The Nasdaq Composite (^IXIC) fell back almost exactly to the 200-day EMA in yesterday’s trading as an early rally attempt from the bulls faded in the later part of the session. Technology still looks vulnerable to further erosion, but a temporary recovery platform may have been attained yesterday as several stocks have come down to chart support levels which coincide with long-term moving average support.

In terms of the larger picture more than fifty percent of the most liquid securities that form part of our daily monitoring have experienced drops of more than 5% during the last five trading days. One half of those (i.e. 25% of the total) have dropped more than 10% during the same period. Only thirteen stocks in that same sample have moved up by five percent or more in the last five days.

Several of last week’s short recommendations were harvested yesterday including CMI and CAM as discussed below.



The gold index (^GOX) shows the severe correction that is under way in relation to the precious metal and the mining stocks. The sector index has reached back to potential support at the 50-day EMA, but realistically I would expect to see the breakout level closer to 165 on this index tested.



Despite some constructive moves in some of the financial stocks in yesterday’s trading the broker/dealer index (^XBD) closed at its lowest level since July 2006.



TRADE OPPORTUNITIES/SETUPS FOR TUESDAY NOVEMBER 13, 2007

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.

Cummins (CMI) fell out of the bearish pullback channel pattern after a failure at the $125 level as discussed here last week.



In a very similar fashion to the chart above Cameron (CAM) plummeted by almost ten percent out of a bearish flag pattern.



Weyerhauser (WY) still exhibits the bullish flag pattern cited last week and yesterday’s upward move on above average volume looks encouraging.



Garmin (GRMN) has been a very profitable short in recent sessions but has now reached a chart support level coinciding with the 200-day EMA where many short sellers will be looking to exit their positions.



Adobe Systems (ADBE) completed the retreat to the 200-day EMA that was discussed yesterday.



Clive Corcoran is the publisher of TradeWithForm.com, which provides daily analysis and commentary on the US stock market. He specializes in market neutral investing and and is currently working on a book about the benefits of trading with long/short strategies, which is scheduled for publication later this year.

Disclaimer
The purpose of this article is to offer you the chance to review the trading methodology, risk reduction strategies and portfolio construction techniques described at tradewithform.com. There is no guarantee that the trading strategies advocated will be profitable. Moreover, there is a risk that following these strategies will lead to loss of capital. Past results are no guarantee of future results. Trading stocks and CFD's can yield large rewards, but also has large potential risks. Trading with leverage can be especially risky. You should be fully aware of the risks of trading in the capital markets. You are strongly advised not to trade with capital.