weeks. There is also resistance from a prior swing low in mid-January at $40:
The stalling action as the ETF bounces into resistance of its 50-day moving average presents us with a low-risk entry point on the short side. However, rather than short selling $EEM, we will look to buy the inversely correlated Direxion Daily Emr Mkts Bear 3x Shs(ETF)(NYSEARCA:EDZ), which is a 3x leveraged short ETF:
Going into today, we are stalking $EDZ for potential swing trade entry.
Another “short ETF” we are monitoring for potential trade entry is the ProShares UltraShort Lehman 20+ Yr(ETF)(NYSEARCA:TBT).
After breaking down below a key swing low in January, $TBT failed to follow through to the downside and formed a bullish reversal candle during the week of February 7.
The false breakdown and reversal formed a double bottom like pattern, with an undercut on the weekly chart below. If the price action clears $73, $TBT might be ready to rip higher over the next several weeks:
Even though our market timing model is currently in “Buy” mode, both of these ETFs have a low correlation to the direction of the US equities markets. That’s the nice thing about ETFs — they can provide opportunities outside of the standard trend trading that comprises the bulk of our trading operations.
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: [email protected]
