What are support and resistance lines?

Support and resistance lines appear as thresholds to price patterns. They are the respective lines where prices stop going down or up.

A support line is the level that a stock's price generally does not fall below. It marks the price level at which there is a sufficient amount of demand to stop and possibly, for a time, turn a downtrend higher. A resistance line is the level above which a stock's price generally will not rise. It indicates a price level at which a sufficient supply of stock is available to stop and possibly, for a time, head off an uptrend in prices. Trend lines are often referred to as support and resistance lines on an angle.

Why do support and resistance lines occur?

A stock's price is determined by supply and demand. Bulls are buying when they think a stock is priced too low. Bears are selling when they think prices have peaked. Bulls bid up the price by increasing demand, bears take it down by increasing supply. When the bulls and bears find a price point they can agree on, the market reaches a balance.

When prices are trending upward, there's a point at which the bulls begin to pull back and the bears become more aggressive - the market balances along the resistance line.

When prices are trending downwards, the market balances along the support line. As prices decline toward that support line, buyers become more inclined to buy and sellers starting holding on to their stocks. The support line marks the point where demand takes precedence over supply and prices will not fall below that support line. The reverse holds true for a resistance line.

Prices often break through support and resistance lines. A break through a resistance line shows that the bulls (the buyers) have won out over the bears (the sellers). The bulls are determined to bid the price of the stock higher than previous highs. Once the resistance line is broken, another will be created at a higher level.

The reverse holds true for a support line.

Support levels can transform into resistance levels and vice versa. After prices break through a support level investors may try to limit their losses by selling the stock, pushing prices back up to the line which now becomes a resistance level.

Why are support and resistance lines important?

Technical analysts often say that the market has a memory. Support and resistance lines are a key component of that memory.

Investors "tend to remember previous area levels and thus make them important. While a stock is changing its price level rapidly, day after day, the public will be buying and selling at widely divergent levels and there will be no unanimity, or strong memory impression, in such changing prices." But, when prices form an "area" and trade within a fairly narrow range for a period of time, investors begin to remember that specific price.

The longer the prices stay in that area and the greater the volume in that spot, the more important that level becomes because investors remember it exceptionally well. Therefore, that level takes on added significance for the technical analyst. According to experts, previous support and resistance levels can be used as "target" or "limit" prices when the market have traded away from them.

Investors should be aware that support levels are usually below the current price; resistance levels are often above the current price. Also, it is not unusual for prices to move below or above a support or resistance level for very short periods of time during a volatile trading period.

Support and resistance levels are important tools for the technical analyst. By monitoring whether a stock's price is nearing a support or resistance level, an investor will be aware of whether a reversal may be in the offing. Together with monitoring the proximity of the price to the support or resistance level, a vigilant investor will also monitor trading volume in the stock. Increased volume is another key sign that a reversal may be at hand.

Let's take for example the SP500

Monthly Resistance

Daily Line Chart Support

Message Board Post

I am floored and amazed at your skill and uncanny intuition on this pull back and today's rally.

ZK 11/28/07

Message Board Post

This seems to fit right in with what JL has told us. This down move, another leg up then down again where we develop our shorting skills. At least that's what I recall.

From what I've gleened, during a secular bear there will be moves to the upside but they won't go as far as the moves to the downside so the market continues to trend down.

It's not as scary now as it was when I went through the last crash. Partly because I wasn't as wise and mostly because of T123 guidance.

It's simply amazing to me that one can profit in the market as much during bad times as good times. Now I know how lawyers feel (just kidding).

Should be some interesting times ahead. Glad I'm here at T123 to not only get the scoop but to profit from it.

Bob 11/22/07

A double bottom occurs when prices form two distinct lows on a chart. A double bottom is only complete, however, when prices rise above the high end of the point that formed the second low.

The double bottom is a reversal pattern of a downward trend in a stock's price. The double bottom marks a downtrend in the process of becoming an uptrend.

Double bottoms are often seen and are considered to be among the most common of the patterns. Because they seem to be so easy to identify, the double bottom should be approached with caution by the investor.

According to Schabacker, the double bottom is a "much misunderstood formation." Many investors assume that, because the double bottom is such a common pattern, it is consistently reliable. This is not the case. Bulkowski estimates the double bottom has a failure rate of 64%, which he terms surprisingly high.If an investor waits for a valid breakout, however, the failure rate declines to 3%. The double bottom is a pattern, therefore, that requires close study for correct identification.

What does a double bottom look like?

As seen below, a double bottom consists of two well-defined lows at approximately the same price level. Prices fall to a support level, rally and pull back up, then fall to the support level again before increasing.

The two lows should be distinct. According to Edwards and Magee, the second bottom can be rounded while the first should be distinct and sharp. The pattern is complete when prices rise above the highest high in the formation. The highest high is called the confirmation point.

Analysts vary in their specific definitions of a double bottom. According to some, after the first bottom is formed, a rally of at least 10% should follow. That increase is measured from high to low. According to Edwards and Magee, there should be at least a 15% rally following the first bottom. This should be followed by a second bottom. The second bottom returning back to the previous low (plus or minus 3%) should be on lower volume than the first. Other analysts maintain that the rise registered between the two bottoms should be at least 20% and the lows should be spaced at least a month apart.

There are a few points of agreement, however. Investors should ensure that the pattern is in fact comprised of two distinct bottoms and that they should appear at or near the same price level. Bottoms should have a significant amount of time between them - ranging from a few weeks to a year depending on whether an investor is viewing a weekly chart or a daily chart. Investors should not confuse a consolidation pattern with a double bottom. Finally, it is crucial to the completion of the reversal pattern that prices close above the confirmation point.

Why is this pattern important?

According to Murphy, the double bottom is one of the most frequently seen and most easily recognized. However, analysts agree that this can be a difficult pattern to correctly identify. Investors must pay close attention to the volume during the formation of the pattern, the amount of increase between the two lows, and the time the pattern takes to develop on the chart.

Murphy explains that bottoming patterns may have smaller price ranges than topping patterns and often take longer to build. "For this reason, it is usually easier and less costly to identify and trade bottoms than to catch market tops."

It is quite common after prices reach a new low for a rebound in prices to occur. A retest of the low then usually follows. According to Bulkowski, a retest occurs when prices return to the low and test to see if the stock can support itself at that price level. "If it cannot, prices continue moving downward. Otherwise, the low usually becomes the end of the decline and rising prices result."

Is volume important in a double bottom?

Investors should pay close attention to volume when analyzing a double bottom.

Generally, volume in a double bottom is usually higher on the left bottom than the right. Volume tends to be downward as the pattern forms. Volume does, however, pick up as the pattern hits its lows. Volume increases again when the pattern completes, breaking through the confirmation point.

Monitoring volume is a key aspect of determining whether or not a double bottom is valid.

Schabacker insists that the volume rule must be applied quite strictly in the case of a double bottom.Elaine Yager, Director of Technical Analysis at Investec Ernst and Company in New York and a member of Recognia's Board of Advisors, strongly agrees with this point. The first low must be made with noticeably high volume. The second low must also experience high volume but it need not achieve the level of the first low. Bulkowski explains that volume tends to rise substantially at the time of breakout.

What are the details that I should pay attention to in the double bottom?

1. Downtrend Preceding Double Bottom

As mentioned previously, the double bottom is a reversal formation. It begins with prices in a downtrend. Bulkowski cautions that on their way down, prices should not drift below the left low of the pattern.

2. Time between Bottoms

Analysts pay close attention to the "size" of the pattern - the duration of the interval between the two lows. Generally, the longer the time between the two lows, the more important the pattern as a good reversal. Schabacker warns investors off of a pattern where only a few days intervene between the two lows. Analysts suggest that investors should look for patterns where at least one month elapses between the bottoms. It is not unusual for a few months to pass between the dates of the two bottoms. Murphy mentions that these patterns can span several years.Yager notes, however, that tracking of bottoms that run for several years can become cumbersome and difficult. Bulkowski suggests that best gains come from formations where bottoms are approximately 3 months apart.

3. Increase from First Low

Some analysts argue the increase in price that occurs between the two bottoms should be consequential, amounting to approximately 20% of the price. Other analysts are not so definite or demanding concerning the price increase. For some, an increase of at least 10% is adequate. Yager strongly agrees with this point. The rise between the lows tends to look rounded but it can also be irregular in shape.

4. Volume
As mentioned previously, volume tends to be heaviest during the first low, lighter on the second. It is common to see volume pick up again at the time of breakout.

5. Decisive Breakout

According to Murphy, the technical odds usually favor the continuation of the present trend.This means that it is perfectly normal market action for prices on a downtrend to fall to a support level a couple of times, rise back up, and then resume that downtrend. It is a challenge for the analyst to determine whether the rise from the bottom is the indication of the development of a valid double bottom or simply a temporary setback in the progression of a continuing downtrend.Analysts, therefore, advise cautious investors to wait for the price to rise back up and break through the confirmation point before relying on the validity of the pattern. Many experts will maintain that an investor should wait for a decisive breakout, confirmed by high volume.

6. Pullback after Breakout

A pullback after the breakout is usual for a double bottom. Bulkowski estimates that in 68% of double bottom patterns, price will throwback to the breakout price.

How can I trade this pattern?

Begin by calculating the target price -of the minimum expected price move. The double bottom is measured in a way similar to that for the head and shoulders bottom.

Calculate the height of the pattern by subtracting the lowest low from the highest high in the formation. Then, add the height of the pattern to the highest high. In other words, an investor can expect the price to move upwards at least the distance from the breakout point plus the height of the pattern.

For example, assume the lowest low of the double bottom is 220 and the highest high is 290. The height of the pattern equals 70 (290 - 220 = 70). The minimum target price is 360 (290 + 70 = 360).

Murphy cautions the terms "double tops and bottoms" are greatly overused in the markets. Most of the patterns referred to as double bottoms are, in fact, something else. Because of this, Murphy advises investors to make their investment decisions only after prices have broken through the confirmation point, completing the reversal pattern.Watching the volume throughout the development of the pattern can help determine whether the pattern is a valid double bottom.

Yager notes that the key for this pattern is for the investor to have patience and wait for confirmation. Too often investors see double bottoms everywhere.

Edwards and Magee explain that patterns where the bottoms are close together in time are likely not valid double bottoms but are, in fact, a consolidation area.

Because so many double bottoms pullback after breaking through the confirmation point, it is often possible to wait for the pullback to place a trade and then watch prices decline for a second time. Bulkowski estimates that the average time for prices to return to the breakout price is 11 days. Throwbacks that occur 30 days after the breakout are not throwbacks at all, but simply normal price fluctuations.

Bulkowski offers advice for both short-term and long-term investors. Because only approximately 68% of double bottoms meet their price targets, he advises short-term investors to be ready to take profits as price nears the target. In other words, sell as prices get close to the target.Long-term investors, he suggests, can hold onto the stock for an extended upward move but should keep watch on the fundamentals to determine whether they are justified in continuing to hold the stock.

Are there variations in the patternthat I should know about?

1. Two Lows at Different Levels

Sometimes the two lows comprising a double bottom are not at exactly the same price level. This does not necessarily render the pattern invalid. Analysts advise that if the second low varies in price from the first low by more than 3% or 4%, the pattern may not be a double bottom.

What is a trendline?

According to Schabacker, "a trendline is a straight line drawn on a chart through or across the significant limits of any price range to define the trend of market movement."

Trendlines were one of the first technical aspects of the market to be discovered. Technical analysis is based on the fact that the prices of stocks move in fairly definite trends. Prices trend for individual stocks and for the market as a whole. Technical analysts use trendlines in two ways: first, to identify the direction of the movement of stock prices; second, to determine if and when the movement will change.

How do technical analysts use trendlines?

Stock prices move in trends. Once a trend has been clearly identified, it's likely to continue for a time. Technical analysts look to trendlines for their ability to support price declines or resist price advances.

When prices are moving neither up nor down, trendlines have little importance. Technical analysts looking for a profitable trendline will search for ones that slope up or down across the charts. These illustrate stock prices that are clearly trending either up (as illustrated by an "up trendline") or down (as illustrated by a "down trendline").

A trendline not only shows the trend but it also defines the limits of price swings of the stock. Assume a stock's price is trending upwards. If the stock's price dips significantly below its trendline, it may mark a reversal - the end of the trend.

No trend continues forever. Technical analysts are as concerned with the breaking of trendlines as they are with watching a trend continue.

How are up and down trendlines created?

An up trendline marks the upward progression of a stock's price. The line is drawn on the chart by connecting the low points the stock hits as its price continues to rise. Each low point will be successively higher than the previous low. This progression gives the trendline its upward slope.

A down trendline marks the downward progression in the price of a stock. It is formed by drawing a line on the chart connecting the high points the stock hits as it continues to fall. Each high point will be successively lower than the previous high. This progression gives the trendline its downward slope.

How do you know when a trendline is dependable?

It's not easy to determine whether or not a trendline is valid. Experience and common sense are two vital skills to possess. According to Schabacker, "no one can take a chart, immediately draw trendlines on it and be certain that they are the proper, or even the best, trendlines that could have been inserted for continuation of the current movement. That is just as impossible as is the absolutely certain forecast of definite future prices by any finite individual."

Cautious investors look for more than two points on the chart which touch the trendline. They'll be watching for a third and fourth point which confirm the trendline they've identified. In addition, experts advise watching for points on the trendline (highs for a down trendline, lows for an up trendline) that are fairly evenly spaced along the chart.

A common mistake is to draw a trendline that is too steep. Often a major movement in the market - which begins very steeply on a chart - will look like it's starting a trend. Many trendlines level off significantly after an initial burst of activity. This is where the experience of drawing and redrawing trendlines can pay off for the investor.

When drawing and redrawing trendlines on a chart, the investor can end up with a chart where the trendlines, which start out steeply, become ever shallower. These "trend reduction lines," drawn from the same starting high or low, create a fan pattern on the chart, giving them the name of "fan lines." According to Kahn, fan lines are, by definition, congestion zones as buyers and sellers position themselves.

Are there different types of trends?

Edwards and Magee divides trends into three basic varieties:

1. Major or primary trends - a trend of at least one year's duration which shows a rise or decline of at least 20%. When the primary trend is up, this is called a bull market. When it's down, it's referred to as a bear market.

2. Minor trends - brief fluctuations (usually less than six days and rarely longer than three weeks). Taken together these short-term fluctuations make up an intermediate trend. Experts will often define an intermediate market as composed of three or more minor fluctuations.

3. Intermediate or secondary trends - these trends move in the opposite direction of the primary trend and usually last for three weeks or more. For example, a secondary trend could be an intermediate decline during a bull market or an intermediate rally or recovery during a bear market. These secondary trends tend to retrace from one-third to two-thirds of the gain or loss in prices recorded in the primary direction.

How do you play the trend?

According to Achelis, "the goal is to analyse the current trend using trendlines and then either invest with the current trend until the trendline is broken, or wait for the trendline to be broken and then invest with the new (opposite) trend."

An investor should not rely on a trendline alone to make a trading decision. Trendlines are one tool that should be used in combination with other signals, including reversal and continuation patterns, which form over time.

All trading decisions are highly dependent on the type of trend being followed. Schabacker advises that it is much safer and much more profitable to play the intermediate movements that run in the direction of the basic major trend, rather than the minor corrections that run counter to it. According to the trader's axiom, the trend is your friend.

Many traders advise that primary trendlines serve the useful purpose of preventing investors from taking profits prematurely. In other words, the trendline tells investors to stay "long" if the trend is up, or "short" if the trend is down.

Keep an eye on fan lines. They can provide a sign of a reversal, signalling the end of a trend. Many analysts suggest that a reversal may occur when the third trendline is touched. According to Kahn, if that third trendline successfully supports or resists prices, then the original trend is still intact. Like any technical pattern, investors should hold their trading until the pattern is clearly and unequivocally resolved.

Patterns help greatly in interpreting trend lines. The formation of a pattern can have great significance in determining whether a trendline is broken. This serves as an important reminder to the investor to use all of the technical tools available and not to rely on any one single tool.
How do you know when a trendline is broken?

Schabacker warns investors to be more conservative with longer trendlines. The longer the trendline, the greater the possibility that its angle may be slightly off. This means that any price that appears to have broken the "slightly off" line may, in fact, not have broken the true trendline. "Consequently, the longer our line has run from its origin the more critical we must be of any price action which apparently breaks the line, and the more conservative in taking action on it."

There are several factors to consider in determining whether a trendline is definitively broken:

1. Volume - In some cases, penetration will be accompanied by increased trading in the stock.

2. Significant price movement - A slight correction in price is seldom a signal of a true break in an intermediate or major trend.

3. Closing price - Analysts will usually ignore breaks in the trendline which occur during the trading day, focussing instead on the closing price for the day.

4. Presence of a pattern - Analysts like to see a pattern formation at the end of a major or intermediate trend. A pattern signalling a reversal reinforces the importance of the break in the trendline

For this example let's use the SP500 for the past 18+ months

Message Board Post

John

Thank you for all of your hard work and desire to see this community succeed. I've been a member longer than most and plan on being around for say...got a 6 yr old x 12 years + 4 more college, mybe 5 years college, well...a long time!!

Breck 12/09/07

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I have combined the 13ema/26sma 30 min and the time shifted stochastics ( 5, 15, 30, 60) and the 3/8 hourly ema. I have found that when all three are in agreement - the set up is a slam dunk!

This Wednesday morning, all three were - and I bought 100 call 52.0 DEC contracts on the qqq's right after the opening at $1.37 and am still holding them - per the rules for all three systems. They closed at $1.92 today. That's like 50% in two days!

I have been making money consistently since combining the three systems.

Just a very sincere thanks to all three traders for sharing their hard won experience and skill set with us.

Adam 12/09/07

Japan Continues to Spend Big on Semiconductor Equipment

by Dan Tracy, Lara Chamness, and Edwin Hall, SEMI Industry Research and Statistics

Japan's economy is rebounding from difficulties in the late nineties and the early 2000s. According to the Economist, the short-term outlook remains favorable, with real GDP growth forecast at 2.3% in 2007 and averaging 2 percent a year over the next several years. Also, electronic manufacturers in Japan continue to innovate and develop technologies that ever increase the functionality of portable electronic devices.

On the semiconductor equipment front, Japan has been the spending leader for the last five years. The country spent about $31 billion on new equipment from 2003 through 2006, which represents almost a quarter of the world total of $133 billion spent on equipment over the same time period. According to the 2007 Year-End consensus forecast published this month, Japan will spend $8.9B in 2008 and $9.5B in 2009, which means the region will continue to be one of the "biggest spenders."

Japan's growth also continues in semiconductor materials, particularly wafer fabrication materials, which are forecasted to grow about 14 percent from about $6.0 billion this year to $6.8 billion in 2009.

Investment in 300 mm technologies is the primary driver behind this spending. As of October 2007, there were seventeen 300 mm volume fabs and another two under construction--with Flash Alliance sharing most of the construction spending in Japan. According to the Fab Capacity Report (October 2007 edition), the 300 mm capacity in this region is expected to increase by about 58 percent from 272,000 wafers per month (wpm) last year to over 429,000 wpm by year end. The capacity is expected to increase to 571,200 wpm by the end of 2008.

Source: Fab Capacity Report, October 2007

In addition to 300 mm wafer fabrication, Japan remains a key region for investment in final manufacturing. Device manufacturers in Japan spent an estimated $6.2 billion on test and assembly and packaging equipment from 2003 through 2006. While many semiconductor manufacturers in Japan have relocated plants to China that assemble and test traditional leadframe-type packages, much of the advanced packaging and test manufacturing remains on-shore.

Equipment spending by other regions in the Asia-Pacific justifiably attracts much of the industry's attention regarding manufacturing investments, especially for memory device production and foundry capacity. Despite this, Japan continues to be one of the leaders in terms of equipment spending. It will remain the regional heavyweight with the largest installed fab capacity for at least the next few years.

Portions of this article were derived from the SEMI Fab Capacity Report, Equipment Market Data Subscription (EMDS), and the Material Market Data Subscription (MMDS). These reports are essential business tools for any company keeping track of the semiconductor equipment and material market in Japan. For additional information regarding this report and other market research reports, visit www.semi.org/marketinfo. For questions, please contact either Dan Tracy (dtracy@semi.org) or Lara Chamness (lchamness@semi.org). If you would like a brochure or a sample of any of these reports, please contact Edwin Hall (ehall@semi.org).

December 3, 2007

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John

On behalf of all the T123' ers...You do a tremendous job and it's a privilege to listen to you in the Trading Room

Cobra 12/06/07

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John - You and your site are unique and I thank heaven I found you at the time in my life that I did.

Quix 12/06/07

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John

As I've said months ago; this is the best site around. The T123 "family" is constantly improving ... your updates are awesome.

Lana 12/06/07

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John

Thanks for working constantly and giving 100% of yourself to this site.

Fina 12/06/07

Continuation Wedge (Bullish)

Classic Pattern

Implication

A Continuation Wedge (Bullish) is considered a bullish signal. It indicates a possible continuation of the current uptrend.

Description

A Continuation Wedge (Bullish) consists of two converging trend lines. The trend lines are slanted downward. Unlike the Triangles where the apex is pointed to the right, the apex of this pattern is slanted downwards at an angle. This is because prices edge steadily lower in a converging pattern i.e. there are lower highs and lower lows. A bullish signal occurs when prices break above the upper trendline.

Over the weeks or months that this pattern forms the trend appears downward but the long-term range is still upward.

Volume should diminish as the pattern forms.

Pattern Duration

Consider the duration of the pattern and its relationship to your trading time horizons. The duration of the pattern is considered to be an indicator of the duration of the influence of this pattern. The longer the pattern the longer it will take for the price to move to the Target. The shorter the pattern the sooner the price move. If you are considering a short-term trading opportunity, look for a pattern with a short duration. If you are considering a longer-term trading opportunity, look for a pattern with a longer duration.

Target Price

The target price provides an important indication about the potential price move that this pattern indicates. Consider whether the target price for this pattern is sufficient to provide adequate returns after your costs (such as commissions) have been taken into account. A good rule of thumb is that the target price must indicate a potential return of greater than 5% before a pattern should be considered useful. However you must consider the current price and the volume of shares you intend to trade. Also, check that the target price has not already been achieved.

Criteria that Supports

Moving Average

The penetration of the 200-day Moving Average by the price is a false bear signal.

Rising or Stable Volume

Volume should diminish as the pattern forms. If volume remains the same or increases this signal is less reliable.

Underlying Behavior

In this pattern prices edge steadily lower in a converging pattern i.e. there are lower highs and lower lows indicating that bears are winning over bulls. However, at the breakout point the bulls emerge the victors and the price rises.

You Can Always Just Search For Any Stock On Any Exchange We Cover (New York Stock Exchange, NASDAQ, American Stock Exchange, Toronto Stock Exchange, Toronto Venture Exchange, London Stock Exchange, International Money Market, FOREX)

Event Duration

If "Classic Patterns" is selected then the Pattern Duration criteria is enabled. This allows the investor to restrict the search to patterns that formed over a minimum or maximum number of days. Technical Analysis publications often anticipate that if a stock exhibits the price movement suggested by a classic pattern, this will occur within a time period equivalent to the duration of the pattern. If the anticipated price movement does not occur within that time period, then the pattern may have broken down and the suggested price movement may not occur after all. This means that longer patterns anticipate possible price movement over a longer term, and shorter patterns anticipate possible price movement over a shorter term. The investor might set this criteria based on the desired trading horizon.

Inbound Trend Duration

This criteria is enabled if "Classic Patterns" or "Short-term Patterns" is selected. The trend leading into the pattern is often referred to as the "inbound trend". Many patterns indicate a reversal or continuation of this prior trend. Therefore it is useful for the investor to ensure that the prior trend was well-established.

Some technical analysts prefer an inbound trend that is at least as long as the pattern itself. In this case, if an investor is specifying a pattern duration of at least 30 days, then the investor might also want to specify an inbound trend duration of at least 30 days. The investor should note that it is not always necessary to have an inbound trend that is at least as long the pattern. In many cases, an inbound trend can be considered well-established if it is a shorter but strong rally or decline.

Possible Percentage Price Move

This criteria is enabled if "Classic Patterns" is selected. Technical Analysis publications often indicate that classic patterns anticipate price movement that is equivalent to the "height" of the pattern. The "move" refers to the amount the price will move away from the breakout price defined by the pattern.

Based on this concept, patterns can be selected based on the possible price move that they suggest, as a percentage of the breakout price defined by the pattern. The investor should note that the Possible Percentage Price Move is based on the breakout price defined by the pattern, not on the current price of the stock.

The investor should also note that the Possible Percentage Price Move is not a guaranteed prediction. Technical Events™ and the possible price movement that they suggest should be used as additional information in a more comprehensive research process about the instrument.

Every chart pattern has a percentage of likelihood that it will occur. Click here to view the probabilities for some well known patterns.

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The Trending123 Pattern Recognition Scan is one of the most interactive and informative tools available to subscribers, and it's accessible 24 hours a day right here on Trending123.com . This cutting edge software scans over 16,000 securities on nine exchanges in the blink of an eye, looking for any of the 4 million chart patterns that can show you exactly where your stocks are headed. And here at Trending123, our stocks are headed up, up, up!

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John Lansing runs scans all day, every day looking for patterns to "pop" on the charts. When he sees a play that you should be making, he sends an update right to your e-mail inbox. But what if you want to scan the charts yourself? Scan away! You can either perform unique scans on Trending123.com, or sign up to automatically receive electronic alerts whenever specific patterns pop on the charts.

But what does it look for and what does it find?

The Pattern Recognition Tool looks for Classic and Short Term chart patterns, in addition to indicators and oscillators... the very same ones that professional traders use to make quality, profitable calls time and time again. But this is where Trending123 is different... You don't just get raw data - you get solid advice. John Lansing is there to teach you about the patterns, indicators, and oscillators, what to look for when you do see pattern forming, and finally how to use that information to make the right calls.

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Who can benefit from using the Pattern Recognition Scan?

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It's easy! Follow these three steps to success using the Pattern Scan Tool!

#1 - Select the type of search you want to run and execute the scan

Choose any security, index, or currency on the United States, Canada, or London exchange and click "search".

#2 - Select the trading horizon you'd like to investigate

Certain patterns play out only in certain spans of time: short term, intermediate, or long term. Pick the time period you'd like to explore, and view the technical events poised for that period.

#3 - Choose the chart pattern you want to explore and learn as much as you can

You'll see any number of technical events that are showing up on the specific security you chose. Check the box next to any of these events and click "View chart for checked events" to learn more about the pattern and what it means for your stock. Once you're in the education section for that chart pattern, you've got everything you need to make a trade: A description and the implications of that chart pattern, important characteristics of the pattern, trading considerations, criteria that support and refutes the pattern, and the underlying behavior present in this pattern.

The rest is up to you! Take the knowledge of the chart patterns and make winning trades in your own. Or if you're not quite ready, use your new knowledge to understand John's picks better.

And just to make sure you have all the information you need to use this tool successfully (and profitably!), John Lansing has created multimedia tutorials that walk you through every aspect of this dynamic tool. Check out video tutorials on the following topics:

Monday: 12/10/07

Strong economic data and the approach of tomorrow's Fed policy meeting weighed on Treasuries today while stocks made solid gains to push the major indices to their highest closing levels in over a month. In late trading, the 10-Year Treasury Note was down by 13/32, raising its yield to 4.16%; the Dow was up by 101.45 points to 13,727.03; and the Nasdaq was up by 12.79 points to 2,718.95.

The Pending Home Sales report showed an increase in October and a sharply enlarged gain in September. The data point to a brighter sales picture for the last two months of the year.

The seasonally adjusted level of existing home sales have fallen for in each month between March and October while the level of new home sales fell in the first nine months of this year and only rose slightly in October.

The news rekindled the upward momentum for stocks with the Dow gaining 478.30 points in the last four sessions. News of an investor bail-out for USB Bank following last week's news of a bail-out for Citigroup helped energize the beleaguered financial sector and rechanneled some of the safe-haven interest in Treasuries. A further ease in oil prices also helped stocks. The price of a barrel of light, sweet crude oil for next month delivery slipped by $0.31 to $87.97. This followed a $1.95 drop on Friday.

By the end of stock trading, the Dow had risen on the day by 0.74%, the S&P 500 by 0.75%, and the Nasdaq by 0.47%.

Besides reacting to the stock market, bond traders were also continuing to prepare for tomorrow's Fed meeting. Prior to last week, speculation was divided as to how much the Fed would cut interest rates. Some felt that 0.50% cuts might be forthcoming to guard against the housing / credit situation from dragging further on the economy.

But the latest take on last quarter's gross domestic product turned out to be much stronger than expected and Friday's employment report revealed no notable weakness in the labor market as a whole. In addition, a plan to help out some subprime mortgage holders has further eased credit market concerns.

Though there are some Fed watchers who are still predicting half-percent cuts to the overnight borrowing rate between banks (federal funds rate) and the rate charged by for loans directly from the Fed (discount rate), the predominating expectation is that the cuts will be 0.25%.

And while rate cuts are generally a plus for bonds, their stimulative effect on the economy raises worries that they will also stir up inflation pressures. Since the fed funds rate is the benchmark for short-term rates, the short end of the Treasury securities maturity spectrum found some support from the rate cut expectation. On the other hand, the increased inflation risk helped weigh against the longer-termed securities.

The Fed policy statement comes out at about 2:15 PM Eastern Time. In the morning, the report on wholesale inventories will by released, though it is not expected to get much attention. The seasonally adjusted level is expected to have increased by about 0.5%. Levels are expected to have remained lean.

Rotation Out Of Commodity Related Sectors

RUN FOR THE HILLS!!! (Even those with iTards should get this)

Rotation out of commodity related sectors with the 2 biggies including GOLD and OIL as these 2 sectors are an extremely over crowded trade because they happen to be tied into many of the same traders shorting the $USD which from what the charts tell me only has one way to move and that is up. Let's call this it's own "carry trade" if you will. What has worked for years short the $USD while going long OIL and GOLD worked just as much as shorting YEN and going long POUND, EURO and many other even more riskier carry trade bets.

Much to what everyone might think that the $USD has been going down because the FED has been cutting rates; this is likely the worst lie they have been telling themselves.

The $USD has been dropping for 6+ years, the fed has done only 3 rate cuts in the past 3 months so far. The market looks ahead but it doesn't look that far ahead. The rate cuts have NO impact on any $USD decline but rather these things.

1. The United States has a lot of debt with or without rate cuts we don't save money but rather spend money we don't have and that is why the $USD has been going down.

2. The Untied States plays big brother to the world spending billions of dollars a day saving everyone else's country while we ignore our own that is another reason why the $USD has been going down.

3.The banking/brokerage/lending sector for years has been on a free money give away to anyone that wanted to borrow it as I warned long long long ago before "sub-prime" and "dodgy debt" even became a household name. That is another reason why the $USD has been going down.

4. If anyone wants to blame the decline in the dollar we certainly can come up with 1,000 reasons on why it has been in a 6 year spiral down but none of that has to do with the fed's last 3 rate cuts.

For once they are actually doing something right after years and years of getting it wrong, Will it be too late? Of course it is that is like me chopping off my left arm and saying "Gee ya think a Band-Aid is in order? "I'm no doctor but I did stay at a Holiday Inn once".

But what does that have to do with the rotation into TECH and the CHIP RALLY that I said starts in the last ½ of 2007 and will likely last a year from the time it starts. Well we have to look at the signs. INTC it all starts with INTC, the box makers the router makers and the gadget makers. (Let's call this the trickle down effect).

First it won't start until INTC can lead the way, I believe the fact that INTC is going on a 3 year high is now official that the rally in chips can now begin. But this is a CYCLE RALLY that happens every 4 years.

Not A Chart Pattern Rally As A Stand Alone Call.

Not A 1-2-3 Bullish Or 1-2-3 Bearish Trend Reversal Rally As A Stand Alone Call.

But a CYCLE rally in a sector that is no different than many other commodity related sectors except this sector has everything to do with DRAM prices which have not seen this big of a rally in about 6 months. Yesterday we saw a 5th day of gains on the DRAM index giving it the longest winning streak not seen for at least the past 6 months. It's been that STRONG due to demand mostly coming from the emerging markets.

DRAM (Chips) trade on an exchange just like anything else, they have charts just like everything else. When those charts bottom and prices start moving higher there is a pecking order as to which stocks see the most juice first. Well with the exception of WFR, NVDA, and SIGM all those chips are already suggested.

So as far as timing this rally with "charts" well it helps but it has never been the "Holy Grail" to this call. It is all about the CYCLE that starts when it starts typically about every 4 years and has been going on for at least the past 16 years. As to the EXACT day it will begin and the very last day it will end, well if I knew that I would be on a beach drinking margaritas.

So when will the chip cycle rally end? Typically 8-12 months after it begins. When did it begin? Typically when INTC starts breaking out to new highs, and then the "trickle down effect occurs".

As stated before you can't have the mother board makers, the box makers, the router makers, the gadget makers, the graphic design makers, the nets and operating software system makers all go on new highs but the very thing that powers them and makes them all function remain in the gutter. It doesn't work that way, but they do lag and they also catch up VERY FAST. I can never get anyone in on every stock on the EXACT lows when we are dealing with CYCLES. It's impossible, no human being can, and anyone that tells you they can only knows how to lie and I'm not very good at that.

But is that the only story going on here that NO ONE is talking about? NO

We also have these other side bullet points that I have mentioned throughout the past few weeks and months that will lead this market into a stealth rally and tack on at least 500 NASDAQ points from CURRECT levels.

1. The third quarter was the eighth in a row of more than $100 billion in buyback spending.

2. Companies announced more than $33 billion in new share buyback's last week.

3. We have the highest short interest EVER in the history of short interest going on in the SP500 right now in a float shrinking at a very rapid clip due to all the share buy backs. Think of it as a supply demand issue, when stocks are hot there is much less supply to buy and it works in reverse when stocks aren't because fewer and fewer shares are on the exchanges. Hence the reason ETFs can move entire sectors even though I believe the SP500 ETF (SPY) makes up only about 6% of the actual index. Momentum is still there.

4.The YEN carry trade appears to have finally run its course and is likely to resume its downtrend (meaning Japan has blatantly stated speculators causing the run-up in the YEN better watch out, it wasn't a hint it was flat out a blatant statement).

5. The FED like in 1998 cut 3 times just like Greenspan did (but back then it was about the Asian currency crisis) but the chart patterns within the DOW, SP500 and NASDAQ were the same as pointed out in February, March, April, May, July and August of this year in about 30 different updates.

1998 Chart--FED RATE CUT X3

2007 Chart--FED RATE CUT X3

6. The $UTIL will lead the way as stated all along. When it topped in May we knew rocky times were ahead, well guess what? As expected in December of 2007 it broke out to NEW all time highs, once again history repeats the past of what happened before will happen again. The Utility index is the most interest rate sensitive index we have. They carry the MOST debt on their balance sheets, when they rise to new highs we can safely assume that rates are NOT headed higher.

7. The rally in China will continue also through 2008 and is NOT in a bear market according to news letter writers whose names I won't mention but you have seen the charts and the updates with the triple 3 Ascending Triangles that clearly state the highs are not in.

Now let's talk about shorting, we have thrown on a few shorts in RGLD and GOLD but that is it so far.............Much More For Subscribers

Message Board Post

John

Thanks for the technical analysis of today's fed reaction, John. It puts things back in perspective and removes the emotions.

It seemed like such a farce. The minute the news hit things went down, as if someone pushed a button somewhere. What a way to manipulate us. I was getting the feeling that the big boys were given a "blue light special" sale.

With your GPS, we won't get lost and stray from our original plan. If we do, we'll just stop and pick up some beer along the way.

Sybil 12/11/07

Message Board Post

Great Big THANK YOU JOHN for keeping me in the race!

Fizzy 12/11/07

Little Known Facts about Credit Cards

The concept of extending credit has been used for thousands of years, but the first "credit card" didn't appear until the 1950s. The usage of credit cards has significantly grown since its inception. Today, credit cards are the preferred method of payment, with U.S. consumers carrying an average of 3.2 cards and approximately 46% of the population holds at least 2 open credit cards. Here are some other interesting credit card facts that you may not have known about:

How credit cards began:

It all started when businessman Frank McNamara found out after his dinner at a restaurant that he had left his wallet in another jacket. The idea of people being able to spend what they could afford, and not limited to the amount of cash they carried, was born.

What organization issued the first card:

The Diners Club issued the first charge card that consumers could use at different business locations and which allowed them to defer payment. Financial organizations soon caught on to the lucrative opportunity of billing for charges and requiring payments with interest, and the idea quickly spread.

How many cards should consumers carry:

It is considered favorable to have at least two credit cards. Credit cards show that a creditor (or creditors) has decided a person is a good risk to extend a line of credit, so having no open credit cards is not considered a good sign to other creditors.

What do some of the numbers on a credit card mean?

The first digit represents the system: whether the card is a travel or entertainment card (Diners Club, for example), Visa, MasterCard, or Discover. The numbers that follow represent a bank number, account number, and a "check" digit, but the order may vary per system.

What is a smart card?

A smart card is a payment card with an embedded microchip. The chip enables the card to hold more information than the common magnetic stripe card. The increased data capacity enables each individual smart card to perform many functions, such as holding bank and credit account information, providing building or room access, and even keeping track of reward points or miles.

What card is the most popular in the U.S.?

MasterCard is the most popular credit card, and Visa is the most popular debit card.

What is the average credit card debt in the U.S.?

Currently, the national average U.S. consumers owe is about $8,000 per household.

Treasuries had lost considerable ground in the last week. The oversold condition led to a healthy rebound this morning and the anticipated Fed decision provided the trigger for an additional surge this afternoon. The story on stocks was just the opposite. Following a string of gains, the indices suffered steep declines in today's trading action.

In late trading, the 10-Year Treasury Note was up by 1-16/32, lowering its yield to 3.97%; the Dow was down by 294.26 points to 13,432.77; and the Nasdaq was down by 66.60 points to 2,652.35.

As expected, the Fed cut its target for the overnight borrowing rate between banks (federal funds rate) and the rate for loans by the Fed to banks (discount rate) by 0.25% today, pushing them down to 4.25% and 4.75%, respectively.

The statement explains the action: "incoming information suggests that economic growth is slowing, reflecting the intensification of the housing correction and some softening in business and consumer spending. Moreover, strains in financial markets have increased in recent weeks. Today?s action, combined with the policy actions taken earlier, should help promote moderate growth over time."

There were no indications in the statement that the Fed would not cut rates again at the next policy meeting scheduled for the 29th and 30th of January. In fact, the only dissenting vote against today's decision came from Boston Fed President Eric Rosengren who wanted a deeper cut to the fed funds rate of 0.50%

The Federal Open Market Committee decided today to lower its target for the federal funds rate 25 basis points to 4-1/4 percent.

Incoming information suggests that economic growth is slowing, reflecting the intensification of the housing correction and some softening in business and consumer spending. Moreover, strains in financial markets have increased in recent weeks. Today's action, combined with the policy actions taken earlier, should help promote moderate growth over time.

Readings on core inflation have improved modestly this year, but elevated energy and commodity prices, among other factors, may put upward pressure on inflation. In this context, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully.

Recent developments, including the deterioration in financial market conditions, have increased the uncertainty surrounding the outlook for economic growth and inflation. The Committee will continue to assess the effects of financial and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Charles L. Evans; Thomas M. Hoenig; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; William Poole; and Kevin M. Warsh. Voting against was Eric S. Rosengren, who preferred to lower the target for the federal funds rate by 50 basis points at this meeting.

In a related action, the Board of Governors unanimously approved a 25-basis-point decrease in the discount rate to 4-3/4 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, and St. Louis.