Daily Form August 19, 2008

Profit Patterns and Risk Management For Active Traders
Trade successfully without having to be right about the underlying market direction
TUESDAY AUGUST 19, 2008       06:43 ET

As anticipated in yesterday’s commentary the Russell 2000 (^RUT) faced a stiff hurdle at the June high and has begun a pullback that could take the cash index back towards the pivotal level about twenty points below yesterday’s close.

The hourly chart for the exchange traded proxy, IWM, shows quite clearly the price rejection that occurred in Friday’s trading just below the June 6 high and also shows that the 200 hour EMA lies at the equivalent to the 720 area on the cash index.

The Nasdaq 100 (^NDX) which had previously retraced 62% of its move from its late October high to the March low is now stalling at the 50% retracement level. There is however strong moving average support in the region of 1900.

The KBW banking index (^BKX) reveals a pattern that looks suspiciously like a failed bullish wedge pattern. With all of the recent shenanigans in the trading of the financials I would wait for further confirmation before getting on the short side of the banks.


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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IBB  iShares Nasdaq Biotechnology  

The exchange traded fund IBB which tracks the biotech sector is revealing negative divergences on the MACD and MFI charts.

SLB  Schlumberger Limited  

Schlumberger (SLB) appears to have lost contention with the 200 day EMA and could be headed down towards a test of lower levels seen earlier this year. The MACD chart also reveals that this stock was showing non-confirmation in momentum despite reaching higher price levels in late June and a distribution top seems to be in place.

SPLS  Staples Inc.  

Staples (SPLS) could resume its upward bias after retreating to the $24 level.