Published on 04/13/2006

Should we see a break below key trend-lines on the index charts, we will have to decipher whether this is a true shift or yet another trap for overly zealous short-sellers.

Corcoran Technical Trading Patterns for April 13

Yesterday's session was marked by very light volume but intriguingly it leaves the indices paused at very significant inflection points. As the daily chart for the S&P 500 illustrates, the close yesterday at 1288 is poised exactly on the rising trendline through the recent lows; but as we commented yesterday we expect the equally significant 1280 level to be properly tested in coming sessions.

The Treasury market sold off again yesterday and the yield on the ten year note finished at 4.98% and the thirty year bond closed the session with a yield of 5.05%.

We will not be publishing tomorrow or Monday and will resume our commentary next Tuesday.

The chart for the Nasdaq 100 index (^NDX) reveals exactly the same pattern that we discussed with respect to the S&P 500. Stepping back to review the overall patterns for the year to date we have a well defined baseline that has been tested twice and a rising trendline through the lows that marks the progress that we made in March. As of yesterday's close we are still (just) on the right side of a bullish formation.

Should we see a break below this trendline, which we suspect is probable, we will have to decipher whether this is a true regime shift or yet another trap for overly zealous short-sellers.

The Russell 2000 recorded one of the better performances yesterday and climbed back 0.8% from its preceding three day slide. Yet again the trendline we have discussed above is intact and we noticed that volume on the IWM proxy was more impressive on the rebound than for the SPY and QQQQ instruments.

TRADE OPPORTUNITIES/SETUPS FOR THURSDAY APRIL 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.

In yesterday's column we mentioned Computer Sciences (CSC) as attractive on the long side but we just missed hitting our entry target. The bullish flag formation still looks compelling and we repeat our recommendation for today's trading.

Sandisk (SNDK) has a bullish retracement pattern following its recent breakout and we could be headed back toward the early 2006 highs.

CMS moved up impressively yesterday creating a very well defined Morning star formation on heavy volume. We would not chase the breakout but would be willing to buy on a retracement.

RFMD is behaving erratically in a possible topping pattern. We may see a further spike up toward the late March highs and would take that as an opportunity to get short.

Marvell seems to present an attractive reward/risk opportunity on the long side.

Pixar (PIXR) has very unusual money flow as it has straddled its 20 day EMA for the last two weeks. It could be preparing to move higher.

Several charts have been showing long standing negative divergences but we hesitate to suggest short positions as they are in sectors that have shown remarkable resilience. E-Trade is an example of a stock that has reached an area where it will be testing a long standing uptrend that follows the 50 day EMA.

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.

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