Daily Form June 18, 2007

Profit Patterns and Risk Management For Active Traders
Trade successfully without having to be right about the underlying market direction
MONDAY JUNE 18, 2007       03:48 ET

Our first chart shows a much longer time frame than we would normally examine in our daily commentary. We have shown the monthly yields on the ten year Treasury note since 1990 and the reason why it is worth reviewing is that a steady and persistent declining trend line through the high yields over the seventeen year period appears to have been violated with the recent surge in yields that we have seen during the last few weeks.

It hardly needs to be said that a transformation in the longer term of the underlying financial environment ( and that may have as much to do with a declining appetite for Treasuries by foreign governments and investors as concerns about inflation and Fed policy) will not be constructive for equities and the housing market. But given the market’s resilience it may take some time before the concerns manifest themselves.

As anticipated in last Thursday’s commentary the Dow Jones Utilities (^DJU) has headed back rather smartly to tag the intersection of the 20 and 50 day EMA’s.

While international equity markets were afflicted with the spike in yields in the first week of June they have largely remained indifferent to the interest rate concerns of the US Treasury market. The FTSE 100 in the UK pushed closer towards its all time highest close from seven years ago and as this is being written the Nikkei 225 has added another 1.1% to reach its highest close in more than four months.


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

CYMI  Cymer Inc.  

Cymer (CYMI) registered a long lower tail or hammer candlestick which kept the close above both short term moving averages. The stock looks poised to move up towards its upper volatility band which also coincides with the 200 day EMA.

INTC  Intel Corporation  

Intel (INTC) has broken above a trading range and traded above $24 for the first time since late 2005. The stock gained more than ten percent last week and in so doing helped to propel the semiconductor sector to a multi-period high.


The exchange traded fund for the semiconductor sector, IGW, gapped upwards twice at the end of last week to achieve a multi-period high. The volume during the price surge has, however, been below average.

MMM  3M Company  

We will be watching 3M Company (MMM) this week for signs that a lower top may about to be registered as the stock has recovered from the early June weakness.

WFC  Wells Fargo and Company  

Amongst the money center banks Wells Fargo (WFC) registered a striking shooting star candlestick in Friday’s trading on above average volume. The high for the session coincided with the top of the recent range and again raises the specter that the recent recovery rally may be faltering.