Wednesday's trading saw price erosion before the close on all of the major indices. The charts now show consecutive long upper tails to the candlestick patterns and this is clearly visible on the daily chart for the S&P 500 (^SPC).

Earnings season brings with it the potential for large surprises and readers are advised to be even more diligent than usual in analyzing the technical conditions of individual securities as the capacity for large gaps is currently high.

The yield on the ten year Treasury note is now approaching the 4.85% level that we discussed in our weekend column.

We should expect to see some price and yield consolidation within the two trendlines that we have drawn on the chart for ^TNX.

Action in the semiconductor sector has been disappointing for the bulls this week as the constructive patterns from a week ago and the promise of a challenge to the upside range seems to have faded with disappointing earnings forecasts from Intel (INTC). Also a poor reaction in the post-market trading last night to the earnings statement from Lam Research (LRCX), which is engaged in the design and manufacture of fabrication equipment for the semiconductor sector, may further dampen sentiment. The chart for one of the ETF’s for the sector, IGW, shows that the path of least resistance may now be a continuation of the range bound trading that has been in effect since last September.

TRADE OPPORTUNITIES/SETUPS FOR THURSDAY JANUARY 18, 2007

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.

In yesterday's column we noted that "US Global Investors (GROW) appears to be struggling in a flag/pennant formation following a bout of selling at the turn of the year". The stock moved down by 11.5% in yesterday's trading and traders would have had the chance to see most of that gain as there was no large downward gap on the open.

Goodrich Petroleum (GDP) appears to be building a tradable bottom as the money flow turns constructive.

We like the look of the basing pattern for Ann Taylor (ANN) and there appears to be ongoing accumulation. Yesterday's tiny Doji candlestick could be the precursor to a move up towards the region near the 200 day EMA that we have marked.

Research in Motion (RIMM) is at a fairly critical juncture. The long lower tail and above average volume suggests that traders and especially large institutions may be ready to see beyond the potential competition suggested by all of the hoopla surrounding last week's iPhone announcements. Recent money flow is approaching an extreme and if the tide turns this could lead to a large short covering rally.

Clive Corcoran is the publisher of TradeWithForm.com, which provides daily analysis and commentary on the US stock market. He specializes in market neutral investing and and is currently working on a book about the benefits of trading with long/short strategies, which is scheduled for publication later this year.

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