Tuesday's action lacked any punch, with all major averages chopping around on light volume and closing in the -0.2% to +0.1% range. Although we would welcome a short-term pullback in the market, we know that a strong rally can hold above the 10-day moving average for several weeks (see S&P 500 price action in January of this year).

$SMH hit our protective trailing stop (explanation of stop placement here) and we are out of the swing trade with a gain of $1,100 on a 9% move. $SMH finally reversed on the hourly chart yesterday, breaking below the 20-period EMA and steep uptrend line. The next stop for $SMH could be the 10-day moving average, around $38.

iShares Dow Jones Transportation Average ($IYT) recently broke out from a bullish, six-week base at the highs. It is a bit too extended to purchase now, but a pull back to the prior breakout level (around $112) could present us with a low-risk pullback entry:



The base leading up to the breakout is strong, with a tight consolidation at the highs. Also, the 20-day EMA is above the 50-day MA, and the 50-day MA is above the 200-day MA.

SPDR KBW Bank ETF ($KBE) looks a lot like $IYT, with the tight basing action at the highs, but the current breakout attempt has failed to extend much beyond the prior high. A failed breakout attempt could lead to a pullback to the rising 20-day EMA around $27, which would also coincide with a pullback to the downtrend line that connects from the high of 3/14 to the high of 4/11. The 50-day MA would also provide support, as it is currently sitting at $26.62:



Like $IYT, the 20-day EMA has crossed above the 50-day MA, and the 50-day MA is well above the 200-day MA; all major moving averages are trending higher.

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.