With the long weekend approaching not even a suprise from Microsoft and weaker housing starts numbers seemed to spook the equity markets. Friday's Volume for the S&P 500 proxy, SPY, was less than 40 million shares with the 15 day SMA running at more than 60 million shares daily. The cash index (^SPC) closed at 1455 which was marginally below the six year high level close that was achieved in Thursday's trading. The index is tagging the upper Bollinger band but with a successful re-test of the 20-day EMA just behind it this exploration of the upper limits of the inherent standard deviation could continue during this week.

The Nasdaq 100 (^NDX) ended Friday's session with a tiny inside day candlestick that left the index just above the 1820 level. The small stranded island of prices registered in mid-January could be rescued this week if the index can decisively move beyond the 1760-1820 channel that has been in place since mid-November.





TRADE OPPORTUNITIES/SETUPS FOR TUESDAY FEBRUARY 20, 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.

Last week we commented in regard to the chart for Adobe (ADBE) on the striking combination of an inside day with a hammer candlestick and above average volume that occurred in Monday's trading (highlighted in yellow). We suggested that the pattern could presage further moves higher, and the stock seems to be developing upward momentum.



American Express (AXP) has positive divergences and the pattern suggests that a break above the $59 congestion zone is probable.



Friday's seven percent plunge in California Pizza Kitchen (CPKI) was preceded by diverging money flow as the price stalled at $36.



IBM has been on our watch list for the last two weeks as we have expected another pullback. We still feel that the $100 price level could prove hard to penetrate.



Lyondell (LYO) has the challenge of taking out the late January high in the context of signs of distribution.



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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