Potential breakout entry in (UYM)- The Wagner Daily
The Wagner Daily – December 21, 2010
Concise technical analysis and picks of the leading global ETFs
Commentary:
The major indices ended Monday’s session mixed on very light volume. For the seventh consecutive session stocks meandered in a tight range. The small-cap Russell 2000 showed the most strength on the session, as it rallied 0.4%. The Nasdaq and the S&P 500 both ended the day up by 0.3%, while the S&P MidCap 400 eked out a 0.1% advance yesterday. The Dow Jones Industrial Average lagged the overall market as it closed down 0.1% on the day.
Turnover was decidedly down across the board on Monday. Some of the drop can be attributed to the extremely high volume associated with options expiration last Friday. Turnover on the NYSE and the Nasdaq plummeted by 46% and 30% respectively. Still, the ratio of advancing volume to declining volume was positive on both indices. The NYSE saw up volume outpace down volume by a factor of 1.8 to 1, while the Nasdaq turned in a less impressive ratio of 1.3 to 1.
The Market Vectors Russia ETF (RSX), has demonstrated excellent relative strength compared to most international ETFs. After a serious, multiple week test of the 50-day MA from November 16th through November 30th, this ETF gapped up and rallied to the previous swing high set on April 16th of this year ($36.90). It has been consolidating at this mark, in a pennant-like formation, for the past 11 trading sessions. A volume fueled breakout above the December 7th high of $37.40, provides a potential buy trigger for RSX. As such, we are carefully monitoring this ETF for a possible long entry. An intraday alert will be sent to our members should we decided to enter this set up.
The ProShares Ultra Basic Materials ETF (UYM), has been consolidating in a tight range since it recording a false breakout on December 7th. The consolidation has been accompanied by declining volume which is often a bullish indicator. Yesterday, UYM rallied above the December 7th high of $48.30. But, it could not hold the breakout and ultimately ended the session back in the trading range. A rally above yesterday’s high ($48.51) could provide a long entry trigger for UYM. A spike in volume likely holds the key to a sustained breakout.
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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