Delayed Diary
Apologies for the late diary yesterday. We experienced an error on the server web pages
and had to wait for all cache servers to clear.

Trading Diary
August 5, 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 .

The Dow fell 1.6% on average volume, closing at 9036. 
The intermediate trend is up but the index has penetrated the supporting trendline. A break below 9000 will signal a reversal.
MACD and Twiggs Money show bearish divergences.
The primary trend is up.

The S&P 500 broke through support, closing down 18 points at 965 on higher volume.
The intermediate trend has turned down, having fallen below 974.
Twiggs Money Flow (21) has crossed below zero, signaling distribution.
The primary trend is up.

The Nasdaq Composite fell 2.4% on higher volume, closing marginally below support, at 1673.
The intermediate trend has turned down.
The primary trend is up.


The Chartcraft NYSE Bullish % Indicator retreated further to 74.99% (August 4).

Market Strategy
Short-term: Long if the S&P500 is above 1000. Short if below 974.
Intermediate: Long if S&P 500 is above 1015. Short if below 950.
Long-term: Long is the index is above 1000.

The Network equipment maker meets earnings and sales expectations but its cautiously optimistic outlook led to some selling. (more)

Labor market worries
Employers are still cutting jobs, undermining chances of a recovery. (more)

Treasury yields
The yield on 10-year treasury notes rallied 12 points to 4.44%.
The intermediate and primary trends are both up.

New York (18.57): Spot gold rose to $351.20.
The primary trend is still upwards.

ASX Australia
The All Ordinaries recovered to close up 7 points at 3123. The index still displays uncertainty, failing to hold above the previous high despite strong volume.
The intermediate trend is up. A fall below 2978 would signal a reversal.
The primary trend is up.

Slow Stochastic (20,3,3) is above its signal line; MACD (26,12,9) is above; Twiggs Money Flow signals accumulation.

Market Strategy
Short-term: Long if the All Ords is above 3127. Short if the index falls below 2978.
Intermediate: Long if the index is above 3127.
Long-term: Long if the index is above 2978 .

Telecom NZ [TEL]
Last covered June 5, 2003.
TEL has broken out above a broad stage 1 base.
Twiggs Money Flow (100) signals strong accumulation.

The stock consolidated in a narrow range below resistance, between 4.40 and 4.66; a bullish sign ahead of the breakout. 
Relative Strength (price ratio: xao) has eased from the 3-month high in May.

 MACD has completed bullish troughs above zero [+].

The daily volume chart shows selling pressure at [1] and [3]. The breakout at [2] was accompanied by strong volume (and Relative Strength) but retreated back to support at 4.40. A dry up of volume can be seen near the 4.40 support level. The rally to [7] was on weak volume and again retreated. Strong volume accompanied [8] but the weak close signals resistance. 

There may be further tests of the 4.40 support level before a decent rally. Relative Strength making a new 3-month high would be a positive signal. A close below 4.40 would be bearish.

Telstra [TLS]
Last covered on August 15, 2002.
Telstra has started to form a stage 1 base. There are likely to be further tests of support at 4.00 (or 4.50) before a reliable breakout. I suspect that resistance will be heavy because of the large number of small shareholders.

Twiggs Money Flow (100) displays a bullish divergence and signals accumulation, but the signal is nowhere near as strong as TEL above.

Relative Strength (price ratio: xao) is rising and MACD has made a bullish trough above zero [+].

Strong support is evident at 4.40, especially with the volume on the up-day at [1]. High volume also shows at resistance at [2] and [3]. The breakout to [4] lacks volume confirmation and price retreated sharply to [6]. We now see a dry up of volume and volatility at [7], signaling another possible breakout attempt. 

Resistance levels are going to be hard to overcome. It would be prudent to wait for strong signals, on a pull-back that respects the support level.
A close below 4.40 would be a strong bear signal.

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

Colin Twiggs

Rules Conditional # 3

In all ordinary circumstances my advice would be to buy at once an amount that is within the proper limits of capital, etc.,
selling out at a loss or profit, according to judgment. The rule is to stop losses and let profits run.
If small profits are taken then small losses should be taken.
Not to have the courage to accept a loss and to be too eager to take a profit, is fatal. It is the ruin of many.

~ SA Nelson: The ABC of Stock Speculation (1903).

Stock Screens: Bollinger bands

Another method of identifying breakouts is to use Bollinger Bands. To identify downward breakouts:

(1) Select Bollinger bands;
(2) Enter -200 as the 50-day Maximum;
(3) Submit.

Back Issues
You can now view back issues at the Daily Trading Diary Archives.

Back Issues
Access the Trading Diary Archives.