Chart Watch 2009-03-04

XAO - All Ordinaries

The first decline in Australia's GDP for eight years was reported today with a fall 0.5 per cent in the December quarter.  The All Ordinaries followed to close at a five and a half year low to 3,125.90 or 1.43%.

Fears of recession took hold of traders with the next 6 months looking a lot gloomy, and all sectors took a hit. 

The world markets are anticipating another Chinese stimulus package to be announced that could help limit the length and depth of the recession in the

industrialized world.

LST – Lionsel
LST came up on my TAZ scan yesterday and today a confirmation candle formed.  Volume is too light for me to take a position, and like all bullish trades, against the market timing.

1. Pulled back to Traders Action Zone

2. Respected support and 50% Fib
3. ADX above 25 indicating start of a trend

4. First pullback

Quick Trends

Symbol	Short Term (10MA)	Medium Term (50MA)	Long Term (200EMA)
XAO	Down	Neutral	Down
XDJ	Down	Down	Down
XEJ	Down	Neutral	Down
XFJ	Down	Down	Down
XHJ	Down	Up	Neutral
XIJ	Down	Up	Down
XMJ	Down	Neutral	Down
XTJ	Down	Down	Down
XUJ	Down	Down	Down

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Chart Watch 2009-02-25 - XAO, BHP

XAO - All Ordinaries



All ordinaries closed below 3300, and below low from 23/01/2009, to finish the day at 3281.5 (-0.7%). Could see a retest of the low of 3201.5 and creating a new down-swing. March 2003 low of 2700 in reach from here.

XAO started the day positive on open, and continued to slide throughout the day. Nikkei 225 finished the day up 2.65%.

Looking to the DOW now to see if it can follow through with the +236.16 (+3.32%) gain yesterday.

BHP - BHP Billiton



BHP closed on the short term trend line today, finishing at $29.01 (-1.0%). Stochastic showing oversold

WOW - Woolworths



Woolworths closed above $28.00 for the first time this year. I'm looking to trade this short term with a target of $29, and stop $27.50 (risk $0.50, gain $1.00). Against the trend of XAO, but WOW has 50MA pointing up and closed about 200EMA.

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Personal Attribute and Strategy

What every trader strives for is a low-risk, high-reward system that consistently produces results. Fundamental and Technical analysis are the two main schools of thought in the financial markets that will allow a trader to achieve this. Within these are vast range of systems and techniques that a can be utilized.

A selection Fundamental Analysis styles include Value, Contrarian and Growth.

A selection Technical Analysis styles include swing, trend and pattern trading.

Determining what style and strategy one uses depend on different factors of the trader/investor. Everyone will have their own strengths and weaknesses and these traits need to be consider when developing your trading plan. The following are a quick outline of my trading strengths, weaknesses and circumstance that helped direct me to the strategy I am trying to implement.

1. I cannot handle long-tem investing. I don’t have the patience to wait months for results, read hundreds of reports and believe someone else’s fundamental analysis. I also haven’t found a fundamental analysis technique that someone can write down their steps for me to learn and understand.

2. Unfortunately I am one of those people that want to understand why something works. It’s not enough for me to accept that something does work. I think this is why I’m a computer programmer by trade. This leads to me over analyzing a complex system, and trying to delve deeper into its workings. These then leads me to question parts of the system.

3. Working all day requires me to use and end of day system. Although I do have time throughout the day to monitor my trades and enter/exit when required, my eyes cannot be glued to the screen. I utilize Quote Tracker’s alerts feature to let me know when pre-determined levels are reached.

Conclusion
1. To ensure I stay focused to the the trade plan the system must be short to medium term
2. System should be based around technical analysis
3. System must be simple enough for me to understand why it works
4. Utilize minimal indicators
5. Allow optional intra-day entry/exit or end-of-fay entry/exit without requiring focus on ticker throughout day

Has anyone else analyzed their personal attributes to see if they match their trading strategy?

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Chart Watch 2009-02-23

XAO - All Ordinaries



A fall of 1.5% to 3,304.10 keeps the index above the years end-of-day low of 3000.2 (23/01/2009) helped by a strong close. The index was down over 80 points during the day. Big miners were down including ex-dividend BHP down $1.20 to $29.31 and RIO down $3.42 to $46.87.

RIO - Rio Tinto





RIO closed below support (although not on strong volume) indicating a test of the lower trend channel line (or 50MA).

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Chart Watch 2008-05-29

XJO - S&P ASX 200



As displayed in my last post , the XJO was sitting right on a current trend line. This line has since been breached. XJO now lookig for support at the 100MA, and the 32.5% Fibonacci Retracement.

On the 5/4/2005 Colin Twiggs indicated potential resistance at the 5900-6000 level which looks to be playing out.

"The All Ordinaries broke above short-term resistance at 5450 on heavy volume and is headed for a test of resistance at 5900/6000. Resistance is expected to hold because of the bear market, but continued advances on strong volume would increase the chance of a breakout. "

"

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Joining Trend

I’ve been reading a candlestick trading book and when I reached the end I was extremely disappointed. The book discussed the full range of candlestick formations, and the psychology behind them but it didn’t discuss how to trade the setups. No entry, exit or failure rules were defined.

After coming to this conclusion about the book, I realized this blog has missed an important step on how I trade. I blogged about an entry in ESG that was possible when it bounced above the count back line, but that isn’t a situation I have ever traded or will. The count back line isn’t intended to be traded this way. Trend trading isn’t about picking bottoms. It’s about joining an established trend, or joining an established trend after it has re-confirmed continuation.

Joining an established trend is an easy scan using MarketNinja or most scanning programs. I look for consistent separation of the short and long term Guppy MMA. I then look for an entry with minimal risk, which is close to our count back stop loss and provides me with minimal risk.

Joining an established trend after it has re-confirmed continuation (pullbacks) is about waiting till after the short term group has contracted, and indicators show the 3, 5 and 8 EMA’s are again separating. This provides more confidence that the trend is intact an entry is available at less risk than guessing the trend will continue.

Trend trading is about using our defined indicators to determine entry and exit of all trades. Using each indicator as its intended will provide the most profitable results. I hope to has some examples of each of these setups in coming blogs.

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Guppy MMA

Guppy MMA are extremely important to my trading style. For the past 6 months I have been trading using Daryl Guppy's 'Trend Trading' technique to trade the ASX. Multiple Moving Averages are important in this strategy to determine the trend of a stock.

Gupp MMA consist of 2 groups of EMA's. The first group know as the 'short term' group consist of 3, 5, 8, 10, 12 and 15 day EMA's. The second group consist of 30, 35, 40, 45, 50 and 60 day EMA's.

There are numerous ways to trade this type indicator but I only use to to determine the trend of a stock. I find this the fastest way to determine if a stock is a potential trend trade without requiring me to draw trend lines.

Below is an example of Riversdale Mining Limited (ASX:RIV)



The current aim of the Market Ninja software is to scan the entire market for this type of situation. My current scan looks for any stock with a separation of the 15MA and 30MA of 4% or more with volume greater than 300,000. I'm currently alternating between stocks above 50c and below to try and determine what I find as the best opportunity to trade.

In later posts I will discuss the count back line that I also plot before determining the strength of the trend.

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