On the "open positions" section of today's swing trade newsletter, subscribers will note that we have (for the fourth consecutive day) trailed our protective stop higher in Market Vectors Semiconductors ETF ($SMH). Because the ETF is already nearing our original target area of $40 while remaining on a very steep angled climb, we are continually squeezing the stop tighter in order to protect gains, while still allowing for maximum profit.

On the daily chart of $SMH below, we have labeled the increasingly higher stop prices we have used in each of the past four sessions:



As you can see, our stop in each of the past four sessions has been raised to just below the low of the prior day's session. Whenever an ETF or stock is nearing your target area and you wish to maximize profits while still protecting gains, setting a stop just below the previous day's low (allowing for a tiny bit of "wiggle room") is a great strategy. This is because basic technical analysis states the prior day's lows and highs act as very near-term support and resistance (respectively).

By using this method for trailing stops, you will be out of a winning position before the start of a significant pullback, while still allowing the gains to build as long as buying momentum remains. This system also provides an objective way for knowing when to close a winning swing trade, rather than guessing and potentially leaving significant profits on the table.

In the May 10 issue of The Wagner Daily, we pointed out the bearish "shooting star" candlestick pattern PowerShares QQQ Trust ($QQQ), a popular ETF that tracks the Nasdaq 100 Index, formed on May 9. We then said the formation of such a pattern is often a warning sign to the bulls that stocks may be running out of gas in the near-term. Although the broad market followed up with a solid day of gains in the following session, the signal is still valid because $QQQ failed to close above the intraday high of the May 9 session that formed a "shooting star:"



As we frequently remind subscribers, the most important technical indicator at our disposal is simply price action. Therefore, as long as bullish momentum remains, we must continue to take advantage of the strength by holding long positions. A mere one-day signal like the "shooting star" is never more important than the actual price action in the market. Nevertheless, we remain prepared for the substantial possibility of at least a short-term correction in the coming week.

Last week, we pointed out the "cup and handle" type pattern that was forming on the daily chart of Guggenheim Solar ETF ($TAN). We expected the handle (consolidation) to build for another week or two, but the ETF convincingly broke out above the range last Friday instead. Furthermore, the breakout was confirmed by a spike to more than 2x the average daily volume of $TAN:



Although we missed last Friday's breakout, this trade setup could still provide us with a low-risk, secondary entry point if the price pulls back to near the breakout level on Monday. As such, we have added $TAN to our watchlist as a potential buy entry. Subscribing members should please note the $TAN trigger price is a BUY LIMIT order, which means we will only buy IF it pulls back to our predefined buy limit price.

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.