Daily Form July 18, 2007

Profit Patterns and Risk Management For Active Traders
Trade successfully without having to be right about the underlying market direction
WEDNESDAY JULY 18, 2007       07:14 ET

The chart for the semiconductor sector fund, IGW, reveals a classic formation attributable to William O’Neill and which is often seen ahead of explosive breakouts. The sector is on a roll with suprisingly good earnings announcements from companies like KLAC (see below). This should provide further further impetus to the Nasdaq index which continues to make strong upward progress.

An unmistakable triangle is developing in the chart for the yield on the ten year note. As annotated I would not be surprised to see us nestle further into the apex before the next directional trend makes itself evident.

The candlestick formation from yesterday’s action in the Russell 2000 (^RUT) deserves a mention as it shows a doji/shooting star formation in which higher prices were rebuffed below the previous session’s intraday high and the index settled virtually where it opened the session.


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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KLAC  KLA-Tencor Corporation  

One week ago I made the following comment on KLAC. "The stock has rallied to a point of potential breakout and the chart formation and yesterday’s above average volume seem to be pointing to further progress ahead."

FDRY  Foundry Networks Inc.  

Foundry Networks (FDRY) appears to be ready to break above an ascending wedge formation.

XING  Qiao Xing Universal Telephone Inc  

The performance for Qiao Xing (XING) shows just how dramatic some reversals can be.

COF  Capital One Financial Corp.  

On the bearish side I would suggest that Capital One Financial (COF) should struggle to rise above the convergence of all three moving averages as a bear flag like formation is developing.