The Wagner Daily


Stocks followed up the previous day’s breakout with a session of extremely tight, sideways trading that ended with mixed results. The Nasdaq Composite ticked 0.3% higher, but the Dow Jones Industrial Average slipped 0.1%. Contained within a rather narrow trading range of less than five points, the S&P 500 was unchanged. The small-cap Russell 2000 and S&P Midcap 400 indices registered matching gains of 0.2%. Most of the major indices closed near the middle of their intraday trading ranges, which was rather irrelevant considering stocks barely moved all day.

Adding to yesterday’s uneventful session was lower turnover in both exchanges. Total volume in the NYSE receded 14%, while volume in the Nasdaq was 7% lighter than the previous day’s level. Trading in both the NYSE and Nasdaq was below 50-day average levels. Although the Nasdaq managed a small gain, advancing volume in the exchange exceeded declining volume by a margin of only 3 to 2. Nevertheless, the adv/dec volume ratio in the NYSE was fractionally positive, despite the flat close in the S&P.

As we’ve been seeing a bit of sector rotation back into commodities lately, the pattern in Market Vectors Gold Miners (GDX) may be setting up for a nice swing trade entry. Last week, GDX broke out above a three-month downtrend line, as well as its 50-day MA. Now, it is consolidating in a narrow, four-day range. We like GDX for buy entry above that four-day high, with a short to intermediate-term time horizon. This is annotated on the daily chart of GDX below:

Although it appears to be stabilizing above its 50-day MA, SPDR Gold Trust (GLD), which tracks the price of the actual spot gold commodity, has been choppy. Instead, we prefer the setup in GDX, whose portfolio is comprised of a basket of individual gold mining stocks. Spot gold and individual gold stocks sometimes trade with a close correlation to each other, but this is not always the case. Regular subscribers should note our detailed trigger, stop, and target prices for the GDX setup on Today’s Watchlist below.

Two weeks ago, we said it appeared the intermediate-term correction in the various emerging markets ETFs was nearing completion, as many of them were forming bottoming patterns. Anticipating institutional sector rotation back into the emerging markets, we subsequently bought iShares China Xinhua 25 (FXI) on February 26, as it broke out above its 20-day exponential moving average and a six-week downtrend line. Since then, FXI has been trending higher, and is presently showing a substantial unrealized gain. But let’s take an updated look at the recent performances of two additional emerging markets ETFs, each of which could be considered for investors and traders looking for additional exposure in the emerging markets arena.

One of the smoothest-trending emerging markets ETFs over the past two weeks has been iPath India Index (INP; technically an exchange traded note [ETN], but trades like an ETF). While many emerging markets ETFs are just now moving back above their 50-day moving averages, INP surged right through its 50-day MA last week, and is now only 4% below its 52-week high from January of 2010. INP is probably too extended over the past few days to buy at its current price, but one can look for the formation of a “bull flag” pattern, or even a pullback to new support of its 50-day MA. Either could present a secondary buy entry over the next week or so. The setup is shown on the daily chart of INP below:

Consolidating in a tight range, just above its 50-day MA, iShares Brazil Index (EWZ) may soon break out above resistance of a three-month downtrend line. If it does, bullish momentum could send it sharply higher in the near-term. Below is the daily chart of EWZ:

Unlike INP, in which we’re waiting for a pullback or some sort of short-term price consolidation, EWZ could be bought about 50 cents above yesterday’s high of $72.56. However, because resistance of the three-month downtrend line is in the same vicinity, consider a very tight stop on the initial day of entry, perhaps around 50 – 75 cents below the entry. This will prevent getting stuck in a quick “stop run” that leads to a failed breakout. However, if EWZ triggers and closes strong, it makes sense to use a wider stop the following day, below the 50-day MA. AS with all technical setups, be sure not to “jump the gun” with a premature buy entry ahead of the actual breakout trigger price.

Today’s Watchlist:

Market Vectors Gold Miners (GDX)

Shares = 175
Trigger = $47.08 (above the four-day high)
Stop = $44.29 (below the 50-day MA and prior downtrend line)
Target = $53.90 (just shy of resistance of the 52-week 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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  • For now, we are keeping the same stops on our open positions. However, they will be monitored closely as the S&P and Dow approach key resistance of their January 2010 highs. If any changes are made intraday, we will promptly send an alert with details.
  • 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