Biotech Holdr Shaping Up

NOTE: Please click on the charts below to enlarge them if they do not appear clearly.

Stocks snapped their three-day losing streak yesterday, but the session's price action was rather unconvincing. The main stock market indexes grinded their way higher in the morning, then backed off in the afternoon.  The Nasdaq Composite gained 0.8%, the S&P 500 0.6%, and the Dow Jones Industrial Average 0.4%.  The small-cap Russell 2000 and S&P Midcap 400 advanced 0.7% and 0.9% respectively.  The major indices finished just above the middle of their intraday ranges. 

Total volume in the NYSE increased 8% above the previous day's level, but turnover in the Nasdaq was 3% lighter. Although the S&P 500 scored a bullish "accumulation day" by rallying on higher volume, trading remained below its 50-day average level for the past six days.  Curiously, Nasdaq volume was the lightest of the year for the second day in a row.  Market internals were not overly impressive.  Advancing volume in the NYSE exceeded declining volume by just 2 to 1.  The Nasdaq ratio was positive by 5 to 2.

In yesterday's commentary, we pointed out the bullish chart patterns in both the Steel and Basic Materials sectors.  Another industry that has come across our radar for potential long entry is Biotech.  Specifically, the Biotech HOLDR (BBH) may soon be ready to break out above a one-month band of sideways consolidation.  Other Biotech ETFs are also perking up, but BBH is actually showing the most relative strength for a change.  Its daily chart is shown below:

Because yesterday's price action was a bit shaky, we trailed a tight intraday stop on our long position in the ProShares Ultra QQQ (QLD). Our new stop subsequently got hit in the afternoon, enabling us to lock in a gain of nearly 3 points since our March 18 entry.  QLD closed approximately 50 cents below our exit price, but the daily chart still shows the potential for upside momentum if it rallies above yesterday's high.  This would enable QLD to move back above its 50-day MA.  We're fully prepared to re-enter the position if that occurs, and at nearly the same price we sold.  Below is a daily chart of QLD:

Yesterday's reversal attempt came just in a nick of time.  Had the major indices sold off for one more day, they would have been in danger of falling below their 61.8% Fibonacci retracement levels from their March 17 lows to March 24/25 highs.  Instead, the broad market now has a chance to resume its short-term uptrend that began in mid-March.  Nevertheless, the major indices need to quickly follow through on yesterday's gains by advancing significantly within the next day or two.  If stocks fail to find their "mojo" and hang out at current levels too long, the overhead supply of the primary, long-term downtrends will tip the balance of power back to the bears.

Open ETF positions:


Long - IYT, QLD, EWT, INP

Short - (none)




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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