Daily Form March 4, 2008

Profit Patterns and Risk Management For Active Traders
Trade successfully without having to be right about the underlying market direction
TUESDAY MARCH 4, 2008       03:11 ET

The Nasdaq 100 (^NDX) has carved out a downward wedge formation after notably failing to break above the 1850 level which I have discussed previously as being a key resistance level that has developed over the last year and a half.

The low achieved intraday yesterday was marginally above the intraday low from January 23rd, however the descending wedge pattern can often be the precursor to a downward breakout.

The S&P 500 (^SPC) registered a tiny doji candlestick yesterday following Friday’s sell-off. The background news-flow was hardly supportive yesterday and another downward trend day could easily have materialized as traders could have succumbed to the temptation to re-test the January low.

While the 1270 level remains so nearby and is not tested there will be hesitation from fund managers to make any firm commitments on the long side.

The CBOE Volatility Index (^VIX) has risen steadily since reaching down to the 200 day EMA a week ago. The index gapped up and touched the 28 level in early trading yesterday but as the day wore on the index declined to finish marginally below Friday’s close.

It does not demand too much of our imagination to conceive of additional weak data and/or another shoe to drop in the ongoing structured credit malaise that would see us headed back towards the more extreme readings seen last August and in mid 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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GS  The Goldman Sachs Group Inc.  

The chart for Goldman Sachs (GS) suggests a possible double bottom formation which could attract some fund buyers but the underlying momentum and money flow dynamics are not that encouraging.

AVID  Avid Technology Inc  

I shall repeat my comments on Avid Technology (AVID) from last week where I suggested that the valiant pullback effort seems to have reached an area where sellers could be re-energized.


The Biotech Holders Trust (BBH) broke above all three moving averages yesterday on increased volume.

CPWR  Compuware Corporation  

Compuware (CPWR) has noticeably failed to make it above the resistance of the overhead moving averages and seems to be vulnerable.