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Strategies & Market Trends : Technical analysis for shorts & longs -- Ignore unavailable to you. Want to Upgrade?

To: Johnny Canuck who wrote (43057)	2/14/2006 3:44:19 AM
From: Johnny Canuck	Read Replies (1) \| Respond to of 68145

by Clive Corcoran February 13, 2006 Last week we suggested that a test of the December 31/January 3rd lows on the Nasdaq 100 (^NDX) would be a hard temptation for the bears to resist and on Friday we may well have seen off that challenge. The long tail to Friday's price action indicates how, as we approached the January 3rd intraday low, buying support emerged enabling the index to reverse and close higher on the session with a 0.6% gain. If buying support continues to appear in the neighborhood of 1650, the suggestion is that we may have witnessed a false breakout to the downside from the triangular pattern (triggered by the Feb 4th employment data) and that we may now be on a path to test the descending trendline through the 2006 highs. We suspect that 1680 could be the next target, which also marks an intersection point for the 20 and 50 day EMA's, and if we get there with conviction we could see a scramble by index players who are short that takes us beyond 1680 quickly. While the really important test last week appears to have taken place in the Nasdaq 100 it is also notable that the S&P 500 held on to the 1260 level despite closing below it last Tuesday. The long tail to Friday's price action also looks constructive for the bulls and, in harmony with our observations about important targets to test, 1280 seems to be next on the agenda. The daily chart for the Nikkei 225 shows what might be an intermediate correction beginning for this index which rose fairly dramatically in the latter part of 2005. The index has recently broken below the more aggressive trendline through the lows and could now be setting up for a test of the less steep second line we have drawn. It appears that the 50 day EMA at 15800 and the chart support just below that may also have to be tested this week and should we penetrate these we could be looking at more drastic chart action. The Natural Gas index (^NGX) has dropped more than 10% from its highs on January 20th but may have reached an area of potential chart support. We recently delivered a nice profit to our online portfolio from a short position in BTU nad this could now be shaping up as a recovery candidate for this week. TRADE OPPORTUNITIES/SETUPS FOR MONDAY FEBRUARY 13, 2006 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. For full details on time horizons, risk management and hedging techniques please visit tradewithform.com New Century Financial (NEW) is one of many charts that illustrates the bullish pullback channel pattern. Friday's hammer candle, at the intersection of the 50 and 200 day EMA's, could be a cue for buyers to have another run at $42. Brunswick Corporation (BC) has pulled back in its recovery channel on modest volume to a level where renwed selling could emerge. Meritage Homes (MTH) has a bullish flag pattern associated with evidence of accumulation and could be concluding a basing pattern. Overstock (OSTK) has the kind of MFI chart that can signal explosive price action Paychex (PAYX) has been in a congestion channel just above its 200 day EMA and with the MFI pointing to accumulation, the evidence seems to be suggesting higher prices ahead. We closed out a successful trade with Synaptics (SYNA) late last week enabling us to register a more than ten percent return to our model portfolio. The chart below shows the pattern that caught our attention last week with the combination of the bearish rising channel and the accompanying weakness in money flow and this was followed by the two long red candles at the end of the week. Our online portfolio is always defensively hedged, and this has proven very useful in the current whipsaw environment, and we continue to see a lot of bullish setups that require filtering and prioritization as we scan for the most opportune patterns. Several other bullish setups (KSS, SEPR, INTC, ABT, FDC and LM) can be seen in our Watch List available to subscribers. ABOUT CLIVE CORCORAN Clive Corcoran is the publisher of tradewithform.com. Based in London, he is a trading system developer and has been an active trader for many years on both sides of the Atlantic. He is also the Director of Research & Development of Morphology Management Inc, a company which offers decision support systems and risk management advice to asset managers and hedge funds. He is a featured speaker at trading seminars and workshops. He can be contacted at clive.corcoran@tradewithform.com