When I look at the 1-year daily bars chart (shown below) of PowerShares Water Resources (PHO), I see reasons to buy and reasons to wait -- just no real reason to short. I'm bullish on water in 2007, and PHO is a solid way to play it. Have you ever stopped to think about how scarce of a commodity drinkable water is? 70% of the earth's surface is water and something like 0.1% is drinkable. That's not much water to support a population of over 6 billion and growing.

Enough with the "theories," let's get down to the technicals. PHO recently managed to break above previous highs at 19. The previous resistance level will now act as support, potentially allowing PHO to run significantly from here. The buy side volume on the move through 19 was solid, further confirming PHO's strength.

One thing that deters me from entry at this price is the fact RSI is trading at resistance. There is one previous move above 70 RSI that move resulted in a temporary pullback. Watch for a pullback to 19 and see how the stock acts at the new support level. If PHO moves through 19 with ease and dips to uptrend support, I'm in.



Andy Swan is co-founder and head trader for DaytradeTeam.com. To get all of Andy's day trading, swing trading, and options trading alerts in real time, subscribe to a one-week, all-inclusive trial membership to DaytradeTeam by clicking here.