Daily Form October 18, 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 18, 2007       07:04 ET

Yesterday’s trading highlighted the jittery and fragile nature of current market sentiment as an early rally predicated on good earnings from several large cap stocks was followed by a quick drop as concerns rose to the fore again about a deteriorating housing situation, credit market issues, a slowing economy and an exodus by foreigners from the US capital markets.

The market recovered into the close but a common chart pattern from the day is seen in the chart for the Nasdaq 100 index (^NDX) which recorded a rather striking candlestick known as a hanging man, which is often seen near important highs when market conditions are nervous and unsettled.

As I am writing this the Bombay Sensex (^BSESN) concluded a volatile session with an almost four percent drop after yesterday’s gyrations which included a halt to trading as the index plunged on the open after a government announcement that expressed concerns about the recent boom in this market. The government calmed nerves later in the session and the index regained its composure. There is undoubtedly a bullish case to be made for Indian equities but if hedge funds lose their nerve in the near term based on adverse developments in other global assets, a pause in the appetite for emerging market securities, even if short lived, could produce a lot more disruptive trading in Mumbai.


Yields fell across the spectrum of Treasury instruments and the yield on the ten year note declined by eleven basis points. A retreat to the 4.4% level could be on the cards but traders have to weigh up their competing views regarding the evidence of a slowdown in the US economy and a more benign view of inflation with less supportive factors such as record prices for crude oil and some evidence of a global shift away from US denominated assets

The housing index (^HGX) has declined towards the lows of the year in the wake of some grim news about housing starts and a precipitous drop in home sales in southern California. The larger pattern shows a descending wedge formation which can often point to even lower prices ahead.

TRADE OPPORTUNITIES/SETUPS FOR THURSDAY OCTOBER 18, 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

FRE  Freddie Mac  

Freddie Mac (FRE) has retreated towards the 2007 lows and close to where the stock traded in July 2006. Some institutions may be tempted to bargain hunt at or near current levels.



DLM  Del Monte Foods Company  

Del Monte Foods (DLM) has a constructive looking wedge pattern and could be emerging from a basing pattern.



APD  Air Products and Chemicals Inc.  

Air Products and Chemicals (APD) appears to be registering successively lower highs at the top of the recent range.

Daily Form October 17, 2007

TRADE WITH FORM
Profit Patterns and Risk Management For Active Traders
Trade successfully without having to be right about the underlying market direction
WEDNESDAY OCTOBER 17, 2007       07:10 ET

Equities continued to slide yesterday as worries about the implications of credit market issues came to the fore and the slump in the banks continued. The Nasdaq Composite (^IXIC) fell back by 0.6% but positive earnings reports may bolster sentiment in the short term. In the intermediate term it would not be surprising to see a test of the breakout level from the first day of trading in October which saw the index supersede the previous multi-year highest close from mid July at 2720.


The S&P 500 (^SPC) recorded an 0.7% decline yesterday and has slipped back below the mid July highs but came to rest at almost exactly the level of the 20 day EMA.

The banking index (^BKX) discussed here yesterday as it dropped below two key short term moving averages on Monday continued downwards by another 2.1% in yesterday’s trading. This puts the mid August closing just below 102 in play. A failure to rebound at this level would be a bearish development for the overall market.

TRADE OPPORTUNITIES/SETUPS FOR WEDNESDAY OCTOBER 17, 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

C  Citigroup Inc.  

Citigroup (C) closed at its lowest level since July 2006. The chart is instructive for it shows a clear inability of the stock to rise above its 200 day EMA since the August sell-off



GMKT  Gmarket Inc.  

The long tails above the price action of the last few days shows a strong overhead resistance for GMarket (GMKT) and the stock could correct towards the $24 level.



WYNN  Wynn Resorts Limited  

Many stocks are revealing some rather striking negative divergences including Wynn Resorts (WYNN). Another that was mentioned in Monday’s column is Synaptics (SYNA).



BRLC  Syntax-Brillian Corporation  

Syntax-Brillan (BRLC) dropped back by more than five percent yesterday but this was on very subdued volume. The retreat to the 20 day EMA may have brought the stock back to a point where a renewal of the buying interest exhibited on October 5th could appear.

Daily Form October 16, 2007

TRADE WITH FORM
Profit Patterns and Risk Management For Active Traders
Trade successfully without having to be right about the underlying market direction
TUESDAY OCTOBER 16, 2007       06:39 ET

Yesterday’s downbeat session produced two key breakdowns on the sector charts that I like to monitor. Firstly the banking index (^BKX) dropped below the intersection of the 20 and 50 day EMA’s and closed with a 1.7% loss. Citigroup’s earnings contributed to the fall but more worryingly the new bailout fund, the inauspiciously named Master Liquidity Enhancement Conduit or M-LEC, received a lukewarm reaction from many traders.

The fact that the Treasury has warmly welcomed this initiative is double-edged as it suggests that there may have been no alternative but to encourage three of the largest US banks - that are too big to fail - to underwite the troubled asset backed paper market. If this market begins to come further unstuck for any reason there could be quite a lot more to worry about than the woes of sub-prime lenders.


The second break occured in the S&P Retail index (^RLX) which also dropped below the same moving averages as the banking sector.

In overnight trading the Hang Seng Index (^HSI) reversed again to close with a 2% loss after almost penetrating the 30,000 level intraday. This index has traced out a fifty percent trajectory from the mid August lows to today’s intraday high and, as the chart reveals, the index looks to be quite precariously balanced.

The recent action in Bombay and Hong Kong has echoes of the price action of the Nikkei in the late 1980’s but, as was true then, trying to pick the top in these moments of extraordinary euphoria can be quite hazardous to your wealth.

TRADE OPPORTUNITIES/SETUPS FOR TUESDAY OCTOBER 16, 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) broke down yesterday from an unorthodox bear flag pullback pattern that I mentioned recently and it is probable that there is further downside to be explored as the stock may not find real support until the mid August low near $26 is tested.



LAMR  Lamar Advertising Company  

Lamar (LAMR) could be poised to break out of a bull flag formation.