Stocks bounced off Tuesday's lows, closing with modest gains across the board. The only index that is no longer in a strong uptrend is the small cap Russell 2000, which broke a short-term uptrend line and the 20-day EMA this week.

Given the recent stalling action at the highs and sharp selloff, the odds now favor the Russell chopping around for a few weeks to digest the last wave up.

The daily chart of Russell 2000 ETF ($IWM) below details the resistance from the prior highs and broken uptrend line. As long as $IWM holds above the 50-day MA, then the consolidation should eventually lead to new 52-week highs:



On the stock side, we added two A-rated stocks to the model portfolio of The Wagner Daily this week in Tesla Motors ($TSLA) and Michael Kors ($KORS). $TSLA was purchased yesterday above Tuesday's bullish reversal candle.

Restoration Hardware ($RH) is another A-rated stock, but it is extended in the short-term after a big volume breakout to new all-time highs a few weeks ago. We are monitoring the price action for a pullback to the rising 10-week MA, which should catch up quickly to the price action over the next few weeks.



We have one new setup on today's swing trading watchlist in Tower Semiconductor ($TSEM), which has pulled back to the original breakout level at $9.50. There is quite a bit of support from moving averages on the daily and weekly chart above $9, so this pullback should hold if all is well.

On the ETF side, we have one new setup in real estate ETF ($IYR), which has formed a tight-ranged consolidation while holding above the rising 10-week moving average. Volume has declined during the base which is a good sign. A move above the downtrend line and last week's high should generate some buying interest.



As always, subscribing members of our stock pick newsletter should note our exact trigger, stop, and target prices for these trade setups in today's report.

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.