The chart for the Nasdaq 100 index (^NDX) illustrates better than most the recent price congestion which has been a characteristic for most of the broad equity indices. The triangular formation is usually a precursor to a decisive range expansion and directional session which we expect to see emerge in the course of this week.

The banking index (^BKX) dropped 1.5% in yesterday's trading. There is growing pessimism that problems in the residential mortgage sector will impact regional and money center banks as credit conditions deteriorate. We review one casualty COF in the sector below.





The chart formation for the ETF for the consumer discretionary sector, XLY, reveals some nesting of bearish pullback channels.



TRADE OPPORTUNITIES/SETUPS FOR TUESDAY APRIL 3, 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.

Sub prime and Alt A mortgage woes continue to infect the financial sector. Capital One (COF) dropped by 2.5% on very heavy volume and seems destined to retest levels from the late summer of 2006.



In yesterday's column we pointed out that Hansen Natural (HANS) was showing a bullish range expansion session on heavy volume following the inside day recorded last Thursday. The pattern looks as though a continuation up to the early February high is likely. The stock advanced by more than four percent yesterday and we would suggest taking a profit on half the position with a target for the remaining half just below $42.



Blockbuster (BBI) has reached a level where some temporary support may emerge but the overall pattern looks as though a correction has further to go.



Autodesk (ADSK) is beginning to show some positive divergences in conjunction with a basing pattern.



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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