Daily Form April 8, 2008

Profit Patterns and Risk Management For Active Traders
Trade successfully without having to be right about the underlying market direction
TUESDAY APRIL 8, 2008       05:59 ET

The S&P 500 (^SPC) extended its more introspective posture following last Tuesday’s surge as it registered its fourth consecutive spinning top/doji star formation. Short sellers seem to be sitting on the sidelines and in the meantime the aggressively bullish traders that instigated last week’s breakout are awaiting a new impetus to provide further inspiration for a continuation of the rally.

The CBOE Volatility Index (^VIX) has declined steadily since the cathartic session on March 17th. The drop below the trendline indicated, and peek below the 200 day EMA in yesterday’s session, sets off some contrarian concerns that I have that traders are becoming increasingly comfortable that the big shocks are behind us.

The evolving pattern on the chart for the broker/dealer sector (^XBD) reveals an ascending wedge and a plateau where support is building just below a potential break out level. The 50 day EMA is shaping up as the first target but beyond that a lot of work will have to be done to take on the next obvious target at 260.


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) echoes the pattern seen on the broker/dealer index and I would be looking for leadership from this investment bank to show the way beyond the wedge formation and upwards towards the 200 day EMA in the region of $195.

KGC  Kinross Gold Corporation (USA)  

Kinross Gold Corporation (KGC) has struggled at the $24 level and a nested bear flag pattern is evident.

PLCE  The Children"s Place  

The Children’s Place (PLCE) dropped by seven percent yesterday but volume was much reduced from that seen on the price surge in mid March. Further attrition could see a return to the 50 day EMA but at this level I would be looking for an entry on the long side.

IGT  International Game Tech.  

As anticipated in yesterday’s column, International Game Technology (IGT) did encounter price rejection within a bear flag as it approached key moving average resistance.