Daily Form February 19, 2008

Profit Patterns and Risk Management For Active Traders
Trade successfully without having to be right about the underlying market direction
TUESDAY FEBRUARY 19, 2008       02:57 ET

Traders in the US returning from a long weekend may well be motivated on the long side in today’s trading, following upbeat action across Europe on Monday, as well as a recovery in Hong Kong Tuesday morning which reversed Monday’s weakness.

The S&P 500 (^SPC) could well see a rally up to the 50 day EMA in today’s session although the more upbeat sentiment that began to appear towards the end of last week remains fragile. Several key releases of data during the course of the week will keep traders on their toes, but the background technical conditions are turning more favorable for an intermediate term rally.

The Nasdaq 100 (^NDX) appears to be bracing for a test of the 1850 level again during this week. If, as is probable, this level is successfully pierced the next layer of resistance will be at the 1900 level.

The FTSE in London had a strong showing in Monday’s trading with a 2.7% rise that was partly fuelled by takeover activity and speculation in the mining sector; the UK’s premier index is notably over-weighted in mining stocks. Also there was a healthy appetite for banking stocks which over-shadowed the development over last weekend in which the UK Government announced the nationalization of the troubled Northern Rock bank.

Despite months of trying, the government failed to find a private sector solution as not a single feasible bid emerged from all of the potential acquirers of the bank’s assets - primarily a mortgage book worth more than $200 billion. UK taxpayers are now owners of the business and, in addition to underwriting the entire balance sheet of the bank, they now face the difficult task of foreclosing on mortgage defaulters and downsizing the banks retail branch operations.

The UK index will need to sustain yesterday’s momentum in order to overcome strong resistance at the 6000 level which also coincides with the 50 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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ROH  Rohm and Haas Company  

The chart for Rohm and Maas (ROH) reveals a long lower tail just above all three converging moving averages. The anemic volume during the last few days of price attrition suggest that the dynamics underlying the preceding pattern, which looks bullish, may be ready to re-assert themselves.

ZMH  Zimmer Holdings Inc.  

Zimmer Holdings (ZMH) also reveals a hammer with a long lower shadow at an area of potential chart support.

FUL  HB Fuller Co.  

Fuller (FUL) has an ascending channel that appears to have reached overhead resistance and the recent declining volume suggests that a orice relapse is probable.

LLY  Eli Lilly and Co.  

Eli Lilly (LLY) has a double bottom pattern with a slightly lower high. I would be targeting a move up towards $55 in the intermediate term.