Daily Form May 20, 2009

Detecting Profitable Patterns For Active Traders
Trade successfully without having to be right about the underlying market direction
WEDNESDAY MAY 20, 2009       03:15 ET

Yesterday was an erratic session although most indices did not cover wide ranges. The S&P 500 proxy SPY in fact has registered a doji star formation after just failing to push above the $92 level.

Volume was below average and less than Monday’s as the markets drift into the Memorial Day weekend.

As suggested yesterday there is a sense that the market seems to be stalling just below the 200 day EMA and, if it had not been for adverse news on new housing starts, there could have been a rally up towards $93 at which point I am expecting sellers to really test the resolve of the bulls.

IWM, the exchange trade vehicle which tracks the Russell 2000, registered another doji star and confronts equal challenges to SPY although the technical condition reveals a slightly more precarious position for the small cap stocks at this stage.

The DAX in Germany managed to peek above the 5000 level intraday yesterday and has recently been revealing relative strength amongst the major European indices. The January 6th intraday high is found just over 100 points above yesterday’s high and a failure to rally back to this level in the face of the 200 day EMA would be a negative technical development.


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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XLY  Consumer Discretionary SPDR  

Substantial volume was registered yesterday for the consumer discretionary stocks, as tracked by XLY, and the sector may struggle to move back above towards the 25 level.

DBB  PowerShares DB Base Metals  

DBB, which is an exchange traded fund tracking the price base metals is revealing MACD negative divergence as well as an evolving bearish flag formation

VRSN  VeriSign Inc.  

Verisign (VRSN) has the required characteristics for a bull flag pattern.