Daily Form August 7, 2008

Profit Patterns and Risk Management For Active Traders
Trade successfully without having to be right about the underlying market direction
THURSDAY AUGUST 7, 2008       06:56 ET

Helping to drive the rally in equities are the twin (and related) forces of declining commodity prices and the newly energized dollar. Yesterday I noted the intraday pattern seen in early European trading which showed the US currency breaking above resistance against the yen and it went on to record further strong gains in the US trading session allowing the dollar to record its strongest close against the yen since early January.

Also mentioned here in several recent commentaries, sterling is now facing a bearish looking pattern as it moves into the apex of a descending wedge pattern. On the daily chart the $1.9750 level now seems to be a key barrier and any rally above it would I suspect provide an excellent selling opportunity. Downside targets around $1.90 are now in play.

I shall be taking some time off to recharge the batteries and will return on August 18th.

Further illustrating the new found dynamism of the US dollar is the daily chart below for the the Canadian dollar. The selling could be a little overdone in the near term but the chart points to a clear turning of the tide for this cross rate.

The Australian dollar has tumbled precipitously in recent sessions and although the 200 day moving average did not check the decline there is some chart support in the vicinity of yesterday’s close.

Exchange traded funds provide liquid instruments for taking positions in all of the major currency rates mentioned including FXA which tracks the Aussie dollar.

QQQQ has to confront the convergence of the 20 and the 200 day EMA at current levels which may prove to be a short term obstacle. A more important test lies at the $48.50 level which, following the late May/early June high, proved to be a difficult hurdle to recovery efforts, and this level also coincides with the upper 40 day Bollinger band.


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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XLV  Health Care Select Sector SPDR  

Confirming the upward breakout in the health care sector, XLV, yesterday’s continuation pattern was on twice the average daily volume. The sector has broken decisively through 200 day moving average resistance and upside targets around $36 now seem attainable.

FRX  Forest Laboratories Inc.  

Forest Labs (FRX) shows the kind of pattern that is seen on a number of charts in the health care/pharmaceuticals sector.

BRCM  Broadcom Corporation  

Earlier this week it was noted that Broadcom (BRCM) faces stiff overhead resistance at the conjunction of all three moving averages. The bearish flag formation has evolved further and yesterday’s doji star/spinning top pattern on reduced volume could mark the turning point.

GHL  Greenhill and Co Inc.  

Greenhill (GHL) has a horizontal version of the bullish flag/consolidation pattern just above the 200 day EMA.