Daily Form October 5, 2007

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FRIDAY OCTOBER 5, 2007       04:36 ET

Subdued trading yesterday produced rather narrow range, often inside day patterns, as traders prepared themselves for the release of September’s employment data today.

The Russell 2000 (^RUT) produced another small candlestick which was entirely within the range of Wednesday’s trading, itself a fairly narrow range. I shall be watching how this index behaves in the aftermath of the data to be released today, and a determined effort to establish new historic highs on this index would bode well for the overall market.

The European Central Bank and the Bank of England both left their key short term rates on hold and once again the pundits will expend an enormous amount of effort today trying to analayse the nuances of the employment data and how this will impact on future Fed policy. Unless we get a very surprising number, either very strong or very weak, then there will be little to further clarify the likely outcome of the next FOMC meetings at the end of this month.


XLF, the exchange traded fund for the financial services sector, has gradually but surely now moved above the 200 day EMA and in a formation that looks as though it intends to continue moving further upwards.

So far this week the market has not produced the intraday volatility that I was expecting. The CBOE Volatility (^VIX) has made small moves in recent sessions but interestingly the downward bias in late September appears to have stalled as the index reached the 200 day EMA.

TRADE OPPORTUNITIES/SETUPS FOR FRIDAY OCTOBER 5, 2007



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

LOW  Lowe"s Companies Inc.  

Lowe’s Companies (LOW) has spent several sessions pulling back from the steep drop down on very heavy volume that took place on September 25th. A firm resistance level just above yesterday’s close at the convergence of two moving averages could be the threshold for further selling to emerge.



ESRX  Express Scripts Inc.  

Express Scripts (ESRX) sold off on almost three times the average daily volume yesterday and the chart clearly shows a failure pattern at the $56 level. The MACD chart reveals a negative divergence that could have alerted us to the probable failure to break above the same price level that arrested the advance in early September.



CQB  Chiquita Brands International Inc  

Chiquita Brands (CQB) has returned to a level around $17 from which the stock gapped down in early August.

Daily Form October 4, 2007

TRADE WITH FORM
Profit Patterns and Risk Management For Active Traders
Trade successfully without having to be right about the underlying market direction
THURSDAY OCTOBER 4, 2007       06:21 ET

Yesterday I commented on the abrupt intraday reversal experienced by the Hang Seng index (^HSI) where, after reaching an historic high the index reversed in the latter part of the session to close with a 2.5% decline. The decline continued in trading today with a gap down open and a further drop of 1.8%.

The chart for the Hong Kong index below is really quite extraordinary and reflects what has been happening recently in a variety of overseas markets. The move off the mid August lows took the index in almost a vertical fashion up forty percent in six weeks. This type of action inevitably will bring about quick corrections and perhaps that is all that we are witnessing in the last two sessions. But there is a lingering doubt that the current "decoupling" thesis being promulgated by lots of fund managers could be another example of a post Fed easing bubble being blown up. These bubbles often have extended lifetimes but the mania for some Asian and embryonic capital markets does seem unusually febrile at present.


I continue to be focused on the intriguing daily formations that are showing up on the chart for the Nasdaq 100 (^NDX). The risk/reward calculus for this index is beginning to look less attractive, which is only to say that the low hanging fruit in the immediate aftermath of the cut in the fed funds rate would appear to have been harvested.

In addition to the energy sector funds which are looking somewhat extended I would point again to the chart for XLP which consists of stocks from the consumer staples area which is seeing strong volume activity and which may be about to roll over.

The homebuilders have enjoyed a bit of a bounce this week for both technical reasons and as a result of positive analyst comments. However the rally has to contend soon with the 50 day EMA which the sector has not traded above since early June and a rather clear downtrend line that should provide some stiff resistance.

TRADE OPPORTUNITIES/SETUPS FOR THURSDAY OCTOBER 4, 2007



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

NFLX  Netflix Inc  

Netflix (NFLX) has a small bull flag formation with the appropriate volume characteristics and the pullback has managed to remain above the 200 day EMA.



INTC  Intel Corporation  

Intel (INTC) has turned round three times, over the last few months, in the vicinity of the $27 level and yesterday’s 2.2% drop on substantial volume may be pointing to the beginning of a tradable corrective period.