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.


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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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.

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