Daily Form February 14, 2011

Inter-market Technical Analysis using algorithmic pattern detection

MONDAY FEBRUARY 14, 2011       10:59:00 GMT

Regular readers of the Daily Form will recall that I have commented frequently on the erosion in equity prices in the BRIC’s over the last few weeks and I wrote at some length on the topic here and the article was also republished also here

I wrote that many of the short term indicators suggested that India and China especially looked oversold and that a bounce seemed to be most probable in the near term. In Asian trading today we have seen good rallies with both Shanghai and Mumbai up by more than 2.5% each.

I would expect that these rallies will continue and would be looking at playing the long side while the momentum favors a more risk on approach to these two markets.

Indicated by the yellow highlighting on the chart is the fact that for the Chinese index the rally has arrived at a critical point where the registering of the 50 day EMA crossing the 200 day EMA from above may now see a reversal. The configuration shown on the MACD chart favors a continuation of the rally, and quite probably another attempt at the 3200 level.

Long positions in the exchange traded fund, FXI, are worthy of consideration.

The Mumbai Sensex also rallied by more than 2.5% and a rebound momentum should see a continuation upwards to a near term target of 18,800 - and possibly beyond. Several ETF’s can be played for this rebound including INP.

EUR/USD has already rewarded a short sale placed near the European market open this morning with more than 50 pips but I am looking to cover soon as I would expect short term support at the level indicated by the dotted line.
Longer term I will be looking to sell rallies but with an intraday and scalping bias. GBP/USD could be more problematic to trade this week as there are several data points relating to CPI etc which should ensure that sterling will be even "bouncier" than usual.

The Australian dollar versus the US currency - AUD/USD shows a rather notable failure and double top pattern which has been annotated on the chart and after dropping out of the cloud formation on the 240 minute chart the intermediate term target has been identified with the arrow i.e. around 0.9920