Daily Form February 14, 2008

Profit Patterns and Risk Management For Active Traders
Trade successfully without having to be right about the underlying market direction
THURSDAY FEBRUARY 14, 2008       07:20 ET

The continuation of Tuesday’s recovery effort brought the S&P 500 (^SPC) back above the 20 day EMA and with the current analytical focus being on the succession of higher lows, a growing number of traders (perhaps too many) believe that a sustainable rally is finally under way.

Reviewing the chart below, the S&P 500 faces hurdles around 1380 as well as the 50 day EMA which is just above this level and there is still a strong likelihood of major setbacks that will test the nerve of those convinced that the bargains are just too irresistible at current levels.

Narrow range action in the bond market over the last two sessions has produced two consecutive doji stars in terms of the yield on the ten year note. One can expect traders in the Treasury complex to be acutely sensitive at present to surprising data, such as the healthier than expected retail sales data reported yesterday, that questions just how much of a downturn in economic activity is actually being registered.

The 3.8% yield level looks likely to be targeted again in the very near future

Asian markets had positive sessions on Thursday with the Nikkei 225 (^N225) registering its best performance of the year so far. As with many of the US indices the Japanese index was able to close above the 20 day EMA and also closed on its high for the session.

The 50 day EMA just above 14000 will present a strong barrier but even more formidable as a challenge will be the strong downward trendline indicated on the chart below.


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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STX  Seagate Technology  

Seagate Technology (STX) has climbed steadily from the mid January weakness but recent volume has been modest and there seem to be clear chart hurdles that could halt the recovery in the near term.

MOT  Motorola Inc.  

After its recent plunge and with deteriorating fundamentals, many fund managers will be looking for even modest relative strength to exit Motorola (MOT).

WYNN  Wynn Resorts Limited  

WYNN dropped below all three moving averages on heavy volume yesterday and further downside action is likely.