Daily Form April 15, 2008

Profit Patterns and Risk Management For Active Traders
Trade successfully without having to be right about the underlying market direction
TUESDAY APRIL 15, 2008       05:48 ET

The S&P 500 (^SPC) registered another red candlestick yesterday but the intraday low remained within a whisker of the April 1st low.

All of the gains from that day’s dramatic upward move, many of which could be attributed to a frantic scramble by the shorts to cover when UBS announced eye-watering write downs, have now been given back. With bank earnings on the horizon again we may see yet another example of short sellers booking gains when the news is as gloomy as it is expected to be.

The index that I shall be focusing on for the remainder of this week is the banking index (^BKX) which has retreated to a fundamental level coinciding with January and March lows. The gravity of a test of this critical level is underlined by the descending wedge formation that is very much in evidence.

The exchange traded fund, UTH, which is one vehicle that tracks the utilities stocks is in a consolidation pattern just below a potential breakout level. There is strong support indicated just below the closing price for the fund yesterday at the intersection of all three moving averages with both of the shorter duration averages moving above the 200 day EMA.

The Bovespa index in Brazil (^BVSP) is at a critical level and if the index breaks below the 50 day EMA, in the context of the succession of lower highs since late last year, we should expect a retreat to the 200 day EMA in the near term.


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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DNA  Genentech Inc.  

Genentech (DNA) dropped below the 200 day EMA on an uptick in volume and now faces the test of the gap up that took place in mid February.

DO  Diamond Offshore Drilling Inc.  

Diamond Offshore Drilling (DO) is a good example of one of my favorite patterns - the upward wedge pattern - and the breakout was accompanied by more than twice the average daily volume.

DRIV  Digital River Inc  

Digital River (DRIV) looks to be headed down to probe potential support at the February lows.