Daily Form May 14, 2008

Profit Patterns and Risk Management For Active Traders
Trade successfully without having to be right about the underlying market direction
WEDNESDAY MAY 14, 2008       06:27 ET

The chart for the S&P 400 Midcap index (^MID) continues to show a quite remarkable buy channel where the price action has been almost uniformly positive since the mid-March lows. The index is approaching the 880 level where the price action could be expected to become somewhat choppier.

Yields on Treasuries moved up sharply yesterday and the ten year note added 13 basis points. The chart suggests that this instrument is surely set to challenge the 4% yield level which also corresponds to the 200 day EMA. The 4% yield level has not been so far during 2008.

The banking index (^BKX) has become range bound during the last several weeks and most recently is in a congestion zone almost exactly at the center of this range. While this might persist for some time the chances are increasing that a more decisive directional move could be imminent.

The exchange traded fund for the MSCI Mexican Index, EWW, has hit a price plateau and there is not a lot of buying interest as revealed in the money flow characteristics.


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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HMIN  Home Inns and Hotels Management Inc.  

Home Inns and Hotels Management (HMIN) shows a long tailed hammer candlestick as it straddles the 50 day EMA.

CA  Computer Associates International Inc.  

Computer Associates (CA) gapped up on the open and closed at the 200 day EMA on twice the average daily volume. I shall be monitoring this stock today for signs of further upward momentum.

ECA  EnCana Corporation (USA)  

The chart pattern for EnCana (ECA) is quite intriguing as it shows that Monday’s gap up to a new high on very substantial volume was followed yesterday by an inside day. One possible interpretation of this kind of behavior is that some of the buyers on Monday were quietly exiting the stock yesterday and this could leave latecomers feeling stranded. Until that speculative interpretation is supported by further evidence I shall stay on the sidelines but with a bearish bias if price weakness becomes apparent.