After registering its all time highest close at 831.44 on Monday the Russell 2000 (^RUT) has recorded two small range sessions that could be presaging a test of the 20-day EMA. Recently we have annotated several charts with William O'Neill's cup and handle template as it has seemed appropriate in the current market environment. The presence of smaller or fractal versions of the pattern in a general nesting of the template is also evident and we can project this pattern on to a continuation of the present Russell 2000 chart formation.



The banking index (^BKX) has made strong upward progress this week but may have reached a level where chart resistance could require a short term period of consolidation.



Several semiconductor stocks perked up yesterday and as the chart below for the exchange traded sector fund, SMH, reveals, sector investors pushed the fund towards the top of the range on heavy volume.

The long upper tail points to the formidable overhead resistance and, as we have also marked on the chart, the last effort to push through the top of the long standing range which occurred in late February on even stronger volume was followed by a swift retreat and then a continuation of the range bound trading. A real breakout would lend further support to equities and the Nasdaq in particular which seems to be diverging from the other indices.



TRADE OPPORTUNITIES/SETUPS FOR THURSDAY APRIL 19, 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.

Dress Barn (DBRN) has continued downwards following our alert earlier this week, which was signaled by the inside day highlighted and subsequent range and volume expansion.



D.R. Horton (DHI) made a nice move up towards the 50-day EMA in the context of the pattern that we cited yesterday - a basing pattern with some early indications of positive divergences.



Lehman Brothers (LEH) also moved closer to the near term target of $80 that we discussed earlier this week.



Broadcom (BRCM) pushed above all three moving averages on a range and volume expansion session following Tuesday's inside day.



EBAY dropped more than two percent on more than twice the average daily value and appears to be at an inflection point.



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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