Daily Form November 20. 2008

Detecting Profitable Patterns For Active Traders
Trade successfully without having to be right about the underlying market direction
THURSDAY NOVEMBER 20, 2008       07:03 ET

The S&P 500 has almost completed the retreat to the 2002/3 lows which I have been anticipating in this column for several months. The intraday low on the cash index reached 806.18 and I suspect that we need further attrition to test lower levels nearer to 2002 lows around 770 before making a further interpretation of the technical condition for US equities and the longer term outlook.


Yields on the ten year Treasury note (^TNX) continued down again after the break in the trend-line noted in yesterday’s commentary. Also evident on the long term monthly chart is the fact that the 2003 lowest yield just above 3% could be targeted.

In trading Thursday morning in Asia there was widespread selling and it was the Nikkei which saw the largest drop of 7%. It appears that the recent panic low, which took the index to levels not seen for 26 years, needs to be re-tested.

TRADE OPPORTUNITIES/SETUPS FOR THURSDAY NOVEMBER 20, 2008



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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IYR  iShares Dow Jones US Real Estate  

In my comments yesterday I noted that the sector fund IYR which tracks the Dow Jones Real Estate index was showing no signs of continuing price erosion and we saw another 12% fall yesterday.



BAC  Bank of America Corporation  

The major banks are crumbling with Citigroup registering a 23% drop yesterday and my focus stock, Bank of America (BAC), confirmed yesterday, with its 14% drop the reliability of the signals based upon a violation of the baseline of a descending wedge pattern.



NLY  Annaly Capital Management Inc.  

The drop down from overhead resistance from two moving averages for Annaly Capital Management (NLY) has violated the uptrend line indicated and suggests that there could be a revisit to recent lows.



DRYS  Dryships  

The chart for Dryships (DRYS) is one of the most spectacularly bearish in a market where one is spoiled for choice in selecting suitable candidates for that role.

I would be very wary on the short side for such a high beta stock and at some point a very sharp rally is to be expected.