Daily Form June 10, 2008

Profit Patterns and Risk Management For Active Traders
Trade successfully without having to be right about the underlying market direction
TUESDAY JUNE 10, 2008       06:15 ET

The relative performance roles were reversed essentially in yesterday’s trading in US equities. Whereas the large cap stocks were the principal casualties in Friday’s sell-off it was the Nasdaq stocks that were mainly under pressure yesterday.

However there was a recovery of sorts during the session and the Nasdaq Composite (^IXIC) came back to close more or less at the intersection of the 200 and 50 day EMA’s. The elongated tail suggests some traders were buying at these chart levels but we may need a more robust testing to confirm that there is underlying support from which the overall market can regain some composure.

A lot of attention is being focused on the euro currency at present as all of the key central bankers seem to be finally talking tough on inflation. After the ECB communicated a fairly strong suggestion that it is looking to raise short term rates in the euro zone, Fed chairman Bernanke is also starting to tilt towards a more hawkish stance on further easing for short term dollar rates. Whether this is just lip service or not would be tested if more jitters from the financial sector requires the chairman to ride to the rescue of equities once again.

Looking at the chart for the Euro/USD the range is becoming quite congested with most of the recent activity within just four cents between 1.54 and 1.58. This suggests that a breakout could be shaping up in coming sessions. I have mentioned previously that an upside breakaway for the euro would require another run at $1.60 which seems like quite a stretch if the Fed are more serious about dollar strength. However if rescuing US equities takes center stage again for the Fed this could be exactly the excuse that traders need to push back beyond $1.60.

The Hang Seng index (^HSI) and the Shanghai index (^SSEC) were both closed on Monday so in overnight trading the Chinese markets had their first chance to respond to the fairly dramatic session last Friday in New York.

The Shanghai exchange dropped by more than seven percent and has come back to recent lowest levels seen in mid April. If support does not kick in near the 3000 level there could be more upheavals ahead for this market as well as some of the other emerging markets where a lot of hot money has been parked.


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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CHDX  Chindex International Inc.  

Chindex (CHDX) could be worth considering on the long side as it has come down to potential support at the 200 day EMA and the MFI and MACD charts reveal some positive divergences.

GOOG  Google Inc.  

Google (GOOG) has retreated towards the 200 day EMA where some buying interest is likely.