In yesterday's (January 7) technical ETF trading commentary, we mentioned the possibility of a Pullback swing trade buy entry developing in the WisdomTree India Earnings Fund ($EPI) during the next few days. As we were anticipating, $EPI indeed pulled back for the third day in a row yesterday, and did so on lighter than average volume (which is positive).

On the hourly (60-minute) chart interval (which is not shown below), $EPI has just retraced to "undercut" its 20-period exponential moving average (20-EMA), which usually provides near-term support in strong breakouts. The ideal Pullback Buy Setup is at least 3 to 7 days in length (retracement from the high), with volume declining on the pullback, and orderly price action along the way. So far, this setup meets our criteria for pullback entry.

Although we'd love to see $EPI pull back closer to the prior breakout level at $19.40 in order to establish an even lower risk position, we do not want to miss the next potential move higher when the bullish momentum of the recent breakout resumes. As such, we have placed $EPI on our official ETF Trading watchlist as a possible buy entry. Subscribers with full access to The Wagner Daily swing trading service should note our clearly predefined entry, target, and stop prices for this swing trading setup in the watchlist section of today's report above. The technical trading setup of $EPI is shown on the daily chart below:



Although there is a decent likelihood $EPI will meet our criteria for buy trigger today, it may still pull back for one more day before attempting to resume the bullish momentum of its recent breakout. If that happens, we may be able to establish a lower-risk buy entry point tomorrow (January 9).

Along with $EPI and $EWS (discussed in yesterday's newsletter), the iShares MSCI Taiwan Index ($EWT) is another international (Asian) ETF trade setup we are adding to today's "official" watchlist as a potential ETF swing trade entry. As you can see below, the daily chart of $EWT shows the bullish basing action that has formed since the 50-day moving average (50-MA) crossed back above the 200-day moving average in September. For bullish chart patterns, we are always looking for the price action to tighten up within a base of consolidation, and we are now seeing that with the price action finding support at the 50-MA in late December, and potentially finding support at the 20-day EMA this week.

If the price action holds the 20-EMA and triggers a swing trade buy entry, we may be able to add to the position on the way up (below $13.80) if there is some sort of one or two-day pause. If not, then we may have to add on a breakout above $13.80 or $14.00. As with the $EPI setup, subscribers to our swing trading newsletter should note our exact, preset trade details for the setup shown below (visit http://www.morpheustrading.com for details).

 

Deron Wagner is the Founder and Head Trader of both Morpheus Capital LP, a U.S. hedge fund, and MorpheusTrading.com, a trader education firm.