Daily Form August 5, 2008

Profit Patterns and Risk Management For Active Traders
Trade successfully without having to be right about the underlying market direction
TUESDAY AUGUST 5, 2008       06:16 ET

The correction in the commodities markets is gathering momentum after the quite noticeable lower top that was posted in early July. The Rogers Commodity Index (^RCT) reveals the across the board weakness in commodity prices yesterday. While the 200 day EMA could provide some short term relief from fund selling there should be lower prices ahead before there are obvious chart levels of support.

Sterling is heading further down following the break down characteristics that I discussed here last week and on CNBC last Friday.

The pharamaceuticals index (^DRG) still looks poised for an upward breakout.


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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EWC  iShares MSCI Canada Index  

A couple of weeks ago in this commentary the following was noted in regard to one potential fall out from the commodity correction.

Resource focused economies/stockmarkets will be relatively more exposed to a contraction in world demand for commodities. Yesterday, EWC, which tracks the MSCI Canada index, fell below key support at the 200 day EMA on expanded volume .

The Canadian index dropped more than three percent in yesterday’s trading and should be a relative under-performer in the intermediate term.

IYM  iShares Dow Jones US Basic Materials  

IYM, the exchange traded fund which consists of key stocks in the industrial materials sector, after congestion at the 200 day EMA and the rather pronounced triangular pattern, produced the breakout that the pattern was pointing to. But as with many other recent charts the initial reaction was a fake move to the upside followed by a sharp drop yesterday as the deteriorating fundamentals are becoming harder to avoid.

AMZN  Amazon.com Inc.  

Amazon (AMZN) has pulled back to an attractive area on the long side.

BRCM  Broadcom Corporation  

Broadcom (BRCM) faces stiff overhead resistance at the conjunction of all three moving averages.

ERES  eResearch Technology Inc  

As anticipated the $15.50 area did provide a strong hurdle for eResearch Technology (ERES).