Wagner & Balog, Advanced Technical Analysis of ETFs

Deron Wagner, among his many other activities, is the founder of Morpheus Capital LP and Morpheus Trading Group, a trader education firm specializing in ETFs and stocks. Edward Balog is the head ETF trader for Morpheus Capital and coauthor of the Wagner Daily newsletter. Wagner and Balog have pooled their skills and experience, drawing extensively on their newsletter, to produce Advanced Technical Analysis of ETFs: Strategies and Market Psychology for Serious Traders (Bloomberg/Wiley, 2012).

The authors are swing traders who follow the trend of the broad market and who look for ETFs that have relative strength compared to the market as a whole. Their basic charts include the 20-day EMA as well as the 50- and 200-day MAs as trend guides. In addition, the authors explain their so-called advanced techniques: candlestick patterns, Fibonacci price levels and time series, and accumulation-distribution with RSI. They amply illustrate the use of these indicators with Tradestation charts.

What distinguishes this book from so many others in the field is that it walks the reader through fifteen long trades and fifteen short trades that the authors took using their own capital, including losing trades. Those who are expecting to see advanced technical analysis in action will be disappointed, however. As the authors write, “Because we have already provided specific trade examples of how to apply the advanced technical strategies, the trades in this [and the next] chapter seek to illustrate that profitable trading can be achieved simply through following the basics of our top-down ETF strategy. Application of the additional advanced strategies would only serve to enhance one’s profitability even further.” (p. 71) The skeptical reader is forced to ask why, if the strategies described in this book would add to profitability, the authors didn’t use them in the 2010 and 2011 trades they described in their newsletter. After all, these strategies aren’t exactly brand new.

Wagner and Balog round out their book with some thoughts on market psychology and a description of the most recent innovations in exchange-traded products (along with their tax consequences).

The authors use this book in part to promote the Wagner Daily newsletter, in existence now for ten years (morpheustrading.com). But the book is not merely a promotional piece. It shows how technical trading is actually done and provides some valuable lessons.