Daily Form November 10, 2008

Detecting Profitable Patterns For Active Traders
Trade successfully without having to be right about the underlying market direction
MONDAY NOVEMBER 10, 2008       06:47 ET

The chart below for the KBW Banking Index (^BKX) was one that I featured in last Friday’s slot on CNBC’s European Closing Bell and it is one index that I shall be watching closely this week. I have marked the three failure patterns at A,B and C and as is apparent this index seems to be struggling at a critical stage in a downward wedge pattern, despite the much trumpeted double bottom pattern that has prompted some money managers to jump into the banks.

While the pricing of the TARP program’s purchase of all the toxic stuff remains unclear, and the extent of the damage to the bank’s balance sheets is still largely unquantifiable, buying into this sector is even more of an act of blind faith than buying most other sectors where the near term earnings are not much better than guesswork.

News that China is embarking on major reflationary measures and also that the UK government are planning tax cuts to jump start the troubled UK economy could give a fillip to equities in the near term. The 1050 level on the S&P marks the intraday high from October 14th and also the 50 day EMA.

Reaching up to this barrier however could well be a signal for many funds that have registered large redemption requests to escalate their liquidation activities.

After the interruption in the "V" shaped recovery the DAX index seems to have found renewed momentum and now could be headed to a test of the 5350 area.

The MSCI BRIC index as tracked by the exchange traded fund BKF was another chart that I focused on in the CNBC slot last Friday and I pointed out that the chart is evidencing some positive divergences. The news from China over the weekend should be constructive for this sector.


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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CPHD  Cepheid  

Cepheid (CPHD) has registered a buy signal from my pattern recognition scans.

EXPD  Expeditors Intl of WA  

I would be targeting another test of the 200 day EMA for Expeditors International (EXPD).

FDRY  Foundry Networks Inc.  

Foundry Networks (FDRY) looks vulnerable to a break down from the triangular pattern.

TSRA  Tessera Technologies Inc  

Tessera Technologies (TSRA) also triggered a buy signal from scanning as it matches most of the requirements of an evolving bullish flag pattern.