Potential breakout entry in (AMJ) – The Wagner Daily
The Wagner Daily – March 4, 2011
Concise technical analysis and picks of the leading global ETFs
Commentary:
Stocks rose sharply on Thursday as the market realized its most impressive daily performance in approximately three months. It is noteworthy that all ten major sectors closed up on the day, with only the telecom sector advancing by less than 1.0%. The small-cap Russell 2000 and the S&P MidCap 400 rose by 2.4% and 2.2% respectively. The Nasdaq tacked on 1.8%, while the S&P 500 finished the day up by 1.7%. The large cap Dow Jones Industrial Average also put in an impressive performance, as it spiked by 1.6% for the session.
Volume closed higher across the board yesterday. Turnover on the Nasdaq improved by 1.1% and on the Big Board by 2.8%. The advancing volume to declining volume ratio ended Thursday’s session at 8 to 1 on both the NYSE and the Nasdaq.
Yesterday our stop was hit in RTH and we exited the trade with a modest loss. Due to the recent lack of follow through in the market we have been maintaining tight stops.
The Market Vectors Coal ETF (KOL) broke out of a tight, four week consolidation pattern yesterday and appears poised to go higher. KOL could offer a buying opportunity on a pullback near $47.50 to $48.00 or if it consolidates at the current level for several days. We are monitoring KOL for a possible long entry.
The JPMorgan Alerian MLP Index ETN (AMJ) has been consolidating for almost three weeks in a tight range. A potential buying opportunity exists with a move back above yesterday’s high of $38.22 and/or the three day high of $38.34. One strategy would be to purchase a partial position above yesterday’s high and add to the position should AMJ rally above the March 1st high.
Had volume on the Nasdaq been a bit more substantive, it would have been easy to categorize Thursday’s price action as a distinct accumulation day. Still, it would be hard to argue that institutions were not active in yesterday’s purchase activity. Before shying away from our current neutral stance on market direction, we will need to see follow through in price action.
Deron Wagner is the Founder and Head Portfolio Manager of Morpheus Trading Group, a capital management and trader education firm launched in 2001. Wagner is the author of the best-selling book, Trading ETFs: Gaining An Edge With Technical Analysis (Bloomberg Press, August 2008), and also appears in the popular DVD video, Sector Trading Strategies (Marketplace Books, June 2002). He is also co-author of both The Long-Term Day Trader (Career Press, April 2000) and The After-Hours Trader (McGraw Hill, August 2000). Past television appearances include CNBC, ABC, and Yahoo! FinanceVision. Wagner is a frequent guest speaker at various trading and financial conferences around the world, and can be reached by sending e-mail to: deron@morpheustrading.com.
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