Daily Form January 15, 2000

Profit Patterns and Risk Management For Active Traders
Trade successfully without having to be right about the underlying market direction
TUESDAY JANUARY 15, 2008       05:49 ET

Despite a fairly robust upward move yesterday several indices saw trading that was entirely confined within the range of Friday’s session. The S&P 500 (^SPC) was one of the indices that registered an inside day and there was a further move into the apex of the triangular formation suggesting that we should see a strong directional move in the near term.

As a position trader in the current difficult market environment I find myself, much more than usual, striving to select trades aimed at achieving a combination of long and short positions with a relatively neutral portfolio delta (or tendency of the positions to provide a degree of internal hedging.)

It is also worth saying that under such circumstances it is wiser to trade in smaller position sizes than one would typically employ during less erratic market conditions

The yield on the Treasury note (^TNX) shows a tiny doji star formation at the bottom of the current rage. I am still paying close attention to yields as I would expect to see a break down to a lower trading range if we need to discount more than a shallow and short-lived slowdown.

The Nikkei 225 (^N225) resumed trading on Tuesday, after an extended weekend, and dropped down by another one percent to close at its lowest level since October 2005. The weekly chart reveals a discernible head and shoulders pattern with the further implication that there is no obvious support level that one could point to until the index gets closer to the 12000 level and this would also coincide with a level attainable by subtracting the distance to the top of the head from the current neckline.


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

TEVA  Teva Pharmaceutical Industries Ltd (ADR)  

Teva Pharmaceuticals (TEVA) looks to be ready to test the base of the recent breakout level.

RS  Reliance Steel and Aluminum  

Reliance Steel (RS) could run into resistance as the pullback approaches key moving averages.

PTEN  Patterson-UTI Energy Inc  

Patterson-UTI Energy (PTEN) has reversed quickly on above average volume over the last three sessions.

ERIC  LM Ericsson (ADR)  

Ericcson (ERIC) has favorable momentum characteristics which could propel it towards the 50 day EMA around $25.50 at which level we would want to exit.