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Saturday, February 02, 2008 

FED, DOW and more trade Ideas for the week ahead

Over this week, we were surprised by FED with another interest rates cut by a half of point last Tuesday, the second time this month as it tries to keep the US economy from entering a recession. The central bank lowered rates to 3% from 3.5%. It was difficult to understand initially the way of the financial market, first spiked and 30 minutes later lost all that gains, closing in the lows of the day. It‘s obvious that there is some macro economic signs that the US economy is slowing, however in my opinion of view this kind of action will avoid a slowdown, and this cut come just in time to avoid a big contraction also in the financial markets that have marked the month of January of 2008, as one of the worst years. Interest rates have now been cut five times since 18 September 2007. FED has transmitted a signal of encouragement to all Americans to have confidence in the US economy. Everybody knows that this kind of actions will take some time to get results; however money is now cheaper than was one year ago, and the budget of families soon will increase.

Chart courtesy of stockcharts

Early in the morning I have discussed with my trader friends some particular technical points for the month ahead, and it has become obvious that yesterday breakout of 12500 on DOW was the technical signal for the rebound that many of us were looking for. The earnings season is almost over and the balance was not as negative as initially expected, expect some individual cases. But the question that arises is the economic slowdown in the US, will it be a short spell or over a longer period? for this issue no consensus has been reached, but what counts is the trend of the technical graphs and here things change, now we went from a strong correction action to a possible and speedy recovery. Will this happen, yesterday the first step has already been taken.

Chart courtesy of stockcharts

EBAY gained more than 7% to 28.81 on Friday session, closing for the first time since December above its 20-day moving averge. If stock breaks through $29 then hold or add more. A move up to the $34 level is very likely.

Chart courtesy of stockcharts

We saw a very strong RMBS rally late this week and I think the rally may continue for several sessions. The $21.69 level is not impossible to reach next week, and this level is a target for many traders in the time being.

Chart courtesy of stockcharts

GOOG - I believe this move will continue toward the $500 or even $480 before the stock moves higher again.The major resistance is around $562.

Chart courtesy of stockcharts

The daily chart shows BUCY is trading in a Bullish momentum. Technicaly chart shows the stock is in a bull market with MACD on top of signal line and 50 day moving average on top of 200 day moving average, so we should see the stock keep going strong to test all time highs around $104.36 which it touched nearly in December.

Disclaimer : Trading stocks involves risk, this information should not be viewed as trading recommendations.The charts provided here are not meant for investment purposes and only serve as technical examples.

That's All. Have a nice weekend !!!


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About Me

  • I'm a 48 year old Independent Trader using proprietary technical analysis with more than 20 years experience of investing in the US stock markets. I started this blog in 2006 simply as a way to share my thoughts about capital, risk management, and trading. My blog contains only my personal opinion and is provided for informational purposes only.

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