One of the most common and best patterns is the double bottom pattern. This is simply when the market seems to retest a low and then bounces higher off the low level. It is important to watch for the double bottom low to pierce the prior low before reversing back higher. This is because market makers are looking to bait in momentum short traders and then come in and rip it against them. Once they are forced to cover their short trade by buying back the stock it creates extra momentum to the upside and therefore pushes the stock even higher. The best double bottoms usually have prior support levels on the chart. In the example below you can see the prior support on CAT at the 54.25 area on October13th-15th. This is signaling that CAT should have good support at this level. Remember as traders we are always looking to increase the odds and make the trade more favorable. Please understand it is always prudent to use stops and good money management in any trade.

Chart here: http://inthemoneystocks.com/userfiles/image/cat%20trade%20lesson%2011_10...

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Here is the ETF Professor's ETF Watchlist for Wednesday November 4, 2009.

Semiconductor issues were done in by a downgrade from Morgan Stanley on Tuesday. The Semiconductor HOLDRs ETF (NYSE: SMH) looks bearish to be kind and the ProShares Ultra Semiconductor ETF (NYSE:USD) was down as much as 3%. The inverse play: The UltraShort Semiconductor ProShares (NYSE: SSG).

The ETF Professor is curious as to why with all the M&A news out in the past two days the SPDR KBW Capital Markets (NYSE: KCE) is down more 4% in the past week.

Direxion Daily Funds were the biggest movers among ETFs today, and its Direxion Daily Emerging Markets Bear 3x (ETF) (NYSE:EDZ) was the best among the winners with 13.18% jump.

Direxion Daily Financial Bear 3X (ETF) (NYSE:FAZ) also had a good day as its opposite, Russell 1000 Financial Index was struggling. FAZ was 12.51% up for the day.

Oil headed sharply down today, which is a good news for the owners of Direxion Daily Energy Bear 3X (ETF) (NYSE:ERY) that corresponds to 300% inverse of the performance of Russell 1000 Energy. ERY gained 10.68% today, and closed at $12.64.

Often when stocks or indexes fall there will be good support levels for bounces. Therefore, you want to look at multiple time frames and have a chart that goes back several months to find intraday trades and possible 1-2 day swings. In this example on MGM the stock was in virtual free fall and found support in the $8.80- $9.00 gap window area. This was identified by InTheMoneyStocks.com traders by looking back to the September 3rd date and seeing a gap window. It is also important to recognize that MGM has been down quite a bit and well off it's high.

I trimmed my shorts from yesterday, but am still short the RUT, have some FAZ calls, and some FAZ stock. It looks like if this market is going to move down it needs to do it next week. The market has many divergences going on particularly the weakness in financials, however, divergences are not guarantees. As far [...]

I rolled back into FAZ, SRS calls, DRV, SSO puts, TZA, MCO puts, and SMN today. I think I included an AIG chart to go with this. I also went short with 2x funds. I’m expecting more movement lower due to the break of my SPX level mentioned in the post before this one. Today [...]

Posted last Friday: Posted Monday: Now this is the way it looks today: Now I’m short via my index 2x funds $NDX, $SPX, $RUT, SSO Dec 34 puts, TZA Jan 15 calls, TZA Dec 14 calls, and long TZA as well. I’ll be getting some FAZ, DRV, and various other inverse funds. If topside resistance breaks I’ll look [...]

Its Halloween and I’m just going over things during this spooky period in the market. It is truly scary how good my indicators are and how much money can be made with them. Equally scary is my lack of execution according to these indicators. I should be at my beach house somewhere smoking a cigar [...]

Today was awesome. Yesterday sucked, but I had a nice time at the golf tournament and was the reason my positions got whacked yesterday as I would have covered in the morning. I should have brought my MiFi card with me and traded out in the morning when EVERYTHING was working right. Index shorts, EWZ [...]