Your very first encounter with Ray, stand about the length of his tail away from him and wait for it to swipe you with it. Parry, and it'll queue a blade mode prompt.
I saw someone answer this over on the X360 board, but that topic mysteriously disappeared so I can't credit the person I learned this from. --- XBL - PSN | NemesisTheory. Deadly Premonition: Game of the Year, every year.