Daily Form July 19, 2007

Profit Patterns and Risk Management For Active Traders
Trade successfully without having to be right about the underlying market direction
THURSDAY JULY 19, 2007       07:49 ET

Gold broke decisively above $660 yesterday and as the chart for GLD, the ETF that tracks the precious metal, makes clear a move back to challenge the previous highs from both February and April is now to be expected.

There was a a notable pick up in intraday volatility in yesterday’s trading and one chart that exemplifies it well is for XLF, the ETF for the financial services sector. Several stocks in the sector have charts that show whipsaws. In particular, two of the principal constituents, WFC and MER are displaying a degree of intraday range expansion which could be the precursor to a more volatile period ahead for the broader market as well.

The intraday low in yesterday’s action in the Russell 2000 (^RUT) reached down almost exactly to the 50 day EMA. The exchange traded proxy for the index, IWM saw substantially more volume than its fifteen day moving average as did the other index proxies, QQQQ and SPY. In fact SPY saw its largest one day volume reading since early June.

Tests of the 50 day EMA on the Russell 2000 have been frequent since the March recovery began and in all cases to date buying support has emerged to preserve an upward trend line. While this pattern persists the underlying bullish case for the overall market seems to be still intact but if those bullish dynamics are dissipating this index may well be the first to reveal the cracks.


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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CAL  Continental Airlines Inc.  

The flag formation for Continental Airlines (CAL) could be close to completion.

NEM  Newmont Mining Corporation  

Amongst the gold mining stocks Kinross Gold (KGC) moved up by more than seven percent yesterday and Newmont (NEM) managed a 3.6% gain. The break above the trend line which was noted above for the metal itself is clearly revealed on the chart for NEM. There could well be some resistance at the 200 day EMA (green line) but the February high around $48 now would seem to be in play.

SGP  Schering-Plough Corp.  

The chart for SGP is worth another look as a developing flag formation could be pointing to another spike up.