{"id":3260,"date":"2013-10-15T15:11:01","date_gmt":"2013-10-15T19:11:01","guid":{"rendered":"http:\/\/www.morpheustrading.com\/blog\/?p=3260"},"modified":"2022-04-06T15:05:05","modified_gmt":"2022-04-06T19:05:05","slug":"4-tips-etf-trading","status":"publish","type":"post","link":"https:\/\/morpheustrading.com\/blog\/4-tips-etf-trading\/","title":{"rendered":"4 Winning Tips For Profitable ETF Trading (How We Gained 44% In $TAN)"},"content":{"rendered":"<p><img loading=\"lazy\" decoding=\"async\" class=\"alignright size-thumbnail wp-image-3279\" alt=\"Solar Energy ETF - $TAN\" src=\"https:\/\/www.morpheustrading.com\/blog\/wp-content\/uploads\/2013\/10\/sun-110x110.jpg\" width=\"110\" height=\"110\" title=\"\" srcset=\"https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2013\/10\/sun-110x110.jpg 110w, https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2013\/10\/sun-120x120.jpg 120w\" sizes=\"auto, (max-width: 110px) 100vw, 110px\" \/>On July 2 of this year, we bought Guggenheim Solar Energy ETF ($TAN) in <a title=\"The Wagner Daily newsletter\" href=\"https:\/\/www.morpheustrading.com\/services\/swing-trade-alerts\" target=\"_blank\" rel=\"noopener\"><em>The Wagner Daily<\/em>\u00a0newsletter<\/a>. Three months later, we sold those shares of $TAN for a<strong> cool price gain of 44.3%.<\/strong><\/p>\n<p>In this trading strategy article, we detail the <strong>top 4 technical tips that prompted us to buy $TAN<\/strong> when we did.<\/p>\n<p>Then, we walk you through to the day when we eventually exited the trade to lock in the profits.<\/p>\n<p>Here&#8217;s a snapshot of how the daily chart of $TAN appeared at the time of our initial trade entry. The 4 reasons we bought this ETF immediately follow:<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-3261\" alt=\"$TAN daily chart entry\" src=\"https:\/\/www.morpheustrading.com\/blog\/wp-content\/uploads\/2013\/10\/131007TAN11.png\" width=\"774\" height=\"709\" title=\"\" srcset=\"https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2013\/10\/131007TAN11-110x100.png 110w, https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2013\/10\/131007TAN11-300x274.png 300w\" sizes=\"auto, (max-width: 774px) 100vw, 774px\" \/><\/p>\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">TABLE OF CONTENTS<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/morpheustrading.com\/blog\/4-tips-etf-trading\/#4_Big_Tips_For_ETF_Traders\" >4 Big Tips For ETF Traders<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/morpheustrading.com\/blog\/4-tips-etf-trading\/#So_What_Happened_Next\" >So, What Happened Next?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/morpheustrading.com\/blog\/4-tips-etf-trading\/#Is_44_A_Big_Gain_For_An_ETF_Trade\" >Is 44% A Big Gain For An ETF Trade?<\/a><\/li><\/ul><\/nav><\/div>\n<h3><span class=\"ez-toc-section\" id=\"4_Big_Tips_For_ETF_Traders\"><\/span><strong>4 Big Tips For ETF Traders<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ol>\n<li><strong>Sector Relative Strength &#8211;<\/strong> As detailed in <span style=\"color: #0000ff;\"><a title=\"Trading ETFs: Gaining An Edge With Technical Analysis\" href=\"https:\/\/www.amazon.com\/dp\/1118109139?tag=morptradgrou-20&amp;camp=14573&amp;creative=327641&amp;linkCode=as1&amp;creativeASIN=1118109139&amp;adid=00HPD75G7SPM18CG0N4Y&amp;&amp;ref-refURL=http%3A%2F%2Flocalhost%3A2876%2Fabout-us\" target=\"_blank\" rel=\"noopener\"><span style=\"color: #0000ff;\">my first ETF book<\/span><\/a><\/span>, one of the first steps of my<em> ETF trading strategy<\/em> is to identify the industry sector showing the most relative strength to the benchmark S&amp;P 500 Index. <span style=\"font-size: 13px; line-height: 19px;\">In early May, the relative strength of the solar energy sector became very apparent to us, prompting us to add $TAN to our watchlist for potential trade entry.<\/span><br \/>\n.<\/li>\n<li><strong>\u00a0Uptrend Confirmed &#8211;<\/strong> When a stock or ETF breaks out to the upside, we have a basic trend qualifier that we utilize in order to confirm a valid uptrend is in place before tending to buy the stock. Specifically, the 20-day exponential moving average must be above the 50-day moving average, and 50-day MA must be above the 200-day MA. Additionally, all three moving averages must be trending upwards. Although $TAN initially pushed above its 50-day MA back on April 8 (the big green bar accompanied by the volume spike), it wasn&#8217;t until mid-May that $TAN met our trend qualifier requirement.<br \/>\n.<\/li>\n<li><strong>Big Volume Breakout &#8211;\u00a0<\/strong>The best breakouts are always accompanied by increasing volume in which turnover spikes to 2 to 3 times its average daily level. After mid-May, when bullish momentum really started pushing tan higher, notice how volume picked up as well. Such volume spikes are like stepping on the gas pedal for a breakout, and help to confirm the legitimacy of a breakout as well. Unlike other technical indicators that frequently give false readings, volume is the one indicator that never lies.<br \/>\n.<\/li>\n<li><strong>First pullback to 50-day MA &#8211;\u00a0<\/strong>Because of the relative strength in the solar energy sector, the high volume breakout, and the trend qualifier requirement being fulfilled, we knew we had to buy $TAN. It then became a matter of simply waiting for a proper, low-risk entry point. Rather than chasing the price of the ETF after the initial breakout, we simply waited for a pullback that would give us a low-risk buy entry point. Specifically, we were looking for an &#8220;undercut&#8221; of the 20-day EMA, or even a pullback to more significant support of the 50-day MA. After zooming to the $28 area, $TAN entered into a 4-week base of consolidation, then dipped to &#8220;undercut&#8221; key support of its 50-day MA for one day before heading right back up. Whenever a stock or ETF breaks out on big volume and leads the market, the first touch of the 50-day MA usually leads to a resumption of the new uptrend because many institutions (&#8220;smart money&#8221;) use the 50-day MA as an indicator for when to begin accumulating leading stocks and ETFs on a pullback. After $TAN successfully tested support of its 50-day MA, it would&#8217;ve been a valid buy entry the following day, when the price moved above that day&#8217;s high. However, we prefered to wait for the confirmation of the break of the 6-week downtrend line that formed off the highs of May. That downtrend line breakout occurred on July 1, and we bought the following day at a price of $24.20.<\/li>\n<\/ol>\n<h3><span class=\"ez-toc-section\" id=\"So_What_Happened_Next\"><\/span><strong>So, What Happened Next?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Below is a snapshot of the price action that followed our July 2 buy entry into $TAN:<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-3262\" alt=\"$TAN rallying\" src=\"https:\/\/www.morpheustrading.com\/blog\/wp-content\/uploads\/2013\/10\/131007TAN21.png\" width=\"774\" height=\"709\" title=\"\" srcset=\"https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2013\/10\/131007TAN21-110x100.png 110w, https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2013\/10\/131007TAN21-300x274.png 300w\" sizes=\"auto, (max-width: 774px) 100vw, 774px\" \/><\/p>\n<p>After our initial buy entry on July 2, $TAN acted as anticipated by subsequently cruising to a new high less than two weeks later.<\/p>\n<p>Thereafter, $TAN appeared to be forming a <a title=\"Bull Flag Defined\" href=\"https:\/\/stockcharts.com\/school\/doku.php?id=chart_school:chart_analysis:chart_patterns:flag_pennant_continu\" target=\"_blank\" rel=\"noopener\">bull flag chart pattern<\/a>, which prompted us to add to the position on July 22 (at $27.91).<\/p>\n<p>However, since the bull flag pattern did\u00a0<em>not<\/em>\u00a0follow-through to the upside, we maintained a very tight stop on the additional shares, which we closed for a tiny loss of 1.6% on August 2.<\/p>\n<p>After chopping around in a range for a few weeks, and again coming into support of its 50-day moving average several times, $TAN eventually broke out to new highs again.<\/p>\n<p>As we frequently remind traders, one important psychological aspect of profitable trading is having the <strong>discipline and willingness to quickly close out losing trades when you&#8217;re wrong, while still not being afraid to re-enter the trade if it still looks good.<\/strong><\/p>\n<p>As such, we again bought additional shares of $TAN when it broke out on September 6 (bear in mind that we still held the initial position from our July 2 entry because those shares never went against us).<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-3263\" alt=\"Sold $TAN for large gain\" src=\"https:\/\/www.morpheustrading.com\/blog\/wp-content\/uploads\/2013\/10\/131007TAN31.png\" width=\"774\" height=\"709\" title=\"\" srcset=\"https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2013\/10\/131007TAN31-110x100.png 110w, https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2013\/10\/131007TAN31-300x274.png 300w\" sizes=\"auto, (max-width: 774px) 100vw, 774px\" \/><\/p>\n<p>After buying the breakout to new highs in early September, $TAN consolidated for a few more weeks, then ripped higher as volume began surging higher again.<\/p>\n<p>Rather than attempting to guess when a powerful rally will end, we often close winning trades by trailing protective stops tighter and tighter, until a pullback eventually causes us to lock in the profits.<\/p>\n<p>But in the case of $TAN, we instead made the decision to sell into strength of the rally due to prior resistance from back in February 2012 (visible on a <em>weekly<\/em> chart).<\/p>\n<p>Upon selling $TAN on October 1, the final tally was a 44.3% share price gain from our initial July 2 entry, and a 15.4% gain from our September 6 buy entry.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Is_44_A_Big_Gain_For_An_ETF_Trade\"><\/span><strong>Is 44% A Big Gain For An ETF Trade?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>When trading individual stocks, we typically shoot for an\u00a0<em>average price gain of 20 to 30% for short to intermediate-term momentum trades.<\/em><\/p>\n<p>Sometimes, bullish momentum propels stocks with massive relative strength 40 to 50% higher before we eventually sell and take profits. For example, in our\u00a0<em>Wagner Daily<\/em>\u00a0ETF and stock picking portfolio, we are presently sitting on unrealized<strong>\u00a0gains of 49% in Silica ($SLCA) and 35% in Yelp ($YELP).<\/strong><\/p>\n<p>On October 8, we also\u00a0<em>closed<\/em>\u00a0a swing trade in Bitauto ($BITA) for a price\u00a0<strong>gain of 36.7% with just a 1-month holding period.<\/strong><\/p>\n<p>However, because they are comprised of a basket of actual stocks,\u00a0<em>ETFs are generally much less volatile<\/em>\u00a0than the individual small to mid-cap growth stocks we trade in bull markets.<\/p>\n<p>As such, we consider a solid gain for an ETF swing trade to be in the neighborhood of 10 to 15%, rather than 20 to 30%.<\/p>\n<p>In addition to the various leveraged ETFs, $TAN is one of the few non-leveraged ETFs that trades with the volatility of a typical small to mid-cap stock.<\/p>\n<p>That&#8217;s why we managed to snag a 44.3% gain by trading $TAN, despite it being an ETF.<\/p>\n<p>In between, there was just a tiny 1.6% loss from our bull flag entry attempt on July 22.<\/p>\n<p>You can screw up a lot of things in trading, but still be profitable if you consistently get just one thing right:<br \/>\n<strong>Let the profits ride when you&#8217;re right, but get the hell outta&#8217; Dodge when you&#8217;re wrong!<\/strong><\/p>\n<p><em>To profit from our next big winning trade, sign up now for your <strong><a title=\"The Wagner Daily\" href=\"https:\/\/www.morpheustrading.com\/services\/swing-trade-alerts\" target=\"_blank\" rel=\"noopener\">risk-free subscription<\/a> <\/strong>to our swing trading newsletter.<\/em><\/p>\n<div class=\"cfmonitor\"><center><script type=\"text\/javascript\">\/\/ <![CDATA[\ngoogle_ad_client = \"ca-pub-7565144363001883\"; \/* Footer of content *\/ google_ad_slot = \"7002222565\"; google_ad_width = 300; google_ad_height = 250;\n\/\/ ]]><\/script><br \/>\n<script type=\"text\/javascript\" src=\"\/\/pagead2.googlesyndication.com\/pagead\/show_ads.js\">\/\/ <![CDATA[\n\n\n\/\/ ]]><\/script><\/center><\/div>\n","protected":false},"excerpt":{"rendered":"<p>On July 2 of this year, we bought Guggenheim Solar Energy ETF ($TAN) in The Wagner Daily\u00a0newsletter. Three months later, we sold those shares of $TAN for a cool price gain of 44.3%. In this trading strategy article, we detail the top 4 technical tips that prompted us to buy $TAN when we did. Then, [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_links_to":"","_links_to_target":""},"categories":[3],"tags":[],"class_list":["post-3260","post","type-post","status-publish","format-standard","hentry","category-stock-trading-strategy"],"_links":{"self":[{"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/posts\/3260","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/comments?post=3260"}],"version-history":[{"count":1,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/posts\/3260\/revisions"}],"predecessor-version":[{"id":11364,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/posts\/3260\/revisions\/11364"}],"wp:attachment":[{"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/media?parent=3260"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/categories?post=3260"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/tags?post=3260"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}