After breaking out above the highs of its range on September 18, Technology Select Sector SPDR ($XLK) pulled back into a logical support area, formed by convergence of the prior breakout level and rising 20-day exponential moving average (just above $32). This is shown on the daily chart of $XLK below:



On the longer-term weekly chart (not shown), there is also support of the rising 10-week moving average (nearly the same as 50-day moving average). Currently, the 10-week moving average is sitting at the $32.01 level.

The $XLK pullback to the breakout pivot provides us with a low-risk buy entry and a positive reward-risk ratio. As such, we are stalking $XLK for potential swing trade buy entry going into today's sessions. Regular subscribers of our swing trade newsletter should note our preset buy trigger, stop, and target prices for this setup in the "Watchlist" section of today's report.

After two weeks of consolidating in a tight range, our existing long position in Guggenheim Solar ETF ($TAN) is now in great shape, due to yesterday's big volume advance above $32. Yesterday's breakout sent $TAN to a fresh 52-week high, as volume spiked to nearly double its average daily level.

Although our original buy entry into $TAN is now showing an unrealized price gain of 34% since buy entry, we continue to hold in anticipation of a rally to our price target of $36.50 in the coming weeks. If $TAN hits the target, it would equate to a gain on the trade of roughly 50% since our July 2013 entry.

As for the broad market, yesterday's price action was a step in the right direction for the Dow Jones and S&P 500, as both averages held above the prior day's low and are beginning to find some traction on the hourly chart:



For the Russell 2000 and NASDAQ Composite, it was business as usual, with both averages consolidating in a very tight range (near their respective swing highs):

 

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.