Which Way Will We Go? – (IYZ) (DUST)


Stocks lost ground on Friday on higher trade. Friday’s lower close resulted in mixed results for the major indices in 2011. The Dow Jones Industrial Average finished just over 5.0% higher in 2011, while the S&P ended flat and the Nasdaq slid almost 3.0%. Overall, it was an unimpressive year for stocks. On Friday however, the Dow Jones Industrial Average showed the least resiliency as it fell 0.6%. The S&P MidCap 400 and the small-cap Russell 200 both dropped 0.5%. The S&P 500 slid 0.4% while the Nasdaq contained losses to 0.3%.

Technically speaking, market internals were bearish on Friday. However, due to pre-holiday light volume trade, it is difficult to definitively categorize price action in this type of environment. In the absence of massive reversal candles and/or volume that is close to its 50-day moving average, it is likely unreasonable to consider Friday a true distribution day. Tuesday’s price and volume action should provide a much better read on the current state of the market.

On Friday we entered a long position in the iShares DJ US Telecom Sector ETF (IYZ) as it broke above the six day high, on its biggest uptick in volume in nearly two weeks. Normally, we would not have entered this trade on the Friday of a holiday weekend, but IYZ had recently undercut all of its moving averages and broke out on reasonably high volume. In combination, both of these factors provide evidence that the trade is much more likely to hold. Trade details are available to our subscribers in the open positions section of the newsletter. This trade was sent via intraday alert and was not on the watchlist.

The Direxion Daily Gold Miners 3x Bear ETF (DUST) recently exploded above all three of its major moving averages. However, over the past two sessions, DUST has come under considerable selling pressure and is now approaching support of its uptrending 20-day exponential moving average. An undercut of this key support level could provide a buying opportunity in this inverse ETF.

Now that the holidays are behind us, volume should begin returning to the market. Hopefully we will also get a better read on market direction. For the moment, our bias is modestly bullish. The fact that the S&P 500 and DJIA are hovering near breakout levels is promising for the long side of the market. Nonetheless, we have both long and short positions on the watchlist so that we might capitalize on a sharp move in either direction.

Today’s Watchlist:


Shares = 300
Trigger = 19.66
Stop = 18.67
Target = n/a
Dividend Date = n/a

Notes = see commentary from 12/30


Shares = 300
Trigger = 53.32
Stop = 52.09
Target = Retest of 52-week high
Dividend Date = n/a

Notes = see commentary from 12/30


Shares = 200
Trigger = 31.31
Stop = 29.35
Target = nsh (new swing high)
Dividend Date = n/a

Notes = see commentary from 12/29


Shares = 70
Trigger = 90.66
Stop = 85.80
Target = 99.70
Dividend Date = n/a

Notes = see commentary from 12/23

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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  • Per intraday alert, established a long position in IYZ. We also stopped out of IYZ beneath the 20-minute low after a large gap down on the open.
  • 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