Daily Form January 30, 2009

Detecting Profitable Patterns For Active Traders
Trade successfully without having to be right about the underlying market direction
FRIDAY JANUARY 30, 2009       06:14 ET

The very pronounced tapering triangle formation shows that the Nasdaq 100 index (^NDX) is approaching a point where market players will have to make a tough decision.

Traders may, understandably, want to postpone a major test of support and resistance until the dust settles with respect to all of the initiatives being discussed by the new administration. However the charts are suggesting that wiggle room is disappearing.

Until the market shows its hand the best strategy I have been finding in recent days is to be nimble and keep the holding of positions overnight to a minimum.

Reviewing this last week, several stocks mentioned here have performed well - Sepracor (SEPR) surged yesterday, FXE is correcting as suggested, Legg Mason (LM) could have provided a very nice profit on the short side as did Amdocs (DOX) in yesterday’s session

Even Jacobs Engineering (JEC) which I suggested on Thursday as a short candidate, as it reached towards $45, would have delivered almost seven percent yesterday.

My policy has not been to provide specific entry level suggestions and the reader is advised to inspect intraday patterns for selecting their own best points of entry. My intention is to offer suggestions as to eventual direction but my crystal ball is not that finely tuned (yet!) to give precise recommendations on timing and/or entry and exit levels.

The bearish interpretation provided here recently and on CNBC Europe last Friday for the Euro/USD rate is unfolding as expected. Targets in the low $1.20’s could be attainable in the next few sessions.

The worst industrial production figures since records began more than 50 years ago proved to be very unsettling for the Japanese market in Friday’s trading with a drop of more than 3%.

When drawing the downward sloping line on the Nikkei 225 chart I have avoided the late 2008/early 2009 rally and the resultant pattern provides the proper insight into what is an increasingly bearish looking descending wedge pattern.

As anticipated earlier this week the yields on the US Ten year Treasury note have continued to move higher and have even taken out the 2.75% level.


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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FXY  Currency Shares Japanese Yen  

A rolling top pattern is becoming increasingly apparent on the Japanese yen, as tracked by the exchange traded fund, FXY. As can be seen a rather critical uptrend line could be violated in coming sessions.

GS  The Goldman Sachs Group Inc.  

Goldman Sachs (GS) would likely meet considerable overhead supply if it makes it up towards $90.

NVLS  Novellus Systems Inc.  

Novellus Systems (NVLS) has bounced around very erratically but in today’s trading I would expect to see a bounce. I am finding that in current market conditions I am holding positions for shorter periods and trading in and out with reduced expectations of making positional gains but rather exploiting the ebb and flow of what is a fairly nervous and erratic market.

XRX  Xerox Corporation  

Xerox (XRX) has a rather well defined bearish flag formation.