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October 29, 2002
These extracts from my daily trading diary are
intended to illustrate the techniques used in short-term trading
and should not be interpreted as investment advice. Full terms
and conditions can be found at Terms
of Use .
The Dow dropped sharply in early trading but
later rallied to close unchanged at 8368 on average volume. The
market is moving sideways, signaling uncertainty. A primary trend
reversal will be signaled if the index rises above 9130.
The Nasdaq Composite Index lost 1.2% to close at 1300. The
primary trend will reverse if the index breaks above 1426.
The S&P 500 lost 8 points to close at 882. The primary trend
is down. The index will complete a
double bottom reversal if it rises above 965.
The Chartcraft NYSE Bullish % Indicator has swung to a
bull alert signal at 36% (October 28).
Consumer confidence dives
The Conference Board consumer confidence index fell to 79.4 in
October from 93.7 in September, much worse than the expected
4-point drop. (more)
Rate cuts expected
The plunging consumer confidence figures may force the Fed to
further cut rates at its November 6 meeting. (more)
New York: Spot gold rallied a further 140 cents at $US 316.70.
The gold chart has been forming a bullish ascending triangle
over the last 6 months.
The All Ordinaries lost 23 points to close at 2967 on average
volume. The index is still moving sideways, signaling
uncertainty. A rise above 3150 will signal a primary trend
The Slow Stochastic (20,3,3) has crossed to below its signal
line, MACD is above, while Twiggs money whipsaws around the
After reversing from a triangle
pattern in 2001, ORI entered a stage 2 up-trend before leveling
off in the last 6 months. The stock recently completed an
ascending triangle at . Relative strength (price ratio: xao)
continues to rise while Twiggs money flow signals sustained
accumulation over the last year.
MACD has also formed a triangle over the last 6 months with an
upward breakout last week, after respecting the zero line at
[$], a bullish signal.
The equivolume chart shows strong distribution
at  and , most likely profit-taking by professional
traders ahead of resistance at 10.00. ORI then started to form
a series of higher lows at  followed by a test of resistance
at , the longish shadow signaling a fair number of sellers
entering the market. Price then formed a narrow congestion
pattern below the resistance level, with a failed breakout at
. Congestion just below a resistance level is a strong
bullish signal, with the stock moving sideways rather
than correcting. The second breakout at  shows more promise:
the longer shadow at  shows selling pressure but volume has
since dried up. A rally in the next few days, without ORI
crossing below support at 10.00, will be a strong bull signal.
A rally above support at 9.85 would be a weaker bull signal.
The targeted move for a breakout is 11.40 (9.85 + 9.85 - 8.30).
Short-term: Avoid new entries. The Slow Stochastic and MACD are
on opposite sides of their respective signal lines.
Medium-term: Avoid new entries. Use stop losses to protect
yourself against a sudden reversal.
Thought for the Day:
There is no such
thing as failure, only feedback.
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