Daily Form January 10, 2008

Profit Patterns and Risk Management For Active Traders
Trade successfully without having to be right about the underlying market direction
THURSDAY JANUARY 10, 2008       06:55 ET

The Dow Jones Industrials (^DJI) performed the testing of the mid August intraday low that I had been expecting. Buying support appeared and the indices managed to mount the first meaningful rally of the year so far. Needless to say one should remain wary of broad market exposure and it would be prudent to pay careful attention to the changing sector allocation decisions which fund managers are making, especially with regard to more defensive sectors such as consumer staples and health care related equities.

The S&P 400 Midcap index (^MID) has reached down below the mid August lows but as intimated in Monday’s commentary this index looks more vulnerable to further price erosion towards the 680 level.

As part of the call that the chief economist at Goldman Sachs (GS) made yesterday regarding the fact that the US is now entering a recession which will endure for at least two quarters there was a recommendation that defensive sectors are the place to be. Recent wolume behavior for the ETF for the pharmaceuticals, PPH, shows that this sector migration is well under way and if you favor the long side of the market the health care and pharmaceuticals are starting to reveal some positive accumulation characteristics.


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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CREE  Cree Inc.  

Cree (CREE) has a bullish pullback pattern.

KO  The Coca-Cola Company  

Coca Cola (KO) is revealing its appeal as a defensive play.

STJ  St. Jude Medical Inc.  

St Jude Medical (STJ) looks set to move up towards the mid $40’s.

BRL  Barr Pharmaceuticals Inc.  

Another strong move that was accompanied by twice the average volume was seen in Barr Pharmaceuticals (BRL).