ShadowTraderPro Focus Report for May 12, 2008

The ShadowTraderPro Focus Report is your every morning dose of market reality brought to you from the resident geniuses at ShadowTrader. Overseen by Chief Equity Strategist, Peter Reznicek, each issue contains a full report on the prior day's action, including market internals, technicals, and what sectors were hot and cold. Each issue also includes the ShadowTraderPro Model Portfolio, which updates members on what stock plays STPro is currently engaged in officially, as well as provide a daily list of long and short setups for more self-directed traders and investors.

If you have any questions regarding commentary or plays in this newsletter, please email to focusreport@shadowtrader.net.

The Big Picture




Good Morning, Traders. Back on April 30, Standard and Poor's raised Brazil's rating to investment grade, prompting a monster flow of capital in to interest rate sensitive Brazilian ADR's. BBD, UBB, ITU, GFA, and CBD all ripped higher and have since pulled back to a convergence of support. News driven moves often give back all their gains within a short period of time. Though we prefer to see stocks move independent of news, the recent pullback offers low risk entry points in relatively strong patterns. Check out the chart of BBD above and note the bullish reversal bar off support after undercutting the 2-day low. We see strong support from the uptrend line, the 20ma, and the prior breakout pivot from 22.00 to 22.50. A move above Friday's high is a low risk buy point to catch the next wave up. For those looking to play the strength in Brazil from a broader perspective, one could certainly buy the Brazil ETF (EWZ), which is trading in a tight bull flag pattern after breaking out to new highs...and you thought Brazil was just coffee and Adriana Lima, shame on you.

Crude oil continues to mow down the "short it cuz it's high" crowd on the way to $150/bbl. Precious metals could be staging a bit of a comeback here with GLD and SLV consolidating just below downtrend lines. Both SLV and GLD undercut the last swing low before reversing, shaking out the longs who thought the caught the bottom in early April. The PowerShares Agriculture Fund ETF (DBA) is also one to watch as it closed right at the downtrend line. We could possibly see a quality buy entry develop above the 50ma (this ETF is based on futures contracts of corn, soybeans, sugar, and wheat).

We saw a late session breakout attempt from an inverted head and shoulders pattern on the 15-minute S&P futs fizzle out into the close. The breakout was backed by a strong push off the lows in internals and a +1,000 tick reading, however, we would have preferred an earlier move out (around 3 p.m. rather than 3:30) which would have given traders a little more time to work with. Friday's two day low failed to register a lower breadth reading and the NYSE a/d slowly ground higher throughout the session, even as the market basically stayed in the dumps. As of Friday's close, the S&P 500 is sitting on the hourly uptrend line and the 20ma, so we feel that's it's make or break time. Friday's gap down below the range could have easily led to another day of distribution (volume was lighter than the prior session), but as we have seen time and again this market has been resilient when it needs to be. Any move over friday's highs in the broad market averages that can hold at least the first hour of trading should produce a green light for any long setups you may be interested in. On any move below Friday's lows, put new long entries on hold but don't natually assume its short. Market has moved down a number of days in a row here and remember that technical support levels are often elastic and very often are tested with washout moves that go through them and then close higher.

Under The Hood

When we say "under the hood" we mean market internals, ie: what was really happening behind the scenes. ShadowTraders who listen to our daily broadcast every day live on the thinkorswim platform know that all closing figures on the major averages should only be interpreted in the context of market internals. Look for convergences and divergences in the breadth, a/d line, and trin figures below to either confirm or cast doubt on what all those talking heads on TV are telling you.

Dow Jones Industrial Average 12,746.00 -120.78 -0.94%
S&P 500 1,388.28 -9.40 -0.67%
Nasdaq Composite 2,445.52 -5.72 -0.23%
Nasdaq 100 1,960.29 -6.57 -0.33%
Russell 2000 720.05 +0.50 +0.07%
Spot Gold $885.80/oz. +3.70 +0.42%
Crude Oil $125.96/bbl. + 2.27 +1.84%
NYSE Overall Volume 1,098,880K n/a -5%
Nasdaq Overall Volume 1,703,830K n/a -17%
NYSE Breadth 1.9 : 1 negative
Nasdaq Breadth 1.3 : 1 negative
NYSE Breadth Ratio 35.82
Nasdaq Breadth Ratio 43.16
NYSE Advancers/Decliners -292
Nasdaq Advancers/Decliners -127
NYSE Trin 1.53
NASDAQ Trin 1.16
$VIX 19.41 +0.01
ES Pivot Points for Monday
R3 1403.08
R2 1398.17
R1 1393.58
Pivot 1388.67
S1 1384.08
S2 1379.17
S3 1374.58
Strongest Groups: Insurance Steel Homebuilders
Weakest Groups: Oil Service Software Biotech

Heads Up

Up and coming economic and corporate data that may move markets this week:

Today
none
Reporting earnings before the open: DTG, JASO, S
After the close: FLR, LDK, MDR, NUAN, TWTC
Tuesday
8:30am EST - Import and Export Prices
8:30am EST - Retail Sales
10:00am EST - Business Inventories
Reporting earnings before the open: CSIQ, CCJ, GIGM, LIZ, WMT
After the close: AMT, ERTS, MELI, PAASM, WFMI
Wednesday
08:30am EST - Consumer Price Index
10:30am EST - Crude inventories
Reporting earnings before the open: MT, DE, DSX, FRE, M,
After the close: A, BRCD, CTRP, SINA

Bulls and Bears

This section is for self-directed traders and investors who like to "do it themselves". Every trading day, Bulls and Bears will list long and short equity setups with defined entries and stops. Note: A listing in this section does NOT necessarily mean that the stock will end up as a part of the ShadowTraderPro Model Portfolio. Plays listed here change daily and are not managed or tracked by ShadowTrader unless traded via e-mail alert.

Long Ideas
 Symbol Trigger Price Stop Price Notes
BBD 22.93 22.00 reversal bar off support
AME 49.57 48.58 hammer near lows of range
UBB 147.15 142.00 doji at support of breakout
Short Ideas
 Symbol Trigger Price Stop Price Notes
FMCN 38.22 41.66 inverted weekly hammer at resistance of 50ma
FARO 26.90 28.11 trapped longs on gap down below 200ma/ tight range beneath support at 28.00

ShadowTrader Model Portfolio

The matrix below shows all current ShadowTrader Pro plays in the Model Portfolio. The Model Portfolio contains only those plays that are sent out in real-rime via email. Bulls and Bears plays above are not actively managed or tracked. Current open positions are on top, with positions that were closed in the current calendar week on the bottom. Closed positions are moved out of the matrix on Monday mornings and posted in our performance page here.
To get the most out of your subscription and for detailed instructions on how to structure your own portfolio, read our Focus Report User's Guide

sym dir size date
entered		 entry
price		 date
closed		 exit
price		 target stop status mark
to
market		 p&l
points		 p&l
capital		 capital
commit
 OPEN POSITIONS - week of 5/12 - 12/16
BZP long 200 5/9/08 22.05 n/a n/a 25.00 22.10 open 23.67 +1.62 $324 $4,734
 comments: strong breakout with great close near the highs of the day
SOL long 400 5/5/08 17.26 n/a n/a 21.00 see below open 19.49 +2.23 $892 $7,796
 comments: bg volume breakout to new highs/ split stop: 200 shares at 16.95 & 200 shares at 15.80/ bought 200 shares at 16.40 & 200 at 18.11
IBM long 175 5/1/08 123.65 n/a n/a 129.00 120.40 open 124.06 0.41 $72 $21,711
 comments: tight trading range at highs
 CLOSED POSITIONS week of 5/5 - 5/9
BZP long 300 5/9/08 22.05 5/9/08 23.11 n/a n/a close n/a 1.06 $318 n/a
 comments: locked in a nice gain on just over half the position
TTES long 50 5/1/08 55.00 5/9/08 59.36 n/a n/a close n/a 4.36 $218 n/a
 comments: locked in a +4 point gain on remaining shares
GWR long 100 4/24/08 36.20 5/7/08 37.26 n/a n/a close n/a 1.06 $106 n/a
 comments: locked in a small gain due to break of trend
TTES long 100 5/1/08 55.00 5/5/08 55.02 n/a n/a close n/a 0.02 $2 n/a
 comments: closed 2/3 of the position at breakeven
BKE long 250 4/30/08 49.81 5/5/08 47.54 n/a n/a close n/a -2.27 ($568) n/a
 comments: undercut lows of range hitting our stop
  TOTALS: 775 open shares (open capital committed doesn't include closed trades) $34,241
Click here for ShadowTrader Pro closed trade stats
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Disclaimer and Waiver of Claims: Disclaimer and Waiver of Claims: The ShadowTraderPro Focus Report is a newsletter service, designed as supplemental material for the ShadowTraderPro Newsletter subscription service and it is not intended to be a stand alone newsletter. The risk of loss in the trading of any securities products can be substantial. The strategies mentioned here are active trading strategies, therefore you should carefully consider whether such trading is suitable for you in light of your personal investment objectives and financial resources. This material is for information purposes only and should not be construed as an offer or solicitation of an offer to buy or sell any securities. Past performance of any trades mentioned never guarantees future results.

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