Daily Form September 13, 2007


Profit Patterns and Risk Management For Active Traders
Trade successfully without having to be right about the underlying market direction
THURSDAY SEPTEMBER 13, 2007       07:09 ET

Yesterday’s trading produced a number of patterns suggesting that traders having tested the downside last Friday and the upside on Tuesday are now undecided on the near term direction, which is unsurprising in the context of the pending FOMC decision. The Russell 2000 produced a fairly narrow range session which almost qualified as an inside day and the S&P 500 registered a tiny body doji candlestick which sits between the 20 and 50 day EMA’s.

We are gearing up both seasonally and also specifically in relation to the Fed decision for a potentially large directional move and I would expect to see a continuation of the rather nervous testing of key chart levels, especially the 200 day EMA’s before next Tuesday’s announcement.

The index that tracks the investment banks and brokers ^XBD is also revealing the triangular formation that is so prevalent on many charts at present. The underlying market conditions will continue to dampen demand for many of the services and offerings of the investment banks and it is unclear how a cut in the fed funds rate might improve the operating environment for some of their more specialized activities in relation to asset backed securities and structured products.

I shall be keen to watch how this sector reacts to whatever the Fed has in store for the markets next week.

I examined the prospects for gold in yesterday’s commentary and also looked at the gold and silver index ^XAU which tracks the mining sector for both gold and silver. In reviewing the chart for silver (as represented by the exchange traded fund, SLV) the scenario appears to be less bullish for this metal than for gold and the metal has now reached back to the 200 day EMA where it may meet firm resistance.


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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AMCC  Applied Micro Circuits Corporation  

I am proceeding cautiously at the moment as the charts are not revealing the clarity in their formations that I would like to see to give confidence about short term trading opportunities. Having made that general qualification, Applied Micro Circuits (AMCC) looks as though it could be preparing for a breakout continuation as it appears to have successfully crossed the hurdle presented by the 200 day EMA.

AMAT  Applied Materials Inc.  

Applied Materials (AMAT) dropped below two key moving averages on above average volume yesterday and will be on my watch list in todays trading.