Daily Form April 22, 2009

Detecting Profitable Patterns For Active Traders
Trade successfully without having to be right about the underlying market direction
WEDNESDAY APRIL 22, 2009       02:44 ET

There was no follow through to Monday’s sell-off and the balance of probabilities still favor the bullish case as revealed in the underlying chart patterns.

The Nasdaq 100 index (NDX) is showing the most relative strength and, having surpassed the early January highs a few sessions back and now faces a renewed challenge as to consolidate its position above a 62% retracement threshold (based upon the grid approach I have been using recently with high/low values of 1470 and 1025)

If the index is able to re-challenge the recent high of 1362 there is another key upside target from last November at 1382. Risks to the downside would suggest that 1250 would provide strong support as it coincides with the 50 day EMA and the 50% retracement level within the fibonacci grid.

European indices came under pressure during late morning trading yesterday in Europe. The DAX index in Germany came down and tested 4390 which was almost exactly the level discussed here in Monday’s letter and the FTSE in the UK also tested a key level near to 3900.

The UK government will be presenting its annual budget today in Parliament and all attention will be focused on the PSBR (Public Sector Borrowing Requirement) which could be as high as £180 billion which would be the largest deficit as a percentage to GDP other than during wartime.

Much of this will have been baked in to UK equities but there is a capacity for surprises and as the Ichimoku view reveals this index is at a pivotal juncture.

KBE, is the exchange traded fund which tracks the KBW Banking Index (BKX) and the reversal yesterday shows how the sector managed to bounce back from falling into the pink cloud.


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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XLV  Health Care Select Sector SPDR  

There was further evidence that the defensive sectors are being pushed aside as the overall risk appetite for equities remains lively. Reviewing the technical condition for XLV, the Health Care Select Sector SPDR, the formation suggests that the sector looks likely to be an under-performer.

RWR  DJ Wilshire REIT ETF  

RWR, an exchange traded fund which tracks the total return performance of the Wilshire REIT index, shows a strong reversal candlestick on very substantial volume which eradicated the losses from Monday’s session. Despite the lamentable fundamentals in commercial real estate the price action is suggesting that traders are already seeing those apocryphal green shoots on the horizon.