Daily Form October 12, 2007

TRADE WITH FORM
Profit Patterns and Risk Management For Active Traders
Trade successfully without having to be right about the underlying market direction
FRIDAY OCTOBER 12, 2007       04:37 ET

The markets succumbed to "profit taking" in the afternoon yesterday with much of the liquidation coming in some of the Nasdaq stocks as anticipated in yesterday’s commentary. The Russell 2000 (^RUT) followed the inside doji formation from Wednesday’s trading with a long red candlestick that attempted a move up towards the historic highs early in the session but along with the rest of the market the index dropped steadily into the close resulting in a 1.2% loss for the day.

Whether this was a one day correction or marks something that could be more extended remains to be seen. Many charts are over-extended but that does not necessarily imply that the rather manic catch-up dynamics that have characterized recent trading will not reassert themselves soon. I shall also be watching the Asian markets (excluding Japan) for further signs that the euphoria which has powered the most bullish rally in twenty years and which led to new historic highs on several indices yesterday is peaking, or at least reaching a short term plateau.

Further weakness in the US markets could be one instigator, or concerns about the developing frothiness in markets in Bombay, Hong Kong, and Shanghai could be another instigator, whichever it is, the net effect could be to bring on vertiginous anxiety amongst the large funds that are fuelling this emerging markets rally and then the global markets, which have allegedly de-coupled according to the current rhetoric, may all start moving together again - downwards. I am not forecasting that this is imminent but simply suggesting that when it does occur, as it will, the sudden disappearance of liquidity will produce another high correlation event such as was seen in August.


The FTSE 100 (^FTSE) came within eight points in yesterday’s trading of matching its previous historic high from June 15th.

The CBOE Volatility Index (^VIX) produced its largest daily move yesterday since mid September as it moved up by more than thirteen percent.

TRADE OPPORTUNITIES/SETUPS FOR FRIDAY OCTOBER 12, 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

K  Kellogg Company  

Kellogg (K) dropped below the bear flag formation that was discussed yesterday and after closing below the 50 day EMA looks as though it could be vulnerable to more downside.



ATVI  Activision Inc.  

Activision (ATVI) registered an Evening star candlestick and could be tradable down to the $21 level.



RHI  Robert Half International Inc.  

After moving decisively above the 50 day EMA last Friday on heavy volume, Robert Half International (RHI) has pulled back in a flag formation and I still feel that the $35 level is an intermediate target.



ADSK  Autodesk Inc.  

Autodesk (ADSK) is one of many tech stocks that looks over-extended with an incipient correction emerging.



BRLC  Syntax-Brillian Corporation  

In a similar vein to the interpretation of RHI above Syntax-Brillian Corporation (BRLC) has pulled back during this week since last Friday’s powerful surge and another leg up is to be expected.

Daily Form October 11, 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 11, 2007       04:03 ET

Divergent performances amongst the major US equity indices have been showing up in recent sessions. While the DJIA lost 85 points or 0.6% in yesterday’s trading and a smaller loss was experienced by the S&P 500 (^SPC) the Nasdaq Composite continued its steady ascent into multi-year highs territory with another 0.3% increase.

The outperformance by the technology sector could continue for some time without necessarily posing technical difficulties for the overall market but the sense of a need for a period of consolidation after recent gains may cause some fund managers to begin taking some of the gains from Nasdaq stocks off the table.


The Russell 2000 (^RUT) registered a tiny doji star candlestick that was also an inside day and still has to find the requisite excuse to challenge the all time high that was recorded on July 13th. In my work I have focused on the coincidence of range contraction templates at pivotal chart level and to find an inside doji close to an historic high is sometimes indicating a trend inflection point.

The index for the oil services sector (^OSX) has resolved the recent period of congestion, which initially appeared to be a harbinger of a corrective phase, by breaking away to new highs. Overall the oil stocks look to be extremely well supported and the chart pattern on the related oil index (^XOI) suggests that these stocks are poised for an upward breakout as well.

TRADE OPPORTUNITIES/SETUPS FOR THURSDAY OCTOBER 11, 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

K  Kellogg Company  

Kellogg (K) has a tiered bearish flag formation.



LXK  Lexmark Internation Inc.  

Lexmark (LXK) surged by more than six percent out of a well defined bullish flag formation.



WFC  Wells Fargo and Company  

The banking index has encountered resistance at the 200 day EMA and several charts for individual banks are showing that there are strong hurdles above to overcome. Wells Fargo (WFC) registered a lower intraday high in recent sessions and will have to mount a determined effort to break through the $38 level.