Daily Form January 22, 2009

Detecting Profitable Patterns For Active Traders
Trade successfully without having to be right about the underlying market direction
THURSDAY JANUARY 22, 2009       06:45 ET

The S&P 500 cash index (^SPX) registered a pattern that was found on many charts after yesterday’s recovery - an inside day reversal. The rebound was sharp and erased a lot of Tuesday’s sell off but significantly the reversal failed to move outside the confines established by the intraday low and high from Tuesday.

This strongly suggests that a lot of trading yesterday was short covering.

In terms of upward targets 850 should bring out some sellers again but there is a case to be made that we could get back to the level indicated on the chart around 870.

I would be looking to trade off the bounce again today but would begin looking at the short side if we venture beyond the 865 level.

A similar pattern to the one noted above is seen on the chart for the Nasdaq 100 index and once again there is room for a continuation of the bounce but I would be looking at the short side again as the bulls will try to make progress towards the 50 day EMA.

The Japanese yen looks vulnerable to corrective action. The shooting star pattern with the intraday pattern more or less at the December high is a very strong bearish signal.

The exchange traded fund FXY is revealing clear evidence of a negative MACD divergence and any strength today in the Japanese currency should be seen as providing better short opportunities.

The chart for the ETF that track the price of spot gold GLD shows stiff overhead resistance and I suspect that we could see another abrupt sell-off in coming sessions.


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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ADM  Archer Daniels Midland Company  

The chart for Archer Daniels Midland (ADM) reveals a bearish flag pattern.

DBA  PowerShares DB Agriculture  

An ETF which tracks agricultural commodities, DBA, gained more than three percent yesterday but there is an eight session bearish flag pattern that suggests that this sector still has risks of further pullbacks.

DBB  PowerShares DB Base Metals  

Another commodity focused ETF, DBB, which tracks the prices of base metals could have seen a selling climax yesterday, but any short term rebound should be traded nimbly.

PAAS  Pan American Silver Corp. (USA)  

Pan American Silver (PAAS) has been whipsawing abruptly over the last several sessions and I would suspect that new efforts to head back towards $18 will bring out the short sellers.

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