Daily Form June 18, 2008

Profit Patterns and Risk Management For Active Traders
Trade successfully without having to be right about the underlying market direction
WEDNESDAY JUNE 18, 2008       06:35 ET

In reviewing the charts this morning for a diverse set of indices, sector funds and individual stocks the most common chart pattern is the bear flag formation.

When discussing the S&P 500 (^SPC) on Monday I mentioned that I believed that we could see a rally back to the 1380 neighborhood before the bears might pounce again. This still is feasible but as the chart below suggests there is nothing etched in stone about the 1380 level per se. There are two hurdles to overcome between 1370 and 1380 and given the nature of intraday volatility one needs to be wary of establishing any firm targets at present.

The Dow Jones Transportation index has slumped sharply since closing almost at the 5500 level on June 5th. The exchange traded fund IYT now reveals a very clear bear flag pattern.

As this is being written the FTSE index in London is performing relatively poorly in relation to other European indices. There is a growing sense that the UK economy may be headed for a rougher ride than some of the other continental markets. One way to take a bearish bet (even a relative one) could involve the sector fund, EWU.

Several semiconductor stocks are showing negative divergences as is the exchange traded fund SMH.


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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CCJ  Cameco Corporation (USA)  

Cameco Corporation (CCJ) would appear to be vulnerable as it approaches the intersection of three moving averages just below the $40 level.

FDRY  Foundry Networks Inc.  

Foundry Networks (FDRY) has a bearish pullback pattern.

K  Kellogg Company  

Kellogg (K) has clearly encountered price rejection at the $52 level.

KLAC  KLA-Tencor Corporation  

KLA-Tencor (KLAC) has evidence of negative MACD divergences and a bear flag pattern.