November triangles

Telstra (TLS) formed an ascending triangle and broke out of it and I expect it to peak close to $4.50 before the market reappraises the value of TLS at that level. This reappraisal should result in a sharp sell off in TLS. Telstra has approximately 20 cents more to go before our upside target is reached. Here is the chart.

In the footsteps of TLS or perhaps I should say, on the coat tails of TLS, we have BGL - a small Australian telco/internet company making a clearly defined ascending triangle pattern. For long time followers of my newsletter and blog posts, please note that the 55 day slow stochastic for BGL has risen above 80 on the signal line. We expect BGL to run up quickly to around 71 -  72 cents on a breakout of 60 cents. The TLS chart shows a more mature triangle and breakout scenario but a similar one we anticipate for BGL. The BGL chart is below.

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Is that a dagger I see before me? No, its a .....

RIO Tinto (RIO on the ASX) is making an inverted head and shoulders pattern. Yes it has been in a downtrend and you shouldn't try to catch a falling dagger, but in the case of RIO, it is looking good on technical grounds.

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Short and Long opportunities abound using our RCR technique

The Range-Change-Ratio (RCR) technique is a personally designed technique that provides a high probability entry signals for those looking to go both Long and Short. You can read all about this technique in our Ebook called Simple Tactics, Profitable Trading.

When you buy the book you will get supplementary educational material like the PDF attached to this blog. Those who have our book are able to check out the stocks listed in this PDF and see the techniuqe play out in full, as per the rules set out in our Ebook.

Stocks that appear to have hit their short term highs are TLS and CSL (according to the RCR technique).
Stocks that appear to have hit their lows and which are gaining volume and sentiment support in the market include NCM and BPT.

Please download our free PDF here to see the sort of supplementary educational material we provide to those who have bought the Ebook.

Get your copy of our book by clicking the link below.

Stocks of interest

There are many stocks of interest appearing on the ASX at the moment.

Stocks meeting the criteria of our RCR technique include BPT, NCM, PPT and BHP (we discuss this technique in our book, Simple Tactics, Profitable Trading).

Stocks making solid and easily identifiable chart patterns include FLT, WES, WPL and SYR.

We take a closer look at SYR in this post because it is an example of taking the easy path in trading by applying our Two Best Case Scenarios, as outlined in our book, Simple Tactics, Profitable Trading

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Time to be cautious

We start with the S & P 500 in the U.S. It is in a trend channel, heading upwards, which is a good sign, but it is currently flirting with the support line. It is time to be cautious and to watch what happens here. A break and close below support will be a clear signal to sell for many traders. While a break below the support of the SP500 is not catastrophic, the reasons behind the negative mood that causes the downside break might well be catastrophic. What I am talking about here is Greece. The Greek Drama and now, it appears the Spanish Drama have the potential to crucify global markets.

We should also be looking at the SSEC chart - the Shanghai Index so that we can get a feel for what is going on in China. The SSEC is making a double bottom....but will the bottom hold? Again it is dependant upon the European situation. Europe is China's largest customer. If Europe hits the wall completely (some might say it already has), then China's exports will slow. If they slow, the whole region slows and stocks like BHP in Australia look less attractive.

If BHP slows then it drags down the entire Australian market because it is the largest weighted stock on our index. I have previously discussed the BHP effect and it cannot be ignored if you are an Australian investor or trader. Our index is looking directionless - this shouldn't be a suprise. We are looking at Europe and China and watching and waiting for outcomes, decisions and action from these guys. While they stall, our market stalls. In fact if you look at the STW ETF (an ETF over the ASX200), you will see that the current upside breakout of the pennant chart pattern has failed. This shows us that our market's expectations have already tipped towards a negative outcome in Europe and the subsequent domino effect world wide.

We get a further indication that the overall sentiment is negative by looking at the Guppy Multiple Moving Average indicator (GMMA). Those who are familiar with the GMMA can see in the chart below how the selling pressure in our market is killing off an attempted rally. The STW ETF is not the ASX200 but we use it here as a proxy for what is going on in the broader Australian market.

So it is clearly a time to be cautious. Some serious news and action has to be seen to be coming out of Europe before the SP500, the SSEC and the Australian markets turn bullish.

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New Stock On The Radar

A new stock has hit the Technical Report radar. It is a stock which meets several criteria that we look for and which we use to trade a stock using different methods outlined in our book.

For example this stock meets the criteria of our RCR and DEMAC techniques concurrently, so it has hit our radar and we will observe how it performs and then reflect back to see which trading method (the RCR or DEMAC technique) proved to be the better method.

The name of this stock is reserved for those who have purchased a copy of our book. But what we can tell you is that the company describes itself on its website as:

".....an emerging ASX-listed petroleum exploration and production company, headquartered in Perth and with oil and gas interests in Vietnam, Indonesia and California"

The chart of this stock is shown below:

Some good news at last

At around midday Australian time, some significant decisions were made by European union governments which signalled a commitment to financially supporting European banks. The Aussie market loved it. You can see the immediate reaction on the intraday chart for the ASX200 (XJO) chart below.

As I type this, the CAC, DAX and FTSE are all up by around 2% and the U.S. futures are up about 118 points, which indicates that the European news is being well recieved all around the world. This means it is probably a good time to add new positions to our portfolio.

In our previous post we signaled that we liked AGI and MXI - both are doing nicely. We have an upside target of AGI at around $2.90. MXI's strong up trend remains in tact.

Other stocks that may be of interest for those who have read my book, Simple Tactics, Profitable Trading (buy it here) know that IRE gave an entry signal today (DEMAC technique) and that the ETF for the XJO called STW gave an entry signal today (RCR technique). You can read about how to trade stocks using my techniques when you buy my book and if you do buy it, we will email you exclusive charting set ups based on our techniques as an educational supplement to the book - AT NO Additional cost.

STW - using the RCR technique we look for a combination of volume and price changes to indicate a wash out of the stale bearish money being replaced with new, bullish money. You can read about this technique in my book or in the back catalogue of Daryl Guppy's newsletter.

IRE - today the stock broke the long term down trend line. It has no complimentary momentum or sentiment indicator support, but it does have moving average support.....if you know what moving averages to use. You can read about my DEMAC technique in my book or in the back catalogue of Daryl Guppy's newsletter.

The upside and the downside

Australian traders are faced with a falling market. Nonetheless there are always strong looking stocks that attempt to defy the bearish view of the broader market. At the moment AGI and MXI are looking great technically. But in the face of such overpowering bearishness affecting the broader market domestically and global markets, we wonder if they will eventually come unstuck and collapse.

In the case of AGI, the safest route to follow is to wait for the stock to retest and break above $2 again. In the case of MXI the safest route is to set a tight stop at around 57 cents. There is not much room to move in these stocks before things go wrong, but that is the kind of market we are in at the moment - even the strongest stocks will fall to the clutches of the bears with only a small negative move in their respective share prices.

   

Elsewhere in the market we look at an updated Copper chart (see chart below). We have a previous post where we said Copper was going to fall to around $3.25. It has done that and is currently retesting support at $3.25. We are watching to see if it breaks because if it does, it will provide an additional bearish lead for those trading commodity driven stocks such as BHP, RIO (Australia / UK) and Vale (Brazil)....even if the stock itself is not involved in copper. But Copper is often used as a leading indicator for the entire commodity market. So if Copper falls, well, you can take a strong bet on the direction of additional commodities such as Iron Ore, Gold, Plantinum etc...... 

Update from The Technical Report

Even as we were writing our previous post on 4 May, the global markets were in the midst of developing bearish patterns. We discussed those with our subscribers at the time because we always keep the best information for our subscribers. We thought that the Australian market and in particular BHP would have one last attempt at a rally before plunging to lower prices. This was not the case. The European and Chinese economic numbers have hit many Australian resource stocks hard.

We now have an initial downside target for BHP of $28.50. How we came up with that figure is reserved for our subscribers.

What we have also told subscribers is this: The German DAX was heading to a low of 6000 as a first support level, based on its head and shoulders pattern.

We also advised subscribers of targets for the CAC40, the FTSE and the Dow Jones index. We are not there yet. We also discussed the gold price. While many people are looking at the breach of the long term trend line in gold, we were looking at the descending triangle set up. In our view gold will test $2100. We are in Australian listed PRU to capture a bounce in gold. We are trading PRU using our DEMAC bottom-feeder breakout and subsequent trend following technique. (To find our more, click here - its all in our EBook).

If you are Long the AUD agains the USD, beware that you are in the minority and if you think that this is a cool place to be, let me remind you that it is the majority who dictate market direction, not the minority. The USDAUD chart shows the USD making a rounding bottom pattern, with a potential upside target around $1.20, which places the AUD down at around 80 cents. That is currently 17 cents away from where it currently sits. Our analysis feeds off the sentiment of global Forex traders and investors and the chart indicates what they are betting on.

You can get regular updates from us, simply by purchasing our EBook, Simple Tactics, Profitable Trading via http://www.stpt.com.au/

BHP's bottoming pattern is short term bullish

BHP's bottoming pattern is short term bullish. It is an inverted head and shoulders pattern. You don't have to believe in pattern analysis to want to sit up and take notice of patterns from time to time. Patterns repeat themselves in markets every week. They repeat themselves in global markets too frequently to be caused by random chance. Why is this? Because stock price behaviour reflects human behaviour, human bias and the human interaction with time, price, wealth, speculation, greed, fear, love and hate. Yes, I do mean love and hate. People fall in love with stocks and people who lose money often hate the market.....for a short time at least.

The inverted head and shoulders pattern in the BHP chart has occured very quickly, suggesting that the market has quickly agreed that BHP, at around $34, is fundamentally a strong buying opportunity. The inverted head and shoulders pattern indicates attempts by the bears to push the stock below support on three separate occasions - at the start of each of the shoulder legs down and in the start of the head leg down. Each time the sell offs were met with bullish buyers stepping up to the plate on those uplegs that help to establish the second half of each shoulder and the second half of the head.

Using traditional technical analysis, we think BHP will rally quickly to $37.50.

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We are feeling more positive about the market than we have for a long time. There has been a protracted sideways move in the XJO and BHP has been the albatross around the Australian market's neck.

But here are two flag patterns which we will watch with interest. AAD is making a classic flag pattern and CCL is making a rare typhoon pattern. Both are bullish patterns but they represent different crowds building up in each stock. They offer trading opportunities to the market and we will add these stocks to our notional portfolio which is up over 40% for the current financial year (CLICK HERE).

AAD                                                      CCL

     


Below are several links to past articles written by me, which now appear elsewhere on the internet for free.

http://remisiers.org/cms_images/guppyspeaks/DAILY_PRICE_RANGE.pdf

http://www.remisiers.org/cms_images/guppyspeaks/TRADING_IS_NOT_GAMBLING.pdf


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Is the DAX about to lose its dacks?

The top European markets (FTSE, CAC40 and DAX) have all reached a recent high and pulled back. The most interesting of these is the DAX which appears to be midway through making a head and shoulders pattern. If this does develop the last shoulder of the pattern, we could expect the DAX to retest support at around the 6000 level.

(c) thetechnicalreport.com

This post was taken from The Technical Report.

Copper Chart

Thee Copper price has recently broken the bottom of its trend channel and this will potentially weigh heavily on our largest mining stocks such as BHP and RIO and as previously discussed, weakness in BHP will translate directly into weakness in the XJO and dampen any upbeat sentiment across the Australian market.

International market analysis

The picture on the front of this weeks Report shows the arena where all the bulls and runners end up at the end of the Pamplona bull run in Spain. There is a parallel between this picture and global markets at the moment. Investors and traders in various global markets find themselves at the end of a recent bull run and now they are standing around, scratching their heads and wondering if that really was the end of the race and if not, they are looking around to see when and where the bulls will run next.

In recent issues of this report we discussed the failure of the DAX, the CAC40 and the FTSE. They were leading global markets lower. The Shanghai index (SSEC) is trending down even though recently it showed a two day rally and finally, the we are seeing the first signs of weakness in the trend of Dow Jones index, but as the GMMA chart will show, the broad based upward trend may well still be in place and this pull back could be temporary.

So is the Dow Jones going to follow its European cousins? There is as clear up trend in the DOW and a clear break below the trend line. Technically, this is an automatic exit signal. But the signals are not quite so clear cut when you incorporate the Guppy Multiple Moving Average (GMMA) into the picture.

The GMMA shows that while the short term investors and traders (the red band) have sold off the DOW, the longer term investors and institutional holders and buyers of stock (the black band), are soaking up the selling.

It becomes more of a concern when the red band breaks through the bottom of the black band and the black band tightens up and begins to chase the red band lower.

At the moment however, we are seeing the trend in place according to the GMMA even though the trend line in the top chart has clearly been breached to the downside and signaled weakness in the market.

Perhaps the short term traders have got it right and are moving out of the market in advance of an expected decline. Perhaps the long term investors have got it right and are continuing to soak up the selling at a time when the market is on the verge of rising higher. It is a battle of hearts and minds at the moment and we continue to watch with great interest because the DOW influences our market and often provides a daily lead which we cannot ignore.

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The top three European indices broke their up trends and commenced developing rounding tops at the end of March and are signaling a lead that the Dow Jones might follow.

Will the XJO rally higher or not?

As we take a break over Easter, many traders are wondering whether or not the XJO will break through 4365 and have the upside rally that traditional technical analysis tells us should happen. The diagram below shows the XJO as it currently stands.

But our research into the Australian market at The Technical Report tells us that if BHP doesn't join the party, then any upwards move in the XJO and the broader Australian market is limited. Watch our video on the BHP Effect right here. If you like our research, our videos or would like to learn more about The Technical Report you can take a 4 WEEK FREE TRIAL of our NEWSLETTER. Just email us here with the word TRIAL in the Subject Line and we will start sending you a copy of our report.

Check out our short video through the following link: VIDEOLINK

Time for short term trading

At thetechnicalreport.com we look at global markets, gold and stocks listed on the ASX. At the moment, global indicies are in precarious positions, gold is looking for a retracement to $1575 and stocks on the ASX are struggling to hold onto gains. We will be trading short term opportunities using CFDs in our ASX trading.

Charts that may interest readers are shown below. If you are interested in learning more, email us and jump onboard for a FREE 4 WEEK TRIAL of The Technical Report.

IRE hits our radar

IRE has hit our radar alongside several other stocks. We will explain this chart to our subscribers who are investors, traders and who take an active interest in their SMSF. Sounds like you? Give us a try.

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Two Patterns of interest in the Australian market

Text books on technical analysis give us wonderful descriptions and examples of traditional chart patterns. When I first starting trading I found it hard to find these types of pattern set ups in real time market situations. They only ever seemed to belong in books. If you are new to trading and feel the same way, then take a look at two real time chart patterns occuring in the Australian market right now. One is a pennant and the other is a double bottom. You can watch these stocks develop over time and compare their progress to what you have read in your trading books. Best of luck.

The Technical Report holds a position in SXY. We have been there since it was 73 cents. We are looking for a blow off top of this current pennant pattern to give us the last leg of the current up move and allow us to exit with a strong profit. The second chart shown is Flight Centre (FLT).

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A tough market

This is an extremely tough market. Traditional technical signals are generating many buy signals across the board, but in many cases, there is no traction and no follow through after the signal has been generated.

A recent case in point is the bearish upside flag in the gold price. It showed an exit signal and suggested gold might retrace to $1450, but then suddenly there was a reversal signal of the reversal signal.

What is causing this disruption of technical signals? To sum it up in one word, I'd use 'nexus'. The nexus, the tie, the link between buy signals and the follow up strength in the market required to confirm the buy signals is weak. There is a case to be made for strong-nexus and weak-nexus markets. For example, we typically find bullish charts working better in bull markets and in this environment you get a strong nexus between the technical buy signal and your ultimate profit. But at the moment we have a weak nexus between the buy signal and the profit on offer after the signal triggers our entry into a stock.

There are various reasons for the current weak-nexus bewteen buy signals and profits and this will be a focul point of discussion in this weeks upcoming Technical Report.

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Want to trade stocks, but don't know where to start looking for trading opportunities? Don't stress. We have a table showing you a range of technical indicator signals and its FREE.....Click Here for the PDF

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Beware a fall in Gold

We've said it before and we meant it. We repeat the same message. Beware a dip in gold. In particular, Silverlake Resources (SLR) looks particularly vulnerable due to its double top.

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Turnaround opportunities present themselves

At The Technical Report, we are always looking for high probability trading opportunities as well as different technical set ups to discuss in our weekly newsletter (try our FREE 4 week trial). We currently have open positions in BHP, SXY, RUM, COH and CSL. Two new turnaround opportunites have hit our radar. Their charts are shown below. If you would like to maximise your returns and beat the market by around 30% per year, join us at The Technical Report today.

Chart 1 - name supplied to subscribers only

Chart 2 - name supplied to subscribers only

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This week, we have entered COH, CSL and SXY. If you would like to know more about our stock choices and our trading techniques, visit http://www.stpt.com.au/ or http://www.thetechnicalreport.com/ and fill in the email form to get your free trial.