Daily Form November 1, 2007

Profit Patterns and Risk Management For Active Traders
Trade successfully without having to be right about the underlying market direction
THURSDAY NOVEMBER 1, 2007       06:34 ET

The Federal Reserve delivered the expected 25 basis points and traders eventually mounted a minor celebration as they pushed many stocks higher after the rather sharp sell-off that immediately followed the announcement. The Nasdaq Composite (^IXIC) was one of the main beneficiaries of the easing as it pushed ahead by 1.5% to break convincingly above 2820.

Parts of the FOMC statement could be interpreted as an attempt by the committee to underline the perception that it is not captive to the market’s wishes and that it acts in the interest of the overall economy rather than coming to the rescue of financial intermediaries that have miscalculated in their risk management policies. Nevertheless it can safely be assumed that, if there is further erosion of confidence in the asset backed paper market and further signs of collateral damage and consumer fatigue arising from increasing foreclosures etc., the Fed will once again ride to the rescue at the next FOMC meeting.

The interest rate decision gave a powerful boost to the the Dow Jones Utilities (^DJU) which pushed out of the constructive chart pattern that was discussed in the weekend commentary.

One sector that showed little benefit from yesterday’s rate decision was retailing. The S&P Retail Index (^RLX) barely moved and still looks as though it could be setting up for a new 2007 low.


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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PLCM  Polycom Inc  

I would reiterate my interest in Polycom (PLCM) which has the right characteristics of a bullish pullback pattern.

NEM  Newmont Mining Corporation  

Newmont (NEM) exploded to the upside out of a chart pattern that often produces such breakout behavior.

GRMN  Garmin Ltd.  

One stock that I have been following closely for some weeks is Garmin (GRMN) and, as mentioned here before, I have been expecting another downdraft for some time. I took a loss on a recent short trade as the stock appeared to have overcome the more difficult commercial landscape that was caused by Nokia’s acquisition of Navteq announced at the beginning of last month.

Events took another interesting turn yesterday as Garmin decided to trump the bid made by the European sat-nav powerhouse TomTom NV for control of TeleAtlas which, other than Navteq, is the other major map provider.

Investors in both Garmin and TomTom were clearly perturbed by the bidding war for TeleAtlas and in Amsterdam where TomTom trades, almost 20% was wiped off of TomTom’s market cap. A lot rides for both companies on the results of this bidding competition. My money would be on TomTom in the longer term to consolidate its position as the premier geo-positioning player. Meanwhile Garmin’s shareholders can expect a bumpy ride with further sell-offs a distinct possibility until the TeleAtlas acquisition is settled in favor of one of the two suitors.

CMS  CMS Energy Corporation  

CMS Energy moved quite decisively above all three moving averages in yesterday’s trading.

SGP  Schering-Plough Corp.  

Schering Plough (SGP) has pulled back in quite a steep channel on subdued volume and may find rejection at the intersection of two moving averages which I have marked on the chart.