Daily Form February 4, 2009

Detecting Profitable Patterns For Active Traders
Trade successfully without having to be right about the underlying market direction
WEDNESDAY FEBRUARY 4, 2009       03:07 ET

The trading range regime continues and is clearly demonstrated in the chart below for the S&P 500 (SPX). Observe the two grey lines on the chart on the right hand side - these represent the upper and lower volatility (Bollinger) bands based on a 40 day simple moving average. The upper level corresponds exactly with the upper price of the trading range around 935 and the lower band is more or less at 795 which represents the lower level.

In other words the market has exerted an enormous amount of energy and adrenalin over the last two months and has essentially gone nowhere. There is a tendency to keep believing that there will be some breakout from this range but given the recent behavior there is perhaps a greater probability that to paraphrase a well know saying in French - the more things change the more they stay the same.

Attention will focus on the Euro currency over the next 24 hours with an ECB rate decision imminent. The technical condition as discussed here recently is pointing towards another mini-bear flag pattern evolving with a further decline probable.

The ETF for Gold, GLD, may have to re-group at the point of convergence of two key moving averages before penetrating the overhead resistance seen on the chart.

XLF has been treading water since the burst of enthusiasm last week when the on again/off again idea of removing the non-valuable assets from the bank’s balance sheets spread some enthusiasm for the sector - or was it some anxiety on the part of those who have been comfortably short the sector for a very long time.

The positive MACD divergence still lends plausibility to the notion a sustainable bottom may be forming.


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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NE  Noble Corporation  

There is a bullish looking flag formation on the chart for Noble (NE).

XLV  Health Care Select Sector SPDR  

What is appealing on the chart for Health Care Select Sector SPDR, XLV, is yesterday’s peek above an upward wedge pattern on above average volume. But the presence of the 200 day EMA may suggest that the trade could hit resistance in today’s session.

LPX  Louisiana-Pacific Corporation  

Louisiana Pacific (LPX) could be ready to break away from a basing pattern.