Daily Form December 13, 2007

Profit Patterns and Risk Management For Active Traders
Trade successfully without having to be right about the underlying market direction
THURSDAY DECEMBER 13, 2007       06:58 ET

The most characteristic pattern from yesterday’s erratic session was the spinning top candlestick which reveals itself across most sectors, indices and individual chart patterns. The announcement of the coordinated effort from central bankers to attempt to provide comfort to the bankers who have stopped trusting each other (mainly because they cannot trust the integrity and transparency of their own balance sheets) triggered an early rally and some short covering but then traders began to worry that maybe the central bankers know about even bigger skeletons that were buried in the vaults.

The chart for the S&P 500 (^SPC) displays a text book example of a doji/spinning top formation with long shadows. The pattern which straddles the 50 day EMA indicates indecision and hesitation at a critical inflection point and will almost certainly add nervousness and increased volatility to coming sessions.

Crude rallied strongly yesterday and the ETF for West Texas Intermediate (USO) rallied off support levels. It seems safe to assume that there will be another effort to penetrate the $100 level on the barrel price and $78 on the price of the USO fund.

Germany’s Dax (^GDAXI) registered a multi-week high in yesterday’s trading and is challenging all time highs from 2000 and the most recent high of 8105 that was achieved on July 16, 2007 just before the sub-prime woes re-asserted themselves and produced the August avalanche.

Relative strength in this key European market could be partly explained by a the fact that some asset managers may be favoring some of the non Anglo-Saxon markets which have fewer structural problems resulting from the over-leveraged consumers and bubble like real estate conditions that are to be found in the UK, USA, Australia, Canada etc.


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.
For full details on time horizons, risk management and hedging techniques please visit http://www.tradewithform.com

DNA  Genentech Inc.  

Genentech (DNA) has pulled back following the large leg down in early December towards overhead resistance from key moving averages.

RACK  Rackable Systems Inc.  

Rackable Systems (RACK) has a mini bull flag formation.

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