Daily Form October 28, 2008

Detecting Profitable Patterns For Active Traders
Trade successfully without having to be right about the underlying market direction
TUESDAY OCTOBER 28, 2008       06:47 ET

The Russell 2000 (^RUT) continues to outperform on the downside as it dropped almost five percent yesterday. The waterfall formation was temporarily suspended while the triangular formation evolved during mid October but the downdraft has resumed.

If this index is heading for a re-test of the last "recession" lows the 350 area was touched and retouched in 2002 and 2003.

In the near term there is some technical evidence, reinforced by the action in the Asian and European markets on Tuesday, that the massively oversold condition of major indices could be ready to give way to a tradable rally.

The S&P 500 sold off in the last hour of trading but the October 10th low is still intact.

In Asian trading the Hang Seng index (^HSI) performed a substantial reversal after Monday’s 12.7% drop. The 14.3% increase in Tuesday’s session failed to cancel out all of the losses from the previous session which highlights one of those slightly counter intuitive notions regarding the arithmetic of recovery. It takes a larger percentage gain to completely reverse the erosion which occurs when a security is falling.

The CBOE Volatility Index (^VIX) closed yesterday above 80 for the first time even though the intraday high was below that seen last Friday.


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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KR  The Kroger Co.  

Kroger (KR) is at an inflection point where yesterday’s shooting star pattern highlights the strong overhead resistance from three moving averages in the neighborhood of $26.

MMM  3M Company  

3M (MMM) has managed to recover fairly steadily since October 10th but could face resistance from the 50 day EMA. A buy and reverse strategy at $65 may be worth consideration.

CHRW  C.H. Robinson Worldwide Inc  

CHRW could be ready to break out from an upwards wedge pattern which has been evolving and which showed signs of occurring yesterday during the earlier part of the trading session. However as with the previous two charts there could be stiff resistance from overhead moving averages so profit targets on the long side should be set realistically.