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/