Waiting For a Bounce: (BZQ), (EWZ)


Stocks slid lower on Thursday as trade declined. The morning session showed promise as stocks tacked on solid gains. However the market hit its peak at mid day and from that point on it was a downhill descent into the close. By the closing bell four of the five major indices were trading in the red. The Nasdaq was the lone holdout as it managed to close a mere 1.5 points above break even. The Dow Jones Industrial Average fell 0.5% on the day while the S&P MidCap 400 shed 0.4%. Both the S&P 500 and the small-cap Russell 2000 lost 0.3%.

Thursdays price action brought with it a day of mixed internals. Volume fell across the board yesterday but this might have been expected given Wednesday’s sharp increase in trade. Still, turnover closed well above its 50-period moving average which, given the intraday price reversal, does not seem to bode well for bulls. Declining volume outpaced advancing volume by a ratio of 1.9 to 1 on the NYSE and 1.3 to 1 on the Nasdaq. Although we cannot classify yesterday as a distribution day for the market, the relatively high level of volume and negative price action into the close suggests that institutions may have been selling into strength.

The following two charts of the SPDR S&P Homebuilders ETF (XHB) suggest that it may present a shorting opportunity into a bounce. Since losing support of its 200-day MA on July 25th XHB is now at the key support level of its two year uptrend line. Because XHB has been selling off for almost a week, we are looking for a bounce to possibly enter a short position in this ETF. Notice in the second chart of XHB that it has formed a head and shoulders like pattern that further supports the likelihood that a shorting opportunity may exist for this ETF.

Since October of last year the ProShares Ultrashort MSCI Brazil ETF (BZQ) has been forming a base following a long term down trend. Since April of this year BZQ has been setting a sequence of “higher lows” as it has found its way back above the 20-day EMA, 50-day MA and 200-day moving average. Notice also that the 200-day moving average is now flattening out and with another thrust higher in BZQ it will begin up-sloping for the first time in two years. A volume aided move back above the July 27th high of $16.65 may provide a buying opportunity in this ETF. We will be monitoring BZQ closely for a possible long entry.

What began as a solid day ended on a sour note for Wall Street. The market continues to deteriorate as more and more stocks are either testing or losing support of their 200-day moving averages. The failure of the market to hold onto solid gains following a day of carnage does not bode well for Friday’s prospects. With the current uncertainty in the market we will not be surprised to see further price erosion on Friday. Since this week’s reversal was swift and sharp, our research has not presented us with quality risk reward setups to enter short positions. Rather than chase the market we prefer to take the cautious approach and wait for the next opportunities to present themselves.

Today’s Watchlist:

There are no new setups for today. As always, we will send an intraday alert if any new trades are made.

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

    position summary

    Having trouble seeing the position summary graphic above?
    Click here to view it directly on your Internet browser instead.


  • No changes to our open position.
  • 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.

    Have you had your free 1-month trial to Morpheus Trading Group’s additional ETF and stock trading newsletters?

      Edited by Deron Wagner,
      MTG Founder and
      Head Trader