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Potential Breakout Entry In Energy ETF (ERX)

 April 05, 2011 10:02 AM

Stocks ended Monday's lackluster session mixed, as volume declined. The Nasdaq was the only major index to end the day lower, as it closed fractionally below the flatline. The S&P 500 ended the day fractionally above the flatline. The S&P MidCap 400 and the Dow Jones Industrial Average realized modest gains of 0.1% and 0.2% respectively. The small-cap Russell 2000 was the only major index to post an appreciable gain. The small cap index ended the day 0.5% higher.

Turnover was down on Monday. Volume on the Nasdaq fell by 19%, while on the NYSE it was down 11.1% yesterday. The advancing to declining volume ratio, for all intents and purposes, ended the day at par on both indices.

On Monday we sent an intraday alert providing the trade details for a possible long entry in the Nasdaq 100 UltraShort ETF (QID). We stated, "The Nasdaq appears to be forming a "lower high" on its daily chart, indicating a possibility of a move back down to the recent lows. A QID buy entry above Friday's high gives us a positive reward/risk ratio on the setup. Shortly after sending this alert, QID hit our trigger. Trade details are available for our subscribers in the open positions segment of the newsletter.

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The Market Vectors Coal ETF (KOL) has recent rallied to a new 52 week high. Given the relative strength of this ETF, a pullback near $50.00 may present a buying opportunity in this ETF. We will be monitoring KOL closely for a potential entry.

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Direxion Energy Bull 3X Shares ETF (ERX) has been consolidating for three days in a tight pennant like formation. A move above the two day high of $92.44 could present a buy entry trigger for this ETF. We will be following ERX for a possible buy entry.

Sector rotation continued yesterday. Semiconductors and technology were weak, as healthcare, emerging markets and energy remained strong. It appears that money may be starting to rotate out of financial stocks. The sector appears weak as the XLF has been struggling to reclaim its 50-day MA.

NOTE:Regular subscribers to The Wagner Daily receive daily updates on the open positions above, as well as new ETF trade setups, including trigger, stop, and target prices. Intraday Trade Alerts are also sent via e-mail and/or mobile phone text message on as-needed basis.

Deron Wagner is the head trader of Morpheus Capital Hedge Fund and founder of Morpheus Trading Group (morpheustrading.com), which he launched in 2001. Wagner appears on his best-selling video, Sector Trading Strategies (Marketplace Books, June 2002), and is 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. He is also a frequent guest speaker at various trading and financial conferences around the world. Wagner is currently working on this third book, scheduled for publication in early 2008.For a free trial to the full version of The Wagner Daily above, which includes detailed ETF trade setups and daily position updates, or to learn about our other newsletters, visit morpheustrading.com or send an e-mail to deron@morpheustrading.com
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