Daily Form July 17, 2007

Profit Patterns and Risk Management For Active Traders
Trade successfully without having to be right about the underlying market direction
TUESDAY JULY 17, 2007       06:10 ET

There was a divergence in the performances of the broad equity indices yesterday as the DJIA pulled ahead while almost all of the other indices retreated. As noted yesterday the Russell 2000 (^RUT) has been reticent to break out decisively to a new high during the ebullient mood of the last few trading sessions. The decline yesterday of 0.9% occurred after Friday’s reluctance to really take on the previous high from June 4th. There is no denying that the overall market is well supported (perhaps primarily by traders buying back short positions) but the divergences amongst the indices are always worth monitoring for signs of short term trading opportunities.

I thought that it could be useful to look at the Shanghai index (^SSEC) which from time to time becomes topical in the US financial media. The pattern that has been developing over several weeks is a clear triangular formation and with evidence of a lower high in mid June we should keep an eye on this index for a potential breakout.

Transocean (RIG) caught my attention in yesterday’s commentary based upon the signs of distribution and negative momentum divergences. The stock actually retreated by 1.6% in yesterday’s trading and in reviewing the sector fund, OIH, there is some suggestion that others in the oil services area may be due for a temporary rest.


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

TIBX  Tibco Software Inc.  

Tibco Software (TIBX) tested all three moving averages in yesterday’s session and appears to have found buying support with above average volume.

WFC  Wells Fargo and Company  

Despite a powerful rally at the end of last week Wells Fargo (WFC) still has some indications that an intermediate top may be forming.

SONS  Sonus Networks Inc.  

Sonus (SONS) has a descending wedge formation and may, in the intermediate term, be headed towards the area of chart support at $7.60