Daily Form May 29, 2009

Detecting Profitable Patterns For Active Traders
Trade successfully without having to be right about the underlying market direction
FRIDAY MAY 29, 2009       04:22 ET

Crude Oil and other commodities are breaking out and this manifested itself yesterday in a move which took the Rogers Commodity Index (RCT) to its highest close in 2009 and also beyond a key resistance level from last November.

With a sloppy bond market, a boom in the Baltic Dry Index and more funds moving back into the hard asset play Chairman Bernanke may need a stronger medication than aspirin for the many headaches to come.

The near term direction of US equity indices remains an enigma wrapped in a mystery to me and I can be easily persuaded that there is a major vacuum below current levels on the one hand, or by plausible arguments that in the algorithmic trading domain that predominates - the rotation strategies are currently showing a tilt towards rally continuation.

As we have seen consumer confidence numbers respond very positively to higher equity prices and one must assume that that is a major strategic objective of the relevant interest groups.

The S&P 400 Midcap index reveals that an overhead barrier has contained prices since early May and that there is a sideways pattern following the violation of the very steep uptrend line through the lows. It seems that the bears are having difficulties gaining traction so it is conceivable that a decisive break up to the 200 day EMA could bring even more of the long only fund managers who are falling behind back into the game.

GDX, which provides exposure to the gold mining stocks via an exchange traded fund, has validated its recent breakout pattern and looks set to build further gains in the intermediate term. Touching the upper volatility band in yesterday’s trading could suggest caution in the near term however.


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.
For full details on time horizons, risk management and hedging techniques please visit http://www.tradewithform.com

TOL  Toll Brothers Inc.  

Toll Brothers (TOL) has broken down on heavy volume casting another shadow over the housing recovery narrative.

ESLR  Evergreen Solar Inc.  

My call on the solar stocks last week proved not to have been one of my better diagnoses however the chart for Evergreen Solar (ESLR) clearly reveals a bear flag pattern and vulnerability to further weakness.

CRM  salesforce.com  

Salesforce (CRM) faces a clear resistance barrier at $40.

AU  AngloGold Ashanti Limited (ADR)  

AngloAmerican Gold (AU) is echoing the strength for GDX noted above and a target of $50 from early 2008 seems to be on the radar.

EMC  EMC Corporation  

EMC Corporation dropped below all three moving averages on a substantial uptick in volume.