Encouraged by positive action in the Asian and European markets and a number of large acquisitions that were announced before the US markets opened the indices mounted a healthy rally yesterday. The S&P 500 moved ahead by 1.1% to close at 1402 and a similar percentage increase was recorded by the Russell 2000 which came to rest at 787. The latter index now confronts the hurdle of two moving averages and chart resistance all the way up to the 800 level.

The Nasdaq 100 index (^NDX) closed at 1758 with a slightly subpart performance as its gain was limited to 0.9%. The bulls will be encouraged by yesterday's behavior but the indices now have to contend with chart resistance at the confluence of the short-term moving averages.



As anticipated in last Friday's column the chart pattern on the oil services index (^OSX) looked as though an upward breakout was imminent and in yesterday's trading the index broke away with a gain of 2.8%.



The broker/dealer index (^XBD) still lies below its 200 day EMA and faces further resistance at 235.



TRADE OPPORTUNITIES/SETUPS FOR TUESDAY MARCH 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.

The chart for Fording (FDG) looks vulnerable to further weakness following the large red candles from early March.



We have been looking for patterns in our daily scans of individual stocks that show some variance to the formations that simply reflect the influence of the overall market. IBM shows a lower high pattern in early February following the large gap down in January and the 50-day EMA should provide strong overhead resistance at the $96 level.



Bear Stearns (BSC) recorded a tiny doji candlestick on very subdued volume yesterday and it will be on our radar screen today as it encounters a hurdle at the 200-day EMA which is just above yesterday's close.



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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