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Wednesday, November 21, 2012 5:49:41 PM
3 ETFs Setting Up For Buy Entry Now
One ETF we are stalking for technical swing trading buy entry is ProShares UltraShort Emerging Markets ETF ($EEV), an inversely correlated short ETF. As you can see on the chart below, EEV broke out above a six-month downtrend last week, and has now pulled back to near-term support of its 20-day exponential moving average, which recently crossed above the 50-day moving average. This is a bullish trend reversal signal. With the ETF moving higher in yesterday’s session, but closing just below the previous day’s (November 19) low, we are now monitoring EEV as a potential short-term trade above the two-day high. The technical trade setup for EEV is shown on the daily chart below:
Although the main stock market indexes were flat yesterday, there were at least two ETFs we have been monitoring that pulled back to near-term technical support levels. Specifically, they retraced to test or "undercut" their 20-day exponential moving averages. One of those ETFs was Direxion 20-Year Treasury Bull 3x ($TMF), a fixed-income ETF that roughly follows the price of the US long-term treasury bond, but is leveraged at a 3 to 1 ratio. Last week, we sold this ETF for a substantial profit, after it broke out above resistance of a four-month downtrend line. However, the ETF has remained on our radar as a potential swing trade re-entry on a pullback. The current pullback that followed the recent breakout above the downtrend line is shown on the daily chart of TMF below:
As you can see, TMF sold off sharply yesterday, and closed just below near-term technical support of its 20-day exponential moving average. Such a price retracement off its recent highs provides a low-risk re-entry point to buy this ETF. However, remember that we do not blindly try to anticipate where a pullback will end and find support. Rather, we must now wait for the formation of a bullish reversal candlestick within the next several days, then look to buy TMF above the previous day’s high, which would confirm the pullback off the highs has ended, and TMF is likely to resume its bullish trend reversal. Therefore, TMF is now on our internal watchlist as a potential technical swing trade setup we are monitoring for the proper trigger point for buy entry.
Another ETF with a similar pattern is ProShares UltraShort Basic Materials ETF ($SMN), another short ETF. After buying the breakout above its downtrend line, we sold this ETF into strength last week for a 9.2% gain on an 8-day holding period. Now, it has pulled back to near-term support of its 20-day EMA, but probably needs another day or two to either “undercut” support of the 20-day EMA, or at least form a bullish reversal candle, before we would look for an actual re-entry point into this ETF. Like TMF, this setup in SMN has been added to our internal watchlist as a potential near-term buy entry. The daily chart pattern of SMN is shown below:
One ETF we are stalking for technical swing trading buy entry is ProShares UltraShort Emerging Markets ETF ($EEV), an inversely correlated short ETF. As you can see on the chart below, EEV broke out above a six-month downtrend last week, and has now pulled back to near-term support of its 20-day exponential moving average, which recently crossed above the 50-day moving average. This is a bullish trend reversal signal. With the ETF moving higher in yesterday’s session, but closing just below the previous day’s (November 19) low, we are now monitoring EEV as a potential short-term trade above the two-day high. The technical trade setup for EEV is shown on the daily chart below:
Although the main stock market indexes were flat yesterday, there were at least two ETFs we have been monitoring that pulled back to near-term technical support levels. Specifically, they retraced to test or "undercut" their 20-day exponential moving averages. One of those ETFs was Direxion 20-Year Treasury Bull 3x ($TMF), a fixed-income ETF that roughly follows the price of the US long-term treasury bond, but is leveraged at a 3 to 1 ratio. Last week, we sold this ETF for a substantial profit, after it broke out above resistance of a four-month downtrend line. However, the ETF has remained on our radar as a potential swing trade re-entry on a pullback. The current pullback that followed the recent breakout above the downtrend line is shown on the daily chart of TMF below:
As you can see, TMF sold off sharply yesterday, and closed just below near-term technical support of its 20-day exponential moving average. Such a price retracement off its recent highs provides a low-risk re-entry point to buy this ETF. However, remember that we do not blindly try to anticipate where a pullback will end and find support. Rather, we must now wait for the formation of a bullish reversal candlestick within the next several days, then look to buy TMF above the previous day’s high, which would confirm the pullback off the highs has ended, and TMF is likely to resume its bullish trend reversal. Therefore, TMF is now on our internal watchlist as a potential technical swing trade setup we are monitoring for the proper trigger point for buy entry.
Another ETF with a similar pattern is ProShares UltraShort Basic Materials ETF ($SMN), another short ETF. After buying the breakout above its downtrend line, we sold this ETF into strength last week for a 9.2% gain on an 8-day holding period. Now, it has pulled back to near-term support of its 20-day EMA, but probably needs another day or two to either “undercut” support of the 20-day EMA, or at least form a bullish reversal candle, before we would look for an actual re-entry point into this ETF. Like TMF, this setup in SMN has been added to our internal watchlist as a potential near-term buy entry. The daily chart pattern of SMN is shown below:
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