Daily Form January 28, 2008

Profit Patterns and Risk Management For Active Traders
Trade successfully without having to be right about the underlying market direction
MONDAY JANUARY 28, 2008       07:32 ET

The Nasdaq 100 (^NDX) reversed sharply on Friday after piercing through, in early trading, the indicated chart resistance. Along with the rest of the market the index succumbed to the tendency which highlights the current market predicament of rallies being seen as providing an opportunity for fund managers to liquidate long positions and better entry possibilities for traders that want to exploit the short side again.

The 1900 level represents a major hurdle on the upside but I sense we may go down today to test the lows again before there is any appetite for looking at overhead barriers.

Among the many things that the market has to contend with this week are the FOMC deliberations, Friday’s employment data, the fate of the so called monoline insurers, further negative earnings...etc.. and of course whether we get any new financial accidents a la SocGen. Despite all of the protestations about the soundness of the fundamentals - "It’s the financial system, stupid."

The banking index (^BKX) just made it to the 90 level on Friday where as expected there was very firm resistance. As the chart reveals the sector has a formidable obstacle to clear, and despite all of the positive rhetoric that is starting to surface about how bargains abound amongst the regional and relatively well capitalized banks, there is still too much financial uncertainty for anyone to claim that a meaningful bottom is in place.


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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CYMI  Cymer Inc.  

We made money on both sides of the market last week with CYMI which reversed in Friday’s trading as anticipated.

GS  The Goldman Sachs Group Inc.  

The chart for Goldman Sachs (GS) has an evening star candlestick which on a statistical basis has been a reliably bearish pattern.

VLO  Valero Energy Corp.  

Valero (VLO) looks vulnerable at current levels and even more so as it gets closer to $60.

COF  Capital One Financial Corp.  

The chart for Capital One Financial (COF) highlights the hurdle that many companies face in the financial services sector.

CECO  Career Education Corp.  

Career Education Corp (CECO) is developing a well defined bear flag formation.