Day Trader column for February 2 - 2016

 In last week’s column I commented that the three market indices (All Ords, ASX/S&P 200 and the SPI contract) had all formed reversals to the upside on the weekly chart.   Those reversals followed through last week and they all formed weekly pivot points to the upside.   A weekly pivot point being a close for the week above the high of the week which formed the lowest low of the move down.

However, the relative levels of the three indices has not changed indicating to me the negative sentiment in the market has not changed.

Last week also saw a divergence form between the ASX/S&P 200 and the SPI futures contract on the daily chart.    This divergence formed on Friday when the SPI contract closed above Wednesday’s high and the ASX/S&P 200 failed to trade above Wednesday’s high.    This indicates a high probability that both will trade down early this week.

There were also similar divergences between BHP and RIO, along with divergences between the major banks indicating they will likely fall.

Despite all of the above, the fact the indices all closed near their highs for the week indicates there may be some strength in the market early in the week, but I suspect it will be short lived.

Elders (ELD), the only stock in our portfolio at the moment, was down one cent for the week but it formed a daily reversal pattern to the downside on Thursday and Friday so there is a possibility it will be stopped out, as it now has a tight stop at $4.66 just three cents below Friday’s close.

Both Bellamy’s (BAL) which we were stopped out of three weeks ago and A2M have formed consolidation patterns over the past couple of weeks and if they form daily pivot points to the upside this week I will buy them.

Pilbara Minerals (PLS) which was stopped out a couple of months ago looks to have completed its correction and if it moves to 40c and has a small pullback, I will buy it again on a daily pivot point.    The reason I won’t buy it now is because its stop would be too big a percentage below the likely purchase price.

Galaxy Resources (GXY) is another stock I am looking at and will buy it after it completes its correction and consolidates around 16c.   If it does present me with a buy signal and moves up it would have a next target price around 40c.

There are quite a number of smaller stocks shaping up, but they are trading on low volume, which puts them outside my trading parameters.   Two of those I am watching are Havilah Resources (HAV) and Gascoyne Resources (GCY) and if they continue up and the volume increases to a level I am comfortable with I may look to buy them.

 

 

I am asked on occasion which online broker is the best.   I have only used Commsec and have no experience with any other online brokers so unfortunately for those who ask I am unable to give any recommendation.

However, I expect most give a similar service at a comparable cost, so it becomes a personal choice and possibly a loyalty issue depending on who you do your regular banking with and how easy it is to transfer money to and from your cash account to pay for trades.

 

 

Past columns, information and DVD’s on my methods are available at:-             www.thedaytrader.com.au             

Portfolio Position

 

Stock

No. of Shares

Purchase price

Stop

Fridays Close

ELD

2,000

$4.70

$4.66

$4.69

 

Cash       $319,344

Shares    $9,360

Total      $328,704