW, and remain long UUP.
  • 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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Edited by Deron Wagner,
MTG Founder and Head Trader