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November 19, 2002
the Trading Diary
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 .
provides further guidance.
The Dow closed almost unchanged at 8474 on
higher volume. The recent pattern appears to be forming a head
and shoulders but there are two caveats: (1) volume decreased on
the last correction and showed some increase into the right
shoulder; (2) never trust a head and shoulders pattern with a
visibly ascending neckline. The pattern is unreliable. However, a
break below 8200 will signal a secondary cycle down-trend.
The primary trend will reverse (up) if the index rises above
The Nasdaq Composite Index retreated to 1374 after testing
resistance at 1426, down 1.4%.
The primary trend will reverse (up) if the index breaks above
The S&P 500 threatens a similar head and shoulders pattern to
the Dow, closing 4 points down at 896.
The primary trend will complete a
double bottom reversal if it rises above 965.
The Chartcraft NYSE Bullish % Indicator signals a
alert at 42% (November 18).
When the going gets tough, the tough go
Warren Buffett may bid for Burger King. (more)
New York: Spot gold is down 80 cents at $US 318.40.
The All Ordinaries lost a further 10 points to close at 2951 on
The primary trend will reverse if the index rises above
The Slow Stochastic (20,3,3) is above its signal line, MACD
(26,12,9) is below, while Twiggs money flow signals
Divergences on the MACD indicator are one of the most reliable
signals in technical analysis. I have highlighted them with
yellow trendlines on the MACD indicator. Another strong MACD
signal is a crossover after an MACD spike, as in September
Caltex Australia [CTX]
Last covered on
CTX has broken above its 2002 high of 2.00 with a strong
day. Relative strength (price ratio: xao) is rising sharply and
Twiggs money flow signals accumulation after a strong bull
signal: where TMF formed a trough above zero. MACD is similarly
The breakout above 2.00 resistance occurred at  on strong
volume. The spike day means that it will be risky to enter
above the close because reasonable stop positions are too
wide. The ideal entry point was at  when the range and
volume had dried up before the next rally at . Higher
volume at  signaled accumulation and was quickly followed
by a strong rally to , with a further buy opportunity
just above 2.00. Stop losses should be placed below the low
at  and then moved up to below the low of .
The next conservative entry point will be if CTX pulls back
to test support at 2.00. Entry should be made if price breaks
above the high of the lowest day, in a pull-back of short
duration, with stops placed below the low of the lowest
A pull-back below 1.90 would be bearish.
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.
Destiny is not a matter of chance;
it is a matter of choice.
It is not a thing to be waited for;
it is a thing to be achieved.
- William Jennings Bryan
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