Volume for the S&P 500 proxy, SPY, was modest yesterday and the price action provided us with another inscrutable Doji candlestick. Detecting the near term direction in these conditions is more problematic than normal but we are reminded from last week's gains that bullish dynamics are still just beneath the surface and waiting to spring to life when the right opportunity or excuse arises.

Even reviewing the individual charts today provided few clues as to where the leadership and initiative might come for a decisive break through the 1310 level.

The Nasdaq 100 cash index (^NDX) also shows a Doji candlestick with an extended lower shadow. Yesterday's low broke below the low from Friday but in reviewing the intraday action the short sellers may have been discouraged by the fact that the the index turned around exactly at the 50 day EMA and closed ten points above that level.

The chart for the Nikkei 225 index (^N225) reveals the rather nasty red candle that was recorded from Mondayââ,¬â"¢s trading in which the index dropped by more than 400 points. The steepest trendline was violated but there are secondary trendlines through other strategic lows that would need to be transgressed for us to conclude that the strong positive trend, extending back more than a year, is in trouble.

The Nasdaq Composite (^IXIC) continued its recent retreat yesterday and closed at 2333 which coincides perfectly with the 20 day EMA. We have also displayed a pivotal chart level which extends back to the resistance level for the early January highs

Technically this resistance could now provide support for the index and we may see another attempt to push back to the 2370 level. Another critical level to keep an eye on from a downside persepctive would be the 2300 level and a close below this level would put the upward trend from the beginning of the year in jeopardy.

TRADE OPPORTUNITIES/SETUPS FOR TUESDAY APRIL 25, 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.

Yahoo (YHOO) has a mini bull flag formation and last week's upward gap suggests that there could be further buying interest ready to support the stock after the minor pullback.

Silicon Laboratories (SLAB) dropped by more than ten percent yesterday and in reviewing the chart we see the lower high and fading momentum that could have alerted us to this. The stock will probably carve out a recovery channel over coming sessions and that would be a good opportunity to benefit from the further weakness that we would expect.

CECO has retreated exactly to the base of the "flagpole" and may be an example of an extended pullback channel pattern. If the stock fails to rally near current levels we could see an opportunity on the short side. Aggressive traders may want to consider a stop and reverse strategy.

Very similar reasoning to our discussion for CECO also applies to the chart for ELX. We were stopped out of our position yesterday as the stock touched the level that we normally apply to abandon a failed bullish flag pattern. In reviewing the action we may find that our stop was just a little too close to the base of the flag pole.

National City Corporation (NCC) produced a strong upward move last week on heavy volume and has pulled back on much reduced volume. It could be an early stage candidate for further upward momentum and a well placed entry level may be triggered today.

Time Warner (TWX) could be ready to rally out of an extended basing pattern. It would appear to offer an attractive reward/risk proposition as the momentum and money flow divergences appear construtive.

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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