Daily Form January 25, 2008

Profit Patterns and Risk Management For Active Traders
Trade successfully without having to be right about the underlying market direction
FRIDAY JANUARY 25, 2008       03:10 ET

Microsoft’s earnings and guidance after the close last night should provide further underpinning for the recent relative out-performance of the large Nasdaq stocks. The Nasdaq 100 (^NDX) does face some chart resistance just above yesterday’s close but it is in the vicinity of the 1900 area on this index that I would expect the counter-trend rally to run out of steam.

In overseas action the Hang Seng (^HSI) is racing ahead again with a more than six percent gain as this is being written and with the Nikkei 225 ahead by more than four percent when it concluded Friday’s trading. The Japanese index is approaching levels where the risk/reward ratio favors new positions on the short side.

The S&P 400 Midcap index (^MID) was surprisingly more lively than the larger cap indices yesterday which was also in sharp contrast with the Russell 2000 (^RUT) which went nowhere during the rally continuation.

Reviewing the likely resistance levels I would suggest that 800 could pose quite a challenge for the midcap index.

As suggested yesterday there is still scope for profit on the short side in the Treasury complex and I would expect to see yields reach back towards 3.8% in the near term.


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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ASYT  Asyst Technologies Inc  

Mentioned here yesterday as a candidate on the long side Asyst Technologies (ASYT) provided an attractive entry opportunity and delivered a healthy ten percent return on the session.

CYMI  Cymer Inc.  

On Tuesday I suggested that CYMI would make it back towards the 50 day EMA and this target is close to completion. At this level I would be looking to reverse to the short side.

MSFT  Microsoft Corporation  

The chart for Microsoft (MSFT) is very intriguing and reveals, on an extended basis, a slightly unorthodox version of William O’ Neill’s cup and handle pattern. In particular the key level for this configuration sits between $30 and $31 and this acted as support during the turmoil earlier this week. The chart looks very positive on the long side in the longer term.