Inter-market Technical Analysis using algorithmic pattern detection
WEDNESDAY DECEMBER 16, 2009 06:46 ET
Continuing with one of the themes from yesterday’s column, there are some unusual cross currents at work in the markets at present. The overall outlook for equities still seems to be favorable, reinforced by a positive seasonal bias, and yet beneath the surface there are some discordant under-currents.
The banking sector is drifting downwards and the KBW Banking Index, as tradable in the form of KBE, has broken below its 200 day EMA. Several of the major banks are also at quite critical levels as discussed below.
While writing this Germany’s DAX is making new highs for the year. Especially notable on the Ichimoku chart below are the highlighted areas indicating the remarkable ability of the bottom of the green cloud formations to capture almost exactly recent inflection points. Using these cloud patterns can be a very useful way to set targets and stop levels in your trading.
The EUR/USD managed to remain above the $1.45 level in trading yesterday - but only just.
The daily chart reveals a drop below the green cloud formation which concurs with other negative technical signals from the Eurozone currency.
Normally I would use the AUD/USD spot market chart to illustrate the point, but the exchange traded fund FXA may be more accessible to some traders. In Asian trading the Australian central bank indicated that it might be relaxing its tone in terms of tighter monetary policy in the light of sub-par growth for the Australian economy in the most recently released economic data.
If the Aussie slips below the 89.50 level on the chart there is plenty of scope for downside action and this could further play into the strengthening US dollar scenario which is gaining traction.
TRADE OPPORTUNITIES/SETUPS FOR WEDNESDAY DECEMBER 16, 2009
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
BAC Bank of America Corporation
Bank of America (BAC) is continuing to slide back towards my initial target at the $14 level.
JPM JPMorgan Chase and Co.
JP Morgan (JPM) has also reached back to a key level just above $40.50. Even though the chart reveals a dome like appearance, this could be a reasonably attractive trade on the long side with a stop loss level around $39.30 which also coincides with the 200 day EMA and an upside target around $43.80 which would provide a 2:1 reward/risk ratio.
KO The Coca-Cola Company
Coca Cola (KO) is bound to show up in year end window dressing but the stock faces fading momentum as it approaches the $60 level.