Daily Form August 27, 2008

Profit Patterns and Risk Management For Active Traders
Trade successfully without having to be right about the underlying market direction
WEDNESDAY AUGUST 27, 2008       07:03 ET

Yesterday’s session can best be characterized as one of low volume and featureless trading which brought little new indication as to future direction. Reviewing many charts this morning there are so many stocks and sector funds that are sitting at or near to their 200 day moving averages and have been moving sideways for most of August. There are many patterns that are doing their best to suggest that some kind of basing is under way but because of the lackluster volume of recent sessions one has to take a wait and see approach on the question of whether the underlying market dynamics have turned more bullish in the long term.

The Nasdaq 100 (^NDX) typifies the indecisive nature of the market with the doji start astride the 200 day EMA. A similar pattern can also be seen on the Russell 2000 chart. One risk in the current environment is that we might easily see a false directional break in coming days which will then reverse when the volume starts to resume in September.

The Amex Natural Gas index (^XNG) is moving up towards resistance of two key moving averages.


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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MCD  McDonald's Corporation  

McDonalds (MCD) would seem to be attractive on the long side near to the $60 level.

BRCM  Broadcom Corporation  

Broadcom (BRCM) could be vulnerable to further selling after slipping away from a recovery channel and with volume increasing as range is expanding on the downside.

EEM  iShares MSCI Emerging Markets Index  

One chart which well exemplifies the very low volume behavior at present is for the sector fund EEM which reflects the MSCI Emerging Markets Index. The lack of buying interest in the fund keeps me somewhat dubious that one should be too encouraged by the apparent basing pattern.