Daily Form February 15, 2008

Profit Patterns and Risk Management For Active Traders
Trade successfully without having to be right about the underlying market direction
FRIDAY FEBRUARY 15, 2008       07:19 ET

Chairman Bernanke, in an unusually candid testimony to the Senate Banking Committee, spooked the markets and halted the incipient rally. The Russell 2000 (^RUT) was the out-performer on the downside with a 2.3% loss for the session. As the chart reveals there is a lot of price activity between 720, which now more or less coincides with the 50 day EMA and 680 where there is evidence of chart support. A re-test of this level seems feasible in the near term and if the index should break to this level it seems quite conceivable that the intraday low of 650 exactly (recorded on January 22nd) may well become an attractor as well.

In yesterday’s commentary on the ten year Treasury note I suggested that "The 3.8% yield level looks likely to be targeted again in the very near future". I must confess to being surprised that it was tested so immediately with a 13 basis point upward move registered for the session.

If we re-enter, and look like we are planning to stay for a while, the long standing channel between 3.75% and 5.25% this would suggest that Treasury traders are not currently factoring in a major recession. Of course they could change their minds very quickly with the next release of key data.

With the passing of time the chart for the banking index (^BKX) is revealing even more clearly the "false" breakout from late January.


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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AVP  Avon Products Inc.  

Avon Products (AVP) has a text book instance of the bearish Evening Star formation.

STX  Seagate Technology  

Seagate Technology (STX) ran into exactly the resistance discussed here yesterday.

NITE  Knight Trading Group Inc.  

Knight Trading Group (NITE) produced a shooting star formation and is also showing momentum fatigue.

EMC  EMC Corporation  

EMC looks constructive on the long side.

STJ  St. Jude Medical Inc.  

St Jude Medical (STJ) has another Evening Star pattern.