As discussed in our last commentary the markets were ripe for a range expansion and it came in yesterday's trading with a sharp break to the upside out of the recent price congestion patterns. The volume was not impressive - on the SPY proxy there were only 82 million shares traded compared to 120 million which was the 15-day SMA of volume. The chart pattern looks as though we are, at least, headed towards a retest of the late February high in the vicinity of 1460.

Our interpretation of the chart pattern suggests that the bulls have regained control of the agenda. Even though we will always err on the side of what is apparent on the charts rather than how we feel about the background conditions, we do not claim to be entirely comfortable with this interpretation. There are some notable divergences - the BKX and XBD are still not showing similarly bullish indications and we are moving into the quiet low volume Easter period. We certainly would not want to fight the upward near-term trend, and we will not be carrying open positions over the next week until the holidays are out of the way.



The banking index (^BKX) reversed yesterday after Monday's drop of 1.5%. An inside day was registered and the index still has to climb decisively above all three moving averages to restore the bullish tone that is present in the broader market indices.



The chart formation for the ETF for the retail sector, RTH, shows a rather striking shooting star formation yesterday as there appears to have been strong overhead resistance near $104 - in the vicinity (actually just below) the intraday high from March 26.



TRADE OPPORTUNITIES/SETUPS FOR WEDNESDAY APRIL 4, 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.

Computer Sciences (CSC) surged on heavy volume from a slightly unorthodox bullish flag formation. The stock came to rest close to chart resistance at $54.



Komag (KOMG) has a bullish pullback channel following the heavy volume range expansion session on March 23rd. An upward price target would be $36 which coincides with the 200 day EMA.



The chart for Molson Coors Brewing (TAP) shows more than twice the average volume yesterday on a corrective move that could see the stock retreat to $88.



Gap Stores (GPS) is in the midst of a basing pattern and some positive divergences are becoming apparent.



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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