Day Trader column for July 15 - 2014

Last week it looked like our market would pull back because of the divergence between the S&P/ASX 200 and the SPI futures contract traded against it.   That is exactly what happened and the Index lost over eighty points before the fall was arrested on Thursday.    As it turned out there was another divergence on Friday when the SPI contract traded below Wednesday’s low and the S&P/ASX 200 did not trade below the low it formed on Wednesday.    After this occurred early in the day both the Index and the SPI gained ground for the rest of the day as the divergence predicted.    It is now likely both will gain further this week.    There was also a divergence between two of the major banks on Thursday and both gained on Friday.    I still find it incredible how these divergences between either stocks or related indices which move in tandem so often precede a change in direction.

Two other stocks where divergences are a reliable indicator are BHP and RIO.

They also formed a divergence to fall on July 04 and both fell last week.   They again formed a divergence last Friday, so they will likely move up this week.

The problem with divergences is they do not give any idea of the extent of the expected move.    If however they form on a weekly chart they usually lead to more significant moves than if they only form on a daily chart.

They can however be incorporated into buying and selling strategies to refine the entry.

Triton Minerals (TON) move up last week took it past both the targets I calculated and in the process had a small pull back on Tuesday and Wednesdayforming a spike low thus giving me a new level to raise its trailing stop to.

As its move for the week ended on it closing the week at its high price for the week and all time, I am holding it until it forms a clear reversal as it has now moved above all my target projections.

That said, if it moves toward the $1.00 mark it will likely find resistance there as most stocks do.

Talking about gold stocks as TON is, there were three others I spoke about a couple of weeks ago and two of those Northern Star Resources (NST) andSaracen Minerals (SAR) have both moved up over the past two weeks and I am looking at them for a pull back and possible entry.     The third one mentioned was Matsa Resources (MAT) and it has fallen for the past two weeks but it may still find support around 32c and reverse to the upside.    I would not look to buy it unless it moves back up to around 38c.

Liquid Natural Gas (LNG) continued to consolidate last week and I expect it to move soon and the likely trigger for the move will be a volume increase. 

Finally another observation on Minis which I have been studying closely for some time now.    One thing to be aware of is trades take much longer to be listed after pressing the buy button with your online broker than the time taken for a stock.    This means it is very difficult to get in and out quickly so trades need to be position trades.


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