Daily Form February 13, 2008

Profit Patterns and Risk Management For Active Traders
Trade successfully without having to be right about the underlying market direction
WEDNESDAY FEBRUARY 13, 2008       06:58 ET

Yesterday’s session produced even more than its usual bout of confusing cross currents. The Sage from Omaha discussed in a live CNBC interview his offer to re-insure the municipal bonds that have been gauranteed in the first instance by the monoline insurers. The proposal was greeted in the pre-market trading with a surge in equity index futures which allowed the market to rally strongly off the open. As the session wore on some were left scratching their heads as to whether Mr Buffet’s proposal really amounted to anything that the market should be celebrating. It is not for the muni-market instruments that the banks and guarantors are seeking a safety net but rather the wondrous inventions of financial engineers - CDO’s and such like - that few (I am being charitable) understand, and as in the case of AIG’s troubles, even fewer know how to value.

The S&P 500 (^SPC) is moving further into the apex of yet another triangular pattern and the rejection at the 20 day EMA in yesterday’s trading suggests that the tightening range bound formation may persist while traders mull over all of the ingenious remedies being proffered, both from government and the private sector, to the malaise in the credit market.

I shall be taking part in a one day seminar at London’s Canary Wharf on February 19th and will be discussing the dynamics of Trend Days. More details can be found here

In line with several indices, including the Nasdaq 100 (^NDX) which we examined last week, Germany’s DAX index (^GDAXI) is finding that the late February 2007 highs, just prior to the market’s initial pre-occupations with structured debt issues, is now presenting a hurdle to recovery efforts.


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

AMGN  Amgen Inc.  

Amgen (AMGN) has an extended bullish flag formation.

ESRX  Express Scripts Inc.  

Express Scripts (ESRX) faces overhead resistance from two moving averages just above yesterday’s close.

FDG  Fording Inc  

The chart for Fording (FDG) reveals a peak in momentum and money flow along with heightened intraday volatility.