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Trading Diary
January 31, 2003

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 .




 
USA
The Dow continued the congestion pattern (sideways movement) of the last few days, closing up 1.4% at 8053 on higher volume. The index appears headed for a re-test of the 7500 support level.
The primary trend is down.

The Nasdaq Composite closed 2 points down at 1320. The next major support level is at 1200.
The primary trend is up.

The S&P 500 gained 11 points to close at 855. The index appears headed for a re-test of support at 768.

The Chartcraft NYSE Bullish % Indicator is on a bull correction signal at 48% (January 30).


GDP growth slows
GDP grew just 0.7% in the fourth-quarter compared to 4.0% in the third, according to the US Commerce Department. (more)



Gold
New York (17:00): After trading above 372.00 earlier, spot gold pulled back to close at $US 367.40.



ASX Australia
The All Ordinaries formed a (bullish) hammer reversal signal, closing down 8 points at 2935 on higher volume.
The index has, so far, failed to breach the 2915 support level.

Slow Stochastic (20,3,3) and MACD (26,12,9) are below their signal lines; Twiggs Money Flow signals distribution.





The long-term Coppock Indicator continues to decline. An up-turn below zero would signal the start of a bull market.





Oxiana Resources [OXR]
One of the better-performing gold stocks, OXR broke out of its base at [A] and entered a stage 2 up-trend. The stock formed an excellent trend channel, only recently penetrated by the spike at [J]. 

Relative Strength (price ratio: xao) and MACD are rising strongly. Twiggs Money Flow continues to signal accumulation.




The equivolume chart displays a good entry point at the trendline at [H]: the daily range has narrowed and there is some evidence of volume drying up. A buy-stop can be placed above the high at 0.37 which is activated at [1]. Stop losses can be placed at 0.35, below the recent low.
Stops can then be moved up to [2], [3] and [4] as the rally progresses. When price reaches the upper trendline at [I], the position can either be closed or a sell-stop placed below the low, exiting at [5].





The counter-trend to [6] is of short duration and ends with a hammer reversal signal, signaling that we are still in a strong up-trend. A buy-stop can be placed at 0.50, above the high of [6]. The reversal day has a long tail and a stop below the low would be too wide. There is a support level at 0.475 and the stop-loss can be placed one tick below this. 
OXR then breaks the upper trend channel at [8] after momentary hesitation at [7]. Tighter stop-losses should be implemented outside of the trend channel, trailing below the 1,2 or 3 day low (or using a Trailing % Stop). Increased volume and a long shadow at [9] signals heavy resistance and the sell-stop may be tightened even further, to lock in profits. Most of these strategies would exit the position at either 0.60 or 0.59.


Sector Analysis
Changes are highlighted in bold.
  • Energy [XEJ] - stage 4 (RS is level)
  • Materials [XMJ] - stage 2 (RS is rising)
  • Industrials [XNJ] - stage 4 (RS is rising)
  • Consumer Discretionary [XDJ] - stage 2 (RS is rising)
  • Consumer Staples [XSJ] - stage 4 (RS is rising)
  • Health Care [XHJ] - stage 1 (RS is level)
  • Property Trusts [XPJ] - stage 2 (RS is rising)
  • Financial excl. Property Trusts [XXJ] - stage 4 (RS is falling)
  • Information Technology [XIJ] - stage 4 (RS is falling)
  • Telecom Services [XTJ] - stage 4 (RS is falling)
  • Utilities [XUJ] - stage 2 (RS is rising)

Sectors: Relative Strength
A stock screen of the ASX 200 using % Price Move (1 month: +5%) returned 30 stocks (compared to 99, August 23rd and 10 on October 4th). Notable sectors are:
  • Diversified Financial Services
  • Diversified Metals & Mining



Market strategy
For further guidance see Understanding the Trading Diary.

Short-term: Short if the All Ords falls below 2930. The Slow Stochastic and MACD are below their respective signal lines.
Medium-term: Avoid new entries.
Long-term: Wait for confirmation of the bottom reversal signal.

Colin Twiggs


If you do not do it excellently, do not do it at all.
Because if it is not excellent, it will not be profitable or fun,
and if you are not in business for fun or profit,
what the hell are you doing there?

- Robert Townsend: Up the Organization






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