As we approach the first trading session of 2014, we have one new ETF setup we are stalking for potential buy entry going into today. The iShares Mexico Index ($EWW) has spent just nearly all of 2013 in consolidation mode, after breaking out to new all-time highs in Q4-2012. On the long-term monthly chart below, notice how the recent pullback found new support at prior resistance of the former all-time high (a bullish sign):



There was a big shakeout candlestick that dipped several points below the $65 support level, but that is also a bullish sign because the price action did not return back below the lows of that candle. Also, one must keep in mind that support is more about an area, not just a neat horizontal line.

Dropping down to the shorter-term daily chart, we see several higher lows already in place, which is a great sign. Since the correction was so long, the 50-day moving average is still below the 200-day moving average, which is not ideal, but note that the 50-day MA is now trending higher:



$EWW broke the downtrend line of the consolidation in December, and has since held above its 50-day MA, while consolidating around the 200-day MA.

The price action has tightened up nicely, so we look for $EWW to breakout from here and run to the $71 - $72 resistance level before slowing down. This is not a quick swing trade setup, as we are looking for an eventual breakout to new all-time highs (a potential 3-6 month hold).

Regular subscribers of our nightly ETF and stock pick newsletter should note our exact entry, stop, and target prices for the $EWW trade setup in the "Watchlist" section of today's report.

On the individual stock side, we closed our swing trade in Kandi Technology Corp. ($KNDI) for a 60% share price gain on Tuesday.

The $KNDI trade was exactly how these lower priced setups in individual stocks are designed to work. We want to buy them with small share size, then look for explosive moves in the 30-50% range in a few weeks or less (we held $KNDI for three weeks).

Most of these low-priced, small-cap stocks are not "A rated" because they lack liquidity or top fundamentals. As such, we do not feel comfortable overstaying our welcome once the anticipated move has been made. This is what we are trying to achieve with trades like $SSNI, $TKMR, $SSTK, and $OTIV. These stocks are the quick hitters. Conversely, we are much more patient to ride out gains in "A rated" stocks like $FB and $LNKD.

As for the broad market, stocks closed out December with most of the major averages setting fresh 52-week or all-time highs on the last trading day of 2013.

The NASDAQ Composite is currently sitting about 2% off resistance from the summer highs of 2000, around the 4,260 to 4,290 area. If hit, this level could produce a few weeks of consolidation in the NASDAQ.

In the short-term, the major indices are extended and could be due for some sort of pullback next week, but look for the main stock market indexes to find support at the rising 10-day moving averages.

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.