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Trading Diary
January 15, 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 lost 1.3% to close at 8723. The last short-term rally failed to make significant gains and volume is up on the counter-trend; both are bearish signs in the short-term.
The average is ranging between 8161 and 9076, at the top end of the base that has been forming since July 2002; a bullish sign.
The primary trend is down and will only reverse up if the average rises above 9076 (the high from December 02).

The Nasdaq Composite lost 1.5% to close at 1438.
The primary trend is up.

The S&P 500 formed an outside day, closing down 13 points at 918. The short-term trend shows weakness.
The index ranges between 965 and 768, establishing a base. It has recently held above 867; a bullish sign. 

The Chartcraft NYSE Bullish % Indicator increased to 52% (January 14).
Technology 
Intel beat earnings forecasts for the fourth quarter but its cautious outlook for 2003 has placed a damper on the technology sector.
Apple posted a loss after restructuring charges.



Gold
New York: Spot gold eased 30 cents to $US 350.60



ASX Australia
The All Ordinaries formed an inside day, closing at 3050 on higher volume. The index again failed to hold above the resistance level, a bearish sign.
The index ranges between 2915 and 3050, forming a base. A break out of the base will signal a primary trend change to an up-trend. Look for volume confirmation.
Slow Stochastic (20,3,3) has crossed to above its signal line; MACD (26,12,9) is above; Twiggs money flow is falling.





Perpetual Trustees [PPT]
Last covered on September 24, 2002.
 Another stock from the Diversified Financial Services sector, PPT formed a double top at [1] and [2] before a stage 4 down-trend. There was a strong reversal from [4] to [5] before the down-trend resumed and the stock fell to 30.00. PPT now appears to have bottomed at [6], breaking the long-term trend-line in December and rising above the previous high at [8].

Relative strength (price ratio: xao) is rising and MACD has completed a bullish divergence. But Twiggs money flow still signals weakness, failing to cross above zero.





The daily chart shows that the bottom formed a symmetrical triangle from [a] to [h]. Volume declined on each successive trough;[6], [7] and [f]; but failed to surge on any of the rallies. The breakout at [h] showed very low volume and so has the break above resistance at [8]. The stock is now entering congestion at [k].





An unconvincing reversal:
  • The base is narrow;
  • There was no volume confirmation within the triangle pattern;
  • Low volume on the breakout; and 
  • No real increase in volume on the rally.
The breakout has a fairly high probability of failure, with PPT likely to re-test support at 30.00 and build a broader base.



Market strategy
For further guidance see Understanding the Trading Diary.

Short-term: Long if the All Ords rises above 3060. The Slow Stochastic and MACD are above their respective signal lines.
Medium-term: Avoid new entries.
Long-term: Wait for confirmation of the bottom reversal signal.

Colin Twiggs


Less is more.

- An interesting paradox that applies to technical analysis as well as to many other fields.
Too much analysis leads to paralysis.






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