Look For Buy Entry Points In These ETFs (XRT, BZQ)

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April 27, 2012 10:37am NYSE:BZQ NYSE:XRT

Stocks ended the session higher yesterday on mixed trade. The session began with the major indices trading mixed but in the afternoon the market found a bid and moved higher. The S&P MidCap 400 led all indices as it netted a 1.0% gains. Despite weakness in transportation stocks, the Dow Jones Industrial Average

finished a close second with a 0.9% gain. The small-cap Russell 2000 found resistance at its 50-day MA but still posted a solid 0.8% improvement. Both the S&P 500 and the Nasdaq closed the session higher by 0.7%. Homebuilders and consumer electronics were strong on Thursday, while the telecommunications and transportation sectors struggled.

Market internals ended the session mixed. Volume rose on the Nasdaq by 4.2% but fell on the NYSE by 3.7%. The ratio of advancing volume to declining volume ended the day at a positive 2.1 to 1 on the NYSE and a plus 2.3 to 1 on the Nasdaq. The higher volume on the Nasdaq points to institutional buying and an accumulation day for this index.

The SPDR S&P Retail ETF (NYSEARCA:XRT) recently found support but has now rallied near resistance of the April 19th high of $61.66. A retest of this level (false breakout or overcut), followed by a formation of a lower high, could provide the necessary price action for a potential long entry in this ETF. The blue and red arrows on the chart represent what we would see as the “ideal” price action necessary for XRT to establish a proper base from which to launch a potential rally.

S&P Consumer Staples SPDR ETF (XLP)

Over the past two months, the Proshares UltraShort MSCI Brazil ETF (NYSEARCA:BZQ) has reversed a long-term down trend and is now in trend reversal mode. Since early March, BZQ has formed a sequence of higher highs and higher lows, as it has move along support of its 20-day EMA. A pullback and undercut of its current uptrend line, followed by the formation of a reversal candle, could provide the needed pivot point for a possible long entry. If the market should remain weak, BZQ would likely be one of the strongest ETFs in a selloff.

S&P Consumer Staples SPDR ETF (XLP)

Overall, yesterday was a good day for the market. The Nasdaq moved higher on expanding volume. Further, stocks with relative strength continue to break to new highs, which is a bullish signal. However, price action could remain choppy as we recover from the recent sell-off. We remain of the opinion that the market is range bound and may still require further consolidation prior to any potential move higher. As a result, we are keeping our market exposure at modest levels.

The commentary above is a short excerpt from The Wagner Daily, our nightly ETF and stock swing trading newsletter. Subscribers to the full version also receive specific entry and exit prices for all swing trade setups, an additional section dedicated to individual stock trades, and access to our Live Trading Room. To learn more about our trading strategy, please visit our swing trading blog.

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