When swing trading with the trend of the major indices, we firmly believe it is absolutely necessary to focus on reacting to market action, rather than attempting to predict it. As such, if we change our minds about a position, such as where to place the protective stop, it is because we are constantly trying to manage risk to keep in line with the market. The goal is always to process market information and data by simply “going with the flow,” which prevents us from sticking to unsubstantiated opinions. In an uptrending market, for example, the only good stocks or ETFs are the ones that go up.
With recent stalling action around the 1,500 level in the S&P 500 Index, combined with yesterday’s (January 31) higher volume selling in the broad market, the rally in the S&P has lost some momentum. Although we are not yet calling the rally dead, the objective rules of our market timing model will force us to close existing positions and move to cash if the distribution days begin to cluster over a short period of time. Therefore, now is an ideal time to take an updated look at the technical chart patterns of a few of our open ETF positions.
The bullish pennant formation in iShares Singapore ETF (NYSEARCA:EWS), which we bought in The Wagner Daily on January 30, is still intact and could break out any day now:
The WisdomTree India Earnings Fund (NYSEARCA:EPI) has pulled back to new support of the prior breakout level at the $20 level, and is holding up so far. We plan to continue holding $EPI as long as the price action remains above the 20-day exponential moving average (beige line on the chart below):
Like $EPI above, Market Vectors Russia ETF (NYSEARCA:RSX), which we entered as a swing trade on January 22, recently pulled back to support of its prior breakout level and is holding. As with $EPI, we are willing to stick with $RSX as long as it manages to hold above its 20-day EMA (plus a bit of “wiggle room” below the exact level of support):
Going into today, there are no new ETF or individual stock trade setups we are stalking for potential buy entry. Rather, we are now focusing on managing our existing open positions for maximum profitability with the least amount of risk.
The above commentary is a shortened version of the February 1st issue of our exclusive Wagner Daily swing trade newsletter. To learn how to profitably trade stocks and ETFs, give our end-of-day stock newsletter a 30-day risk-free test drive by checking out this page now.