Daily Form November 14, 2007

Profit Patterns and Risk Management For Active Traders
Trade successfully without having to be right about the underlying market direction
WEDNESDAY NOVEMBER 14, 2007       05:31 ET

After losing more than eight percent last week the Nasdaq 100 (^NDX) was one of the major beneficiaries of a strong rally that was largely inspired by short sellers scrambling to cover positions in large tech and the financials. The index moved up four percent and came to rest close to the chart support/resistance level that marked the July top and the mid-September breakout level.

As with many dramatic short squeezes trading yesterday followed the classical trend day pattern of an absence of the usual intraday pullbacks and price rejection as the direction was more or less straight up with most indices ending at or very close to their highs. Trend days were also seen in Asian trading with the Nikkei 225 pushing ahead by 2.5% to finish more or less at its high for the day and the Hang Seng index surging by almost five percent to close at its high and almost back to its 20 day EMA.

With respect to the Nasdaq 100 index there could be further upward bias until we come back towards the 2110-2120 level which marks the area close to the 50 day EMA.

The S&P 500 (^SPC) also recorded a strong trend day with a gain of 2.9% which brought the index back to a close just above the 200 day EMA. Volume on the exchange traded proxy, SPY, was less than the average daily volume of 250m with less than 200 million shares being traded.

The banks and financials as anticipated in our weekend commentary were ready to mount an abrupt and vigorous rally and that came yesterday as many of the money center and investment banks surged ahead. The sector index (^BKX) should have further scope for upward movement but will face quite strong resistance at the 102 level.


The patterns identified below should be considered as indicative of eventual price direction in forthcoming trading sessions. None of these setups should be seen as specifically opportune for the current trading session.
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IBM  International Business Machines Corp.  

IBM showed a relatively weak recovery yesterday and I would be looking to renew short exposure in the vicinity of $108 which lies just above the 200 day EMA.

BAC  Bank of America Corporation  

Bank of America (BAC) looks as though it could recover further towards $48, but as the chart suggests there will be strong overhead resistance at this level.

MBI  MBIA Inc.  

Despite a fifteen percent rise in trading yesterday MBIA Inc (MBI) still registered an inside day. For intraday traders there is scope for very strong intraday moves as the guarantors of structured products have attracted a lot of short sellers in recent weeks who are likely to be feeling more edgy after yesterday’s trading.

CRL  Charles River Laboratories  

Charles River Labs (CRL) has a bull flag formation with the appropriate volume characteristics.

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