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Trading Diary
November 01, 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 continues to range, closing at 8517 on average volume, up 1.4%. A break above 8600 will be bullish and below 8160 bearish. The primary trend will reverse if the index rises above 9130.

The Nasdaq Composite Index resumed its upward trend, rising 2.3% to close at 1360. The primary trend will reverse if the index breaks above 1426.

The S&P 500 also ranges (between 867 and 967) closing up 15 points at 900. The primary trend is down. The index will complete a double bottom reversal if it rises above 965.

The Chartcraft NYSE Bullish % Indicator signals a bull alert at 36% (October 30).



Auto sales fall
Automobile sales are 27% below sales a year earlier. (more)



Gold
New York: Spot gold was up 70 cents at $US 318.60.



ASX Australia
The All Ordinaries continues to range, closing down at 2967 on lower volume. The primary trend will reverse if the index rises above 3150.
The Slow Stochastic (20,3,3) and MACD (26,12,9) are above their signal lines, while Twiggs money whipsaws around the zero line.





The long-term Coppock indicator slopes downwards below zero. An up-turn will signal the resumption of a bull market.





AJ Lucas [AJL]
 AJL is in a strong up-trend after forming a broad base over the past 12 months, reminding us of the old traders proverb: The broader the base the bigger the move. Price has now formed a pennant continuation pattern over the last 3 weeks. Relative strength (price ratio: xao) is rising steeply.





Twiggs money signals accumulation after a bullish confirmation at [$]. A rise above 1.24 will confirm the pennant breakout.





Pennant and flag patterns normally occur mid-trend, so the target is 1.51 (1.29 - 1.00 + 1.22).


Sector Analysis
Changes are highlighted in bold.
  • Energy [XEJ] - stage 4 (RS is level)
  • Materials [XMJ] - stage 1 (RS is level)
  • Industrials [XNJ] - stage 4 (RS is falling)
  • Consumer Discretionary [XDJ] - stage 4 (RS is level)
  • Consumer Staples [XSJ] - stage 1 (RS is rising)
  • Health Care [XHJ] - stage 4 (RS is falling)
  • 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 1 (RS is rising)
  • Utilities [XUJ] - stage 2 (RS is rising)

Sectors: Relative Strength
A stock screen of the ASX 200 using % Price Move (1 month: +5%) returned 32 stocks (compared to 99, August 23rd and 10 on October 4th). Notable sectors are:
  • Diversified Metals & Mining
  • Diversified Financial Services
  • Movies & Entertainment
  • Pharmaceuticals
  • Specialty Chemicals
  • Real Estate Investment Trusts.



Market strategy

Short-term: Take new entries with caution. The Slow Stochastic and MACD are above their respective signal lines, but the Stochastic is in oversold territory. Only take entries where stops are tight.
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


Thought for the Day:

Strength of mind or of character is the ability to keep one's head at times of exceptional stress and violent emotion.
Firmness cannot show itself, of course, if a man keeps changing his mind. It demands sticking to one's convictions.

Claus von Clausewitz (1831), On War.






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