Daily Form May 6, 2008

Profit Patterns and Risk Management For Active Traders
Trade successfully without having to be right about the underlying market direction
TUESDAY MAY 6, 2008       03:26 ET

The upward progress that was made last week brought several indices into contention with their 200 day moving averages. Some have pierced above this key level while others, like the Russell 2000 (^RUT) and the Nasdaq Composite (^IXIC) are still to mount the hurdle.

The S&P 500 (^SPC) remains under the control of this powerful gravitational attractor and while traders wait for a new impetus there is a possibility that we might dift lower towards the 1400 and possibly even the 1380 level.

Germany’s DAX index (^GDAXI) has now managed to close above the 7000 level twice and now confronts the 200 day EMA. The chart formation has some similiarities to the chart for the Russell 2000 in that price levels from the January recovery where the index met serious resistance still lie within a whisker of yesterday’s closing level.

Gold has retreated by 15% since registering its peek above $1000 an ounce in early March. A couple of weeks ago I suggested that the $830 spot price level on the precious metal looked feasible and that eventually I would expect a test of the $160 level on the Gold and Mining Index (^GOX).

In yesterday’s trading there was a rebound in general for the commodities and gold and silver enjoyed bounces in the proximity of their long term moving averages. I suspect that both metals could have one further leg down, which would see a test of the $160 level on the GOX index before I would be looking for a sustained rally attempt from the sector.


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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CHNR  China Natural Resources Inc.  

China Natural Resources (CHNR) surged ahead on heavy volume and now confronts chart resistance near to $26. The money flow chart points to strong accumulation in the stock,

AMD  Advanced Micro Devices Inc.  

Advanced Micro Devices (AMD) broke above a key downward trendline and the 50 day EMA in yesterday’s trading. Underlining the long opportunity was the fact that volume was twice the moving average volume.