Daily Form October 26, 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 26, 2007       03:53 ET

The rather skittish tone that has characterized trading during recent sessions was again in evidence in yesterday. The broad equity indices diverged with the large cap DJIA and S&P 500 ending essentially unchanged but the Nasdaq 100 (^NDX) experienced the most attrition with a 1.2% decline and the small cap Russell 2000 (^RUT) suffered a smaller decline of 0.6%. The index closed in the midst of two key moving averages - the 50 and 200 day EMA’s and just six points above the pivotal 800 level.

One of the more intriguing developments yesterday was Warren Buffet’s comments about an overheated Chinese market and the subsequent 5% drop in Shanghai. He was also reported as making the ironic remark in relation to cashing out of one of his very rewarding investments in China that he had sold too soon. This echoes the famous quote from the first Lord Rothschild who was asked what the key to his investing success was and habitually replied "I always sell too soon." Sage advice for an investor with a long time frame but advice that doesn’t really help the trader looking for good short trades. In that regard the Hang Seng Index (^HSI) finally mustered the nerve to break above 30,000 as this is being written, and those trying to pick a top here keep running for cover.


The S&P 500 (^SPC) took an erratic intraday excursion yesterday and ended more or less where it had started. The close was right on the 50 day EMA providing little insight as to the probable near term direction.

The leadership being provided by the tech stocks has run into some strong headwinds with the recent sell off in the semiconductor sector. Broadcom’s earnings disappointment from earlier in the week has contributed to a rather steep fall for the exchange traded sector fund, IGW, which has now retreated to the mid August low.

TRADE OPPORTUNITIES/SETUPS FOR FRIDAY OCTOBER 26, 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

SYNA  Synaptics Incorporated  

Mentioned here recently in the context of its negative divergences, Synaptics (SYNA) after appearing to be able to defy gravity, has corrected by almost ten percent in the last two sessions.



HON  Honeywell International  

The recent pullback/bounce in Honeywell after the plunge down on October 19th could find renewed selling pressure close to the $60 level.



QCOM  QUALCOMM Inc.  

Qualcomm (QCOM) has a mini bear flag formation as it straddles all three moving averages.



RYL  Ryland Group Inc  

Ryland Group (RYL) peeked and closed just above a congestion range on heavy volume yesterday. The underlying momentum and money flow also look positive.

Daily Form October 25, 2007

CLIVE CORCORAN WILL BE A GUEST ANALYST ON CNBC"s EUROPEAN CLOSING BELL TODAY

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 25, 2007       05:50 ET

In yesterday’s commentary I discussed the market’s resilience and in particular that shown by the Nasdaq 100 (^NDX). Early in the trading day yesterday I began to sense that this comment might have been a case of poor timing as it seemed that the fund managers that have been piling into the large techs could be starting to lose their nerve. In fact the index showed heroic resilience yet again as it almost erased all of the early losses from the session to come to rest very close to the gap down opening price. This is all the more remarkable in that certainly some fund managers were dumping constituents of the index as can be seen in the carnage for Broadcom (BRCM) down 17%, Altera (ALTR) down 15.7% and Amazon (AMZN) down 12%.

The restorative powers of the potential for further fed easing are providing a powerful astringent to the bears who keep trying to get some momentum going on the downside. Even with Merrill Lynch’s disturbing news about write-offs and equally disturbing news about plummeting housing prices and sales levels the Dr Pangloss adherents keep reminding us that all this bad news can only be good news for the markets.

I shall be a guest analyst on CNBC’s European Closing Bell this afternoon.


The S&P 500 (^SPC) also experienced a strong reversal as the intraday low yesterday penetrated below Monday’s low but again the index closed more or less at the opening price and right in line with the 50 day EMA. As noted yesterday the index could run into some chart resistance at the 1530 level which marks the 20 day EMA and above that at 1540 which represents last Thursday’s closing value.

The FTSE 100 index is off to a strong start in Thursday’s trading and is up by more than one percent after hesitating on October 12th within two points of its June high. As the chart reveal the index came down to a pivotal level yesterday that, if it was to break, would violate the up trend line through the lows since mid August.

The Bank Of England published its periodic Stability report today (available at the Bank’s website) and it contained some unusually pointed comments regarding the risks that it perceives are facing the UK economy. The real estate woes that are now manifesting themselves in the US could be on the horizon for the UK and the growing evidence of tighter credit conditions will not be good news for the over-leveraged UK consumer sector.

TRADE OPPORTUNITIES/SETUPS FOR THURSDAY OCTOBER 25, 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

WYNN  Wynn Resorts Limited  

Wynn Resorts (WYNN) is revealing a succession of lower highs.



SLB  Schlumberger Limited  

Schlumberger (SLB) is gradually pulling back from Monday’s plunge and the stock will be on my radar in coming sessions for evidence that the bounce is faltering.



FRE  Freddie Mac  

The monthly chart for Freddie Mac (FRE) shows that the stock has now broken down to levels not seen since 2003.



AAPL  Apple Computer Inc.  

The chart for Apple (AAPL) over the last two sessions reveals a very similar pattern to that for the Nasdaq 100 (^NDX) and in some ways the stock embodies the hopes and aspirations for the technology sector as a whole.

There is no denying that Steve Jobs’ Apple is a wonderful business success story but we shall have to see whether iPods and iPhones and other examples of leading technology can lead the market through the minefields of dollar weakness, troubled real estate loans and SIV’s that will have to mark their holdings at some point to the market rather than their more benign scenario models