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Trading Diary
October 21, 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 rose 2.6%, forming a continuation flag, and closed at 8538 on average volume. A primary trend reversal will be signaled if the index rises above 9130.

The Nasdaq Composite Index climbed 1.7% to close at 1309. The primary trend will reverse if there is a break above 1426.

The S&P 500 is also forming a continuation flag, closing up 1.7% at 899. The primary trend is down. The index will complete a double bottom reversal if it rises above 965.

The Chartcraft NYSE Bullish % Indicator reflects a bear confirmed signal at 26% (October 18).



Mixed results
Texas Instruments reported third-quarter earnings of 11 cents per share, compared to a loss of 3 cents a year ago, but warns that fourth-quarter sales and earnings will fall below estimates. (TI)
 Dow component 3M Co. increased earnings by 38%, compared to the third quarter last year, and raised its guidance for the fourth quarter. (3M)



Gold
New York: Spot gold was down 190 cents at $US 310.60.



ASX Australia
The All Ordinaries closed down 19 points at 2948 on reassuringly low volume. 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 is whipsawing around the zero line after a bullish divergence.





Chemeq [CMQ]
After a stage 2 up-trend CMQ broke through resistance at 3.00 and is now forming a pennant/symmetrical triangle between 3.00 and 4.00. Relative strength (price ratio: xao) continues to rise.





Congestion just below or above a resistance level is normally a bullish sign. But, after being bullish for some time, MACD and Twiggs money flow show bearish declines in the last month.





The equivolume chart shows strong support at 3.00. Notice how support formed at the round number and not at the high of day [1]. The small correction between [2] and [3], on light volume, was a good time to increase ones position. Alternatively, accumulate on day [4] at the breakout. Rallies to [5] and [7] were on strong volume but this has faded on the next two rallies at [8] and [10]. I will only increase the position if MACD and TMF hold above zero and price breaks above 3.80 on strong volume.





A break below 3.30 would be bearish.



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:

 Many people watch, but few see.

 - Monty Roberts, Horse Sense for People.







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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.