Daily Form August 14, 2009

Detecting Profitable Patterns For Active Traders

Successful trading without having to be right about the underlying market direction

FRIDAY AUGUST 14, 2009       05:36 ET

With a beautiful August morning in the UK and being keen to get away for the weekend comments today will be brief and in many ways a refresher on some other themes for the week.
The Nasdaq 100 (NDX) appears to be rotating through the repertoire of indecisive candlesticks while it remains confined by the overhead resistance of the 50% retracement level.
While the bulls seem to be having difficulties mounting the charge to get us through this barrier the momentum is slowly rolling over.
This could be a "priority" job for the HFT wizards to keep lifting the "animal spirits"

Another fly in the ointment is the Shanghai market which failed to find support at the 50 day EMA and continued its descent in Asian trading on Friday.
Related news concerns the Baltic Dry Index which, as it continues to plummet, casts a shadow over the global recovery story.

On Wednesday I drew attention the high yield debt sector and suggested that a correction might be imminent.
HYG still looks vulnerable at current levels especially if the emerging markets bandwagon might be hitting some bumps in the road.

One more ETF chart which could be putting an exhaustion top is for the base metals sector, DBB.


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 a more comprehensive listing of price formations detected by our pattern recognition algorithms please visit TradeWithForm

TSM  Taiwan Semiconductor Mfg. Co. Ltd. (ADR)  

Here again is what I said in Tuesday's column which, as the text makes clear, was also mentioned on Monday.

I shall repeat my comment from yesterday on Taiwan Semi (TSM) which has a well defined bullish flag pattern and could be headed for a re-test of the early May level near $11.40.

Scaling out of these positions would be recommended so a good 8-10% profit should have been available on 50% of the position, assuming entry in Monday's session. The remaining 50% could still stay in for $11.40 but with a new stop loss at $10.60.

SNDA  Shanda Interactive Entertainment Ltd ADR  

Shanda Interactive (SNDA) has continued to sink and validate one of my favorite patterns the bear flag. As long term readers will know this pattern has a slightly better than 50% ratio of success but the magnitudes of the declines when they come will compensate 2:1 for the losses sustained as long as the position is managed correctly.
I hope you all have an enjoyable summer weekend- or for those in the Southern Hemisphere I wish you a just as good winter weekend.