Daily Form May 30, 2008

Profit Patterns and Risk Management For Active Traders
Trade successfully without having to be right about the underlying market direction
FRIDAY MAY 30, 2008       06:08 ET

During the course of this week I have featured the chart for the yield on the 10 year Treasury note which has now sustained consecutive closes above the four percent level. The far end of the Treasury spectrum, not too surprisingly, is showing even more of a back up in yields. The 30 year bond has now returned to levels not seen since October 2007. Indicated on the left hand side of the chart is an area of resistance that will need to be overcome as traders prepare to test a possible five percent yield on this longest dated instrument.

There is clearly a major allocation shift taking place as the safe have appeal of Treasuries is diminishing, inflationary concerns continue to trouble and the economic data continues to question just how much contraction in the economy is really taking place. Bonds have been sold off quite aggressively recently, and while the intermediate trend for bond prices looks bearish, it would not take too much in the evidence to reignite recessionary fears and give a lift to bond prices and a scurrying for cover by many traders that are building up short positions.


The Midcap 400 (^MID) has recovered quickly from last week’s corrective episode and it will now become quite critical to see whether the index can successfully navigate its way higher through multiple levels of resistance that lie between 880 and 920. What would concern me and undermine my slightly bullish posture would be to see another failure to break and hold above 880.

The Jim Rogers commodity index (^RCT) is approaching what should be some support levels. The action in the metals and some agricultural commodity stocks has been more stealthily bearish recently and not received the same attention as that which has been focused on the pullback in the energy sector.

There are already too many pundits however that are beginning to celebrate the demise of the bull market in commodities and as always that suggests that there could still be a sting in the tail to come.

TRADE OPPORTUNITIES/SETUPS FOR FRIDAY MAY 30, 2008



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.
For full details on time horizons, risk management and hedging techniques please visit http://www.tradewithform.com

ABT  Abbott Laboratories  

On Wednesday I mentioned that Abbot Labs (ABT) looked promising on the long side and yesterday it moved up decisively on increased volume and pierced through a trading range barrier extending back to February.



AMGN  Amgen Inc.  

Amgen (AMGN) has been in a narrow range following its failed breakout pattern in March. The dynamics suggest that another attempt to break upwards could be imminent.



CY  Cypress Semiconductor Corporation  

Cypress Semiconductor (CY) should be monitored today for a possible breakdown as it dropped below the 50 day EMA on an uptick in volume and could fail to find support at the 200 day EMA.

Daily Form May 29, 2008

Profit Patterns and Risk Management For Active Traders
Trade successfully without having to be right about the underlying market direction
THURSDAY MAY 29, 2008       05:37 ET

The yield on the ten year Treasury closed above 4% for the first time this year. I shall not repeat yesterday’s discussion but this now becomes one of the most important charts to monitor for how traders are discounting the economic outlook.


Overseas markets are rallying again. The Brazilian index (^BVSP) moved back up 3% on the session and I shall be watching to see whether the index can sail past its historic high achieved just over a week ago.

In overnight trading the Nikkei 225 (^N225) also regained more than 3% and could be on its way towards a testing of the 200 day EMA which lies about three percent above today’s close.

It was a roller coaster ride for equities yesterday but most of the broad indices ended in positive territory. After out-performance in Tuesday’s session the Nasdaq 100 (^NDX) and Nasdaq Composite (^IXIC) were relative laggards and left rather small range hanging man candlesticks.

TRADE OPPORTUNITIES/SETUPS FOR THURSDAY MAY 29, 2008



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.
For full details on time horizons, risk management and hedging techniques please visit http://www.tradewithform.com

SGR  The Shaw Group Inc.  

The Shaw Group (SGR) mentioned last Friday on the long side produced a nice gain of almost six percent yesterday and could still have further to go. In such circumstances taking profit on half of the position is often the way to go.



CTSH  Cognizant Technology Solutions  

Cognizant Technology Solutions (CTSH) still looks vulnerable.



DRIV  Digital River Inc  

Digital River (DRIV) gapped up on the open and closed above the 200 day EMA on an uptick in volume but now has a clear line of chart resistance to overcome. I shall be watching today to see whether there is sufficient buying power to propel us above this hurdle.

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Daily Form May 28, 2008

CLIVE CORCORAN WILL BE PRESENTING AN ISE WEBINAR TODAY
To register for the event click below and follow the links

Profit Patterns and Risk Management For Active Traders
Trade successfully without having to be right about the underlying market direction
WEDNESDAY MAY 28, 2008       06:50 ET

Considering some of the bleak economic news yesterday US equities performed relatively well and regained some composure following last week’s selling. This was perhaps more impressive against the backdrop of the rather problematic chart patterns that we touched on in yesterday’s column. I also indicated in yesterday’s column that despite concerns about the technical pattern on the S&P 500 chart there were several others such as the S&P 400 Midcap and the Nasdaq 100 where the patterns were less ominous.

The Nasdaq 100 (^NDX) rallied ahead of the pack yesterday and recorded an almost 2% gain on the session. The four day reversal pattern that has been highlighted on the chart could well have been reassuring to fund managers that have been loading up on tech stocks but I suspect that this index will have to show continuing leadership if the bulls are to retain the upper hand during this period of conflicting and often dire economic data.

I shall be the guest presenter at a live webinar on Wednesday May 28th 2008, courtesy of the International Securities Exchange in Chicago. The topic of the presentation is The Carry Trade, Leverage and Capital Markets Liquidity and will cover the close relationship between certain cross rates in the forex market and the behavior of global equity indices.

The event takes place at 3pm EDT or 8pm London time and further details can be found here.


The pattern on the chart for the yield on the ten year Treasury note shows a growing appetite by traders to take on the challenge of the 4% yield level.

Amidst all of the cross currents and debate about inflation versus deflation there is the rather pivotal issue of whether this benchmark yield can sustain closes above the 4% level. The resolution of this matter will be a key barometer as to how the market is discounting the longer term economic outlook.

The chart for the exchange traded energy fund, IYE, which tracks the Dow Jones US Energy Index is showing a pick up in volume that could reflect the bearish bet being made by some traders who are expecting a rolling top pattern to emerge.

The gold index (^GOX) dropped back fairly sharply yesterday and dropped below two key moving averages. I have similar reservations as to how severe this technically weak pattern might be, as I did in relation to the chart for the S&P 500 after last Friday’s close. What is apparent on the chart is the "false" breakout from the triangular pattern highlighted. For those long the precious metal and the mining shares a successful test of the 200 day EMA will be critical.

TRADE OPPORTUNITIES/SETUPS FOR WEDNESDAY MAY 28, 2008



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.
For full details on time horizons, risk management and hedging techniques please visit http://www.tradewithform.com

ABT  Abbott Laboratories  

Abbot Labs (ABT) looks promising on the long side.



CECO  Career Education Corp.  

Career Education Corp (CECO) has mini bear flag and waning momentum and money flow.



BA  Boeing Company The  

I suspect that Boeing (BA) could encounter further weakness as it tries to make it back above $85.

Daily Form May 27, 2008

CLIVE CORCORAN WILL BE PRESENTING AN ISE WEBINAR ON THE FOREX CARRY TRADE AND OVERALL MARKET LIQUIDITY
To register for the event click below and follow the links

Profit Patterns and Risk Management For Active Traders
Trade successfully without having to be right about the underlying market direction
TUESDAY MAY 27, 2008       02:58 ET

The chart formations on several indices that resulted from Friday’s downbeat session paint a mixed picture for the US market. The index which is causing the most concern is the S&P 500 (^SPC) which closed last week at what on the surface appears to be a troublesome level. The close was below the 50 day EMA, below the uptrend through the lows since mid-March and also dangerously low to the rather critical 1375 level which represents an area of previous chart support.

Should we assume that it is unequivocally the end of the rally off the Bear Stearns lows? I always prefer to take charts at face value when the volume characteristics are telling a compelling story, but this was not the case on Friday with the relatively modest pre-holiday volume. Today we could find that the pattern will attract the more zealous bears who will to try to mount a more decisive breakdown, but we could also see that their enthusiasm will get them ensnared in what could become a well orchestrated trap move by the bulls who have retreated from the fray over the last few sessions.

The week ahead should provide the directional clues we need to know whether the March lows could once again be in play.


The midcap index (^MID) which was in the vanguard of the rally since mid March met the price rejection at the 880 level that I was expecting but overall the technical patterns for the index appear a lot less problematic than those discussed on the larger cap S&P index.

The chart below is somewhat uncharacteristic for this commentary and I will be discussing it in much greater detail during a live webinar on Wednesday courtesy of the International Securities Exchange. The topic of the presentation is The Carry Trade, Leverage and Overall Market Liquidity and will cover the close relationship between certain cross rates in the forex market and the behavior of global equity indices.

The chart below shows the very close relationship between the movements in the Australian dollar-Japanese Yen cross rate and the movements in the S&P 500 during 2007 and until present. The values for both the cross rate and the index have been normalized to allow the scales of the two variables to be matched. What is clearly in evidence is the extraordinarily close symmetry between the major peaks and troughs between the two asset classes during the period. In a nutshell this provides unusual insight into the kinds of activities that global macro hedge funds and large proprietary trading desks engage in. Not so obviously evident is the recent de-levering taking place in the financial system that this chart is pointing to. Fur further discussion of this subject please visit the ISE website and follow the links on how to register for the webinar.

The KBW Banking Index (^BKX) is approaching levels where there is an expectation of triple bottom pattern emerging. One factor that would make me more decidedly bearish in the intermediate term is to find that the appetite for the banks from "bargain hunters" has evaporated.

TRADE OPPORTUNITIES/SETUPS FOR TUESDAY MAY 27, 2008



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.
For full details on time horizons, risk management and hedging techniques please visit http://www.tradewithform.com

AMZN  Amazon.com Inc.  

I still like the long side for Amazon.com (AMZN).



TLAB  Tellabs Inc.  

Tellabs (TLAB) ran into overhead resistance as it approached its 50 day EMA and a typical bearish pullback pattern seems to be ready to give way on the downside.



UTX  United Technologies Corporation  

United Technologies (UTX) appears to be in a no man’s land with no obvious nearby support levels to arrest the decline.



ADP  Automatic Data Processing  

Automatic Data Processing (ADP) which had just broke below key moving averages when discussed on Friday morning continues to reveal a weakening technical condition.

Daily Form May 23, 2008

Profit Patterns and Risk Management For Active Traders
Trade successfully without having to be right about the underlying market direction
FRIDAY MAY 23, 2008       06:02 ET

Following two days of selling the equity indices regained some composure in a relatively quiet session where tiny ranges and inside formations were registered on many of the charts.

The S&P 500 (^SPC) came to rest at 1394 and the inscrutable chart pattern will keep us guessing as to the immediate term direction as we head into a long weekend for both the US and UK markets. For my target of 1455 to be met in the intermediate term it would not be constructive if the index breaks down decisively below the 1380 area.


The S&P Retail index (^RLX) looks vulnerable as it has dropped below two key moving averages and violated the trendline since the March recovery.

Attempting to identify topping patterns in the commodity and energy sector is, in the current market environment, going to be hazardous to your wealth. In pointing out the divergences of the exchange traded sector fund for natural gas, UNG, I am not recommending that one should be punting on a near term decline. However I would suggest that when the evidence of a correction becomes more convinving there could be plenty of funds heading for the exits at the same time.

TRADE OPPORTUNITIES/SETUPS FOR FRIDAY MAY 23, 2008



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.
For full details on time horizons, risk management and hedging techniques please visit http://www.tradewithform.com

BAC  Bank of America Corporation  

The tiny doji star at the bottom of the long standing trading range for Bank of America (BAC) suggests that a recovery effort may be imminent.



AMZN  Amazon.com Inc.  

The chart for Amazon (AMZN) shows the development of a bullish pullback pattern which provides an opportunity on the long side



ERTS  Electronic Arts Inc.  

Last week I commented that Electronic Arts (ERTS) had broken through moving averages on substantial volume and looked vulnerable to further weakness. I suspect that the correction is not yet done.



SGR  The Shaw Group Inc.  

The Shaw Group (SGR) should see buying continuation as it approaches the area marked on the chart which shows a convergence of all three moving averages.



ADP  Automatic Data Processing  

Automatic Data Processing (ADP) broke below key moving averages and volume has been picking up over the last two sessions.

Daily Form May 22, 2008

CLIVE CORCORAN WILL BE A GUEST ANALYST ON CNBC's EUROPEAN CLOSING BELL TODAY

Profit Patterns and Risk Management For Active Traders
Trade successfully without having to be right about the underlying market direction
THURSDAY MAY 22, 2008       06:34 ET

The S&P 400 Midcap index (^MID) fulfilled its target close to 880 and almost exactly on cue it has hit turbulence. The question, of course, for some fund managers who have been accumulating recently is whether they believe that bumpy ride is going to be relatively short lived or whether they might decide to put the buying spree that has been in evidence since late March on hold, at least for the time being.

I suspect that while some of the bargain hunters that have entered the market since late March will be happy to liquidate and retreat to the sidelines, the stance of a super accommodating Fed will encourage many fund managers to continue to nibble at equities in the belief that there is now a safety net under the market.


In yesterday’s commentary we reviewed the exchange traded fund, QQQQ, and today I thought we should look at the underlying Nasdaq 100 index (^NDX).

On the cash index the intraday high that was touched in Monday’s session, just above 2050 coincides almost perfectly with the 62% retracement of the interval between the late October high on the index and the March 10th low at 1672. We could retreat back to the 200 day moving average level around 1900 but as I suggested in the discussion on QQQQ yesterday it does seem likely that the area around 2100 on this index which became an actively traded price zone throughout December 2007 will be targeted again.

The broker/dealer sector (^XBD) has been behaving poorly recently with persistent attrition in stocks such as Goldman Sachs (GS) and Lehman Brothers (LEH)

The sector index dropped below the 50 day EMA yesterday as did Lehman and Goldman and as suggested below there is an ETF that would allow one to be short the sector

In overnight trading the Hang Seng (^HSI) fell back 1.6% after rallying in Wednesday’s session but the Nikkei 225 (^N225) in Japan managed to register a small gain. The divergent behavior, especially with the Japanese market not swooning in the face of the drop in New York yesterday and $135 a barrel crude must be seen as a positive for the Nikkei. As the chart below shows, the index has, from a technical perspective, been well behaved since the turning point in March and even during this recent pullback seems to have preserved the uptrend line and not violated the 50 day EMA. However, due to its under-performance last year the index still has to challenge its 200 day moving average.

I would keep an eye on this index over coming weeks to see how it performs in relation to its 200 day EMA, and perhaps even see the success or failure to penetrate and remain above this level as a barometer of global fund manager sentiment.

TRADE OPPORTUNITIES/SETUPS FOR THURSDAY MAY 22, 2008



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.
For full details on time horizons, risk management and hedging techniques please visit http://www.tradewithform.com

IAI  iShares Dow Jones US Broker-Dealers  

The sector fund for the US brokers/dealers, IAI, reveals weak technicals and would provide short exposure to the investment banks without having to be exposed to any individual company risk.



IBB  iShares Nasdaq Biotechnology  

The iShares fund for the biotech sector shows a clear failure pattern to break above overhead resistance. The drop below all three moving averages yesterday was also accompanied by an uptick in volume.



MZZ  UltraShort MidCap400 ProShares  

In my weekend analysis I discussed how the inverse leveraged fund MZZ provided an attractive trading opportunity to exploit the almost obvious vulnerability on the S&P 400 Midcap index discussed above. The fund gained 3.3% yesterday and could have further to go while the correction endures.



OSTK  Overstock.com Inc.  

Overstock.com (OSTK)continues to outperform the market as discussed in my weekend commentary.



CTSH  Cognizant Technology Solutions  

Cognizant Technology Solutions (CTSH) hit resistance at $32 and the preceding bear flag pattern suggests that there could be further scope on the downside.



BZH  Beazer Homes Inc.  

Some bearish patterns are more easily discernible than others, and the chart pattern for Beazer Homes (BZH) has been sending a clear message that the rally in late April was suspect. Moreover the initial drop below moving average support highlighted on the chart, followed by a mini pullback pattern, was also unsustainable. At this point the easy money has been made on the short side as buyers may be tempted back in as the stock approaches the March lows again.

Daily Form May 21, 2008

Profit Patterns and Risk Management For Active Traders
Trade successfully without having to be right about the underlying market direction
WEDNESDAY MAY 21, 2008       06:24 ET

QQQQ, the exchange traded fund that tracks the Nasdaq 100, pulled back by 0.8% in yesterday’s session after Monday’s flirtation with the 50 level which coincides approximately with the 2000 level on the cash index. There has been a pick up in volume during the last few sessions suggesting that higher prices are beginning to attract the bears and, as I have recently commented, there is growing evidence that a corrective phase could be imminent.

Reviewing the longer time frame, the $52 level on the QQQQ fund looks like a viable target before we see a substantial correction but the fact that many traders may be interpreting the charts in a similar fashion could mean that further progress towards this level will bring out the short sellers en masse .


Most global markets were considerably weaker yesterday than the eventual performance seen in the US. London’s FTSE tumbled by 2.9% after showing relative strength last week. There are two lines of chart support for the index below yesterday’s closing level. The nearer to that close is the 200 day EMA at 6125 followed by an even more substantial one at around 6060 which also coincides with the 50 day EMA.

In Monday’s column I commented that amongst the Asian sector funds - "EWT which tracks the Taiwan market, could become vulnerable as it attempts to overcome last October’s highs". The exchange traded fund dropped by 3.5% yesterday after registering the shooting star formation in Monday’s session.

TRADE OPPORTUNITIES/SETUPS FOR WEDNESDAY MAY 21, 2008



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.
For full details on time horizons, risk management and hedging techniques please visit http://www.tradewithform.com

MSTR  Microstrategy Inc.  

Microstrategy (MSTR) looks vulnerable as the definitive technical characteristics of a bear flag are in evidence.



STX  Seagate Technology  

I would be looking at the long side for Seagate Technology (STX) and would expect it to challenge the 200 day EMA in coming sessions.



PCP  Precision Castparts Corp.  

Precision Castparts (PCP) has a bullish flag pattern with the 200 day EMA likely to provide a support in the developing pullback phase.



CHK  Chesapeake Energy Corporation  

Chesapeake Energy (CHK) reveals an evening star and yesterday’s drop following the star formation was on substantial volume. Just one of many energy stocks to keep on the radar for when the tide turns.



PENN  Penn National Gaming Inc  

The chart for Penn National Gaming (PENN) shows a basing pattern with positive MACD divergences although the volume picture could be more compelling.