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Trading Diary
October 17, 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 .






USA
The Dow held above the 8000 level, closing up almost 3% at 8275 on strong volume. The Dow Theory will signal a primary trend reversal if the index rises above 9130.

The Nasdaq Composite Index gained more than 3% to close at 1272. The primary trend will reverse if there is a break above 1426.

The S&P 500 gained 19 points to close at 879. The index will complete a double bottom if it rises above 965. The primary trend is down.

The Chartcraft NYSE Bullish % Indicator reflects a bear confirmed signal at 26% (October 16).



Microsoft up
Microsoft reports first-quarter earnings of 50 cents per share, beating analysts estimates, but lowers forecasts for the next quarter. (more)



Gold
New York: Spot gold last traded at $US 311.60, down 270 cents.



ASX Australia
The All Ordinaries formed a dragonfly doji candlestick [d], signaling that buyers are back in control. The index closed 2 points down on above-average volume, holding above support at 2910. A break above 3150 will signal a primary trend reversal.
MACD (26,12,9) and Slow Stochastic (20,3,3) are above their signal lines. Twiggs money flow is rising, after a bullish divergence [+].





Adelaide Brighton Cement [ABC]
ABC entered a period of consolidation, below 1.00, after starting a stage 2 up-trend. Relative strength (price ratio: xao) is rising. A bullish cup and handle pattern can be seen, with the cup from [1] to [2] and the handle at [2] to [3].





Twiggs money flow and MACD show bullish divergences, with TMF respecting the zero line at [+], signaling strong accumulation.





The equivolume chart reflects the handle from the cup and handle pattern. At [1] higher prices were rejected with the broad bar showing increased volume and the long upper shadow signaling that sellers had wrested control away from buyers. [2] and [3] reflect strong buying support at 0.86. The breakout at [4] is confirmed by strong volume. The ideal entry point would have been a buy-stop at 1.01 or 1.02 (avoid round numbers) with a stop-loss either at: (1) 0.88 below the recent low; (2) 0.92 below the 20-day MA; or (3) 0.97 below the support/resistance line; depending on the trading objective and time frame.





Hopefully ABC will pull back to test the 0.98 support level, giving a second bull signal when it rallies off its lows.


Market strategy

Short-term: Long. The Slow Stochastic and MACD are above their respective signal lines.
Medium-term: Long. Use stop losses to protect yourself against a sudden reversal.
Long-term: Wait for confirmation of the bottom reversal signal.

Colin Twiggs


Thought for the Day:

 And therefore the cautious man, when it is time to act impetuously, does not know how to do so, and he is ruined;
but if he had changed his conduct with the times, Fortune would not have changed.

 - Niccolo Machiavelli, The Prince (1532)







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Colin Twiggs

Author: Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters.

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.

He founded PVT Capital (AFSL No. 546090) in May 2023, which offers investment strategy and advice to wholesale clients.