Daily Form October 8, 2007

Profit Patterns and Risk Management For Active Traders
Trade successfully without having to be right about the underlying market direction
MONDAY OCTOBER 8, 2007       05:59 ET

The S&P 500 (^SPC) closed at an all time high in the aftermath of Friday’s employment report. Traders seem to be favorably disposed to almost all economic news at present and the enthusiasm shown for the small cap stocks, which saw the Russell 2000 (^RUT) make an impressive 1.9% gain on Friday, strengthens the intermediate outlook for equities.

While equity markets found reasons to celebrate the employment data, Treasury traders found a reason to sell US government bonds across the yield spectrum. The yield on the ten year note moved up by 12 basis points and the 4.75% level now seems to be in play. Reviewing the longer term charts there is clear resistance to yield attrition at the 4.4% level and the next target may well be a re-testing of the psychologically significant parameter of five percent.

Many indices are now in record high territory again but the Dow Jones Transport index (^DJT) has some catching up to do as it contemplates a record close of 5446 on July 19th. Friday’s strong performance with a 3.3% gain enabled the index to break free of all three moving averages and once again underlines the breadth of support for the current bullish bias.


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.
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RHI  Robert Half International Inc.  

Robert Half International (RHI) moved decisively above the 50 day EMA on heavy volume and I would be targeting $35 during the next few sessions.

IP  International Paper Company  

As discussed in Friday’s commentary International Paper (IP) was presenting a rising wedge formation, which often precedes an upward price breakout. The stock moved up 2.3% in Friday’s trading on almost twice the average daily volume and I would suspect that there is further upside potential.

EBAY  eBay Inc.  

EBAY should be monitored for further evidence that a correction might be imminent.

SYNA  Synaptics Incorporated  

Synaptics (SYNA) is in the process of forming a bearish flag formation and I would be looking for an entry opportunity on the short side in the region of Friday’s high of $47.42.

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