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Trading Diary
November 19, 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 .




Understanding the Trading Diary provides further guidance.

USA
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 9130.

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 1426.

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 bull alert at 42% (November 18).


When the going gets tough, the tough go shopping
Warren Buffett may bid for Burger King. (more)



Gold
New York: Spot gold is down 80 cents at $US 318.40.



ASX Australia
The All Ordinaries lost a further 10 points to close at 2951 on higher volume.
The primary trend will reverse if the index rises above 3150.
The Slow Stochastic (20,3,3) is above its signal line, MACD (26,12,9) is below, while Twiggs money flow signals distribution.





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 2001.


Caltex Australia [CTX]
Last covered on October 24.
CTX has broken above its 2002 high of 2.00 with a strong spike 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 bullish.




The breakout above 2.00 resistance occurred at [14] 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 [11] when the range and volume had dried up before the next rally at [12]. Higher volume at [13] signaled accumulation and was quickly followed by a strong rally to [14], with a further buy opportunity just above 2.00. Stop losses should be placed below the low at [11] and then moved up to below the low of [13].





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 day.
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.
Long-term: Wait for confirmation of the bottom reversal signal.

Colin Twiggs


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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