Daily Form December 7, 2007

Profit Patterns and Risk Management For Active Traders
Trade successfully without having to be right about the underlying market direction
FRIDAY DECEMBER 7, 2007       04:24 ET

Following the renewed vitality of the Nasdaq stocks and the continued progress of the large cap indices the Russell 2000 (^RUT) produced the catch up move that I was waiting for to underline the sustainability of this rally. The index moved up by 2.8% and will surely try to challenge the 800 level in coming sessions. Equity traders love interest rate cuts and markets are now counting on the fact that there are more in the pipeline for many of the G7 economies.

The banking index (^BKX) moved even closer to a decisive break above the descending trendline through the highs and the 50 day EMA. Assuming that we cross the 50 day EMA hurdle in short order there would be a mission shaping up for the bulls which would be to tackle the 200 day EMA.

In the intermediate term the attainment of this level could provide trading desks with a cue to take some money out of the sector and could mark the point at which this rather remarkable rally could run into strong resistance.

With bulls in control of the agenda again there has been a notable decline in the CBOE Volatility index (^VIX) in the last week and the upward trend that prevailed in November has been decisively broken with the index now set to return to its 200 day EMA.


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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NOC  Northrop Grumman Corporation  

As un update to a long suggestion for Northrop Grumman (NOC) in Monday’s commentary the stock has moved up towards a test the previous high from early November.

PMCS  PMC-Sierra Inc.  

PMC Sierra (PMCS) appears to be heading for the intersection of the 50 and 200 day EMA’s.

SGR  The Shaw Group Inc.  

Shaw Group (SGR) performed a strong bullish reversal in yesterday’s session and closed above two key moving averages on 1.25 times the average daily volume.

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