Wagner Daily: A Closer Look At These ETFs (RKH, IYZ)

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March 16, 2011 9:11am NYSE:IYZ NYSE:RKH

For a second consecutive day stocks finished down but well off the session lows. However, trade was heavy on a down day in the market. The Nasdaq ended the day down 1.3%. Both the Dow Jones

¬†Industrial Average and the S&P 500 slid 1.1% in Tuesday’s action. The small-cap Russell 2000 shed 0.9%, while the S&P MidCap 400 put in the best showing, as it fell 0.7% on the day.

Market internals were negative but somewhat tempered by the fact that stocks finished well above the session lows. Still, gap downs of the magnitude seen in yesterday’s session are generally not a healthy sign for bulls. Volume was up sharply across the board. Turnover increased on both the Nasdaq and the NYSE by 33%. Advancing volume fared poorly across both indices. Down volume overwhelmed up volume by a ratio of 4.7 to 1 on the NYSE and 4.2 to 1 on the Nasdaq.

The Regional Bank HOLDRS ETF (NYSE:RKH) recently formed a head and shoulders like reversal pattern. Yesterday RKH gapped down below the neckline, reversed and then rallied back into the neckline. A light volume move toward the two day high of $87.17 could provide a possible shorting opportunity for this ETF. Should this technical pattern hold true to form, the projected decline for RKH would be a move back to the 200-day MA. We will be monitoring RKH intraday for a potential short setup.

The iShares Dow Jones US Telecom Sector ETF (NYSE:IYZ) lost support yesterday but rallied off the session lows to close at the newly formed resistance level near $22.70. An overcut of this key mark could provide a shorting opportunity in IYZ.

The market demonstrated signs of resiliency on Tuesday but it would be a stretch to consider the overall action as healthy for stocks. As we stated in yesterday’s newsletter, we will be monitoring the market for intraday setups as opposed to pre-determined entries.

The commentary above is an abbreviated version of our daily ETF trading newsletter, The Wagner Daily. Subscribers to the full version receive specific ETF trade setups with detailed trigger, stop, and target prices, as well as daily updates on all open positions. Intraday Trade Alerts are also sent via e-mail and/or text message, on as-needed basis. For your free 1-month trial to the full version of The Wagner Daily, or to learn about our other services, please visit morpheustrading.com.

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.

DISCLAIMER: There is a risk for substantial losses trading securities and commodities. This material is for information purposes only and should not be construed as an offer or solicitation of an offer to buy or sell any securities. Morpheus Trading, LLC (hereinafter “The Company”) is not a licensed broker, broker-dealer, market maker, investment banker, investment advisor, analyst or underwriter. This discussion contains forward-looking statements that involve risks and uncertainties. A stock’s actual results could differ materially from descriptions given. The companies discussed in this report have not approved any statements made by The Company. Please consult a broker or financial planner before purchasing or selling any securities discussed in The Wagner Daily (hereinafter “The Newsletter”). The Company has not been compensated by any of the companies listed herein, or by their affiliates, agents, officers or employees for the preparation and distribution of any materials in The Newsletter. The Company and/or its affiliates, officers, directors and employees may or may not buy, sell or have positions in the securities discussed in The Newsletter and may profit in the event the shares of the companies discussed in The Newsletter rise or fall in value. Past performance never guarantees future results.


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