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Trading Diary
July 16, 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 another 0.4% to close at 9094. Continued strong volume on the decline is a bearish sign, as are the two equal highs below the previous high.
The intermediate trend is up. A decline below 8978 will signal a down-turn.
The primary trend is up.

The S&P 500 declined a further 6 points to close at 994.
The intermediate trend is up. A fall below 962 will signal a down-turn.
The primary trend is up.



The Nasdaq Composite retreated 0.3%, to close at 1747, despite Tuesday's positive results from Intel.
The intermediate trend is up.
The primary trend is up.

The Chartcraft NYSE Bullish % Indicator is up another 0.1% at 76.48% (July 15).

Market Strategy
Short-term: Long if the S&P 500 is above 1003. Short if the index falls below 983.
Intermediate: Long if the S&P is above 1015. Short if the index falls below 962.
Long-term: Long.


Motorola, Lucent down
Motorola earnings and outlook are affected by SARS in Asia. (Motorola)
Lucent suffers from declining wireless revenues. (Lucent)

Bond yields up
The 10-year Treasury note reached 4.0% intra-day, closing at 3.92%.(more)




Gold
New York (17.39): Spot gold has leveled out at $US 343.30.
Gold is above the long-term upward trendline on the five year chart.



ASX Australia
The All Ordinaries rallied 14 points to close at 3075 on strong volume.
The intermediate trend is up.
The primary trend is up.

MACD (26,12,9) has crossed to above its signal line, completing a second bullish trough above zero [+]; Slow Stochastic (20,3,3) is above; Twiggs Money Flow (21) signals accumulation.



Market Strategy
Short-term: Long if the All Ords is above 3066. Go short if below 2978.
Intermediate: The primary trend is up; Long if the All Ords is above 3066.
Long-term: Long.


Bottom-fishing at CSL [CSL]
Last covered on February 25,2003.
CSL broke above its downward trendline at [a] but the rally petered out and rolled over into a lower low at [b].
We then had another attempt at a V-bottom at [b], again with similar results.
This was followed by a shakeout, with a sharp drop to a new low at [1] accompanied by a large volume spike. Shakeouts have a cathartic effect, relieving selling pressure and introducing a swathe of new owners with a more positive outlook, having purchased at lower prices.



Twiggs Money Flow (100-day) has signaled distribution for the past year. The indicator is now rising, recently making a new 6-month high.
MACD and Twiggs Money Flow (21) both display bullish divergences.



Relative Strength (price ratio: xao) has also risen to a 3-month high. 


The large volume spike is clear on the daily chart at [1]. 
On an upward price spike volume tends to fade before the peak, but downward spikes (or shakeouts) normally experience the heaviest volume at the low.
The release of selling pressure is evident on the re-test of support at [2] with far lower volume.
The subsequent rally ended with a closing price reversal on higher volume at [3], signaling that the stock was unable to sustain higher prices.
The test of support at [4] is accompanied by lower volume and is followed by a strong bull signal: equal lows ([4] and [5]) above a previous low [2]. The second low was also accompanied by a dry-up of volume and volatility; further bullish signs.
Short-term traders may enter with a buy-stop above the high of [5] and a stop-loss below the low; the target being resistance at 13.50.



The breakout at [6] completed a large double bottom but the subsequent rally has encountered further selling pressure; we should see a test of the new 13.50 support level..

If the pull-back is short and respects the support level it will present entry opportunities for intermediate and long-term traders, especially if accompanied by a dry-up of volume and volatility.
A fall below 13.50 would be bearish. 





Understanding the Trading Diary has been expanded to offer further assistance to readers.

Colin Twiggs


He who takes no care of little things
will not have the care of great ones.

~ Wall Street maxim 
S.A. Nelson: The ABC of Stock Speculation (1902).


 
Stock Screens: Gaps

Screening for gaps on their own often presents the trader with large numbers of meaningless gaps. To highlight major gaps, combine these two filters:

(1) Gaps: Price gapped up within the last 2 days; and
(2) Volume spikes: 1.5 times 50-day VMA in the last 2 days.




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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.