Daily Form April 20, 2009

Detecting Profitable Patterns For Active Traders
Trade successfully without having to be right about the underlying market direction
MONDAY APRIL 20, 2009       06:24 ET

The S&P 500 (SPX) reached up and registered an intraday high just above the 875 target (the 62% retracement level) which was identified here several weeks ago.

Having risen decisively above the pink cloud on the Ichimoku chart the odds favor the bullish case with a possible test of the 935 level seen in early January as a feasible target. Weakness in Europe and some significant failures in the currency market by sterling and the euro along with some other indicators from the very low yields on 30 day T-bills could however be pointing to some short term dislocations. Also with earnings season now in full force this would be a good time to move to the sidelines with a view to stalking short positions on the broad market if signs of a tradeable pullback emerge.

In European trading on Monday morning the euro has dropped below the $1.30 on its cross rate with the US Dollar and perhaps more ominously it is now losing contention with the green cloud on the chart below, which, if validated in the next couple of sessions, would suggest a re-visit to the $1.25 area.

The Dax Index, after having risen above a key retracement level on Friday has retreated by 2.5% as this is being written and a pullback to the 4380 level now seems likely.

Reviewing many of the sector funds over the weekend one of the Ichimoku patterns which is well formed and caught my attention is for XLE, which tracks a variety of energy companies and assets.

Point A indicated on the chart illustrates a failure in early January to emerge from the pink cloud, point B confirms the break down which culminated in the early March low and as can be seen the point C on the right hand side of the chart is the most bullish indication on the chart as price is emerging from the pink cloud. One would like to see a couple more closes above the pink cloud in coming sessions which would provide a good buy signal for the 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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FXB  Currency Shares British Pound  

As the chart for FXB reveals the British pound failed at the $1.50 level and would now appear to be headed in short order back to the $1.45 level.

INP  iPath MSCI India Index  

The exchange traded fund which tracks the MSCI India Index, INP, is at threshold of a zone which may present very short term resistance and almost certainly will present more substantial resistance if the first hurdle is crossed.

The risk/reward matrix within the price zone indicated on the chart in unfavorable and would keep me on the sidelines of this emerging market in the near term but with a bias towards a re-entry on the long side longer term.