Day Trader column for July 9 – 2013

 

Our market has fallen steadily since mid May and last week both the All Ords and the ASX/S&P 200 both formed a weekly Pivot point to the upside.  So perhaps this will be the beginning of a rally.    Whether it will be a sustained trend remains to be seen.

However, for the time being I will only be watching some stocks which have already turned positive before I make any buying decisions.    The next thing for me now is to watch the index on a daily chart and wait for it to turn and have a few days pull back then form a daily pivot point, and then look for the buy signals on some of the stocks on my watch list.

I have mentioned before and I think it is worth repeating, because over the past month or so many stocks including, or I should say, as well as a large number of top one hundred stocks have formed the fourth leg of a five point reversal.    What this means is if they now move up and their price exceeds the highs made in May this year then the five point reversal will be complete on the weekly chart.    I have found this pattern to be a powerful reversal pattern. This does not necessarily mean the price will reverse immediately.   It is often the case the price can rise a great distance before the reversal itself occurs.

That being the case I may see the opportunity to make some substantial profits on these stocks before the reversal is seen.

As is the case with any pattern whether it is a buy or sell signal there is a reversal and then a confirmation.    I will explain the difference between the two shortly.

Before I do that I have to clarify a recent sell decision.   I recently sold Dyesol (DYE) and several readers have asked why I did not sell after the spike low formed after June 07.    I think I stated at the time I did not have access to my data after the formation of that spike low.   I then did something I do not advocate, and that is to reassess my stop.    To my cost I decided to hang on until the previous spike low of May 30 was broken.    It was a costly decision.   What I should have done if I was following my own rules was to sell the next day.   It would have been even more profitable to have had an order in the market to sell at my projected target of 55 cents.    Sometimes lessons have to be repeated!

 

Now to buy signals and the conformations.    The steps I look for all need to be in place before a confident decision to buy is indicated for me.

Number one is if a stock has been trending down I want to see a clear break of the downtrend.

As this happens I also want to see a weekly pivot point to the upside.
If the confirmation week for the weekly pivot point is accompanied by a significant volume increase it is all the more likely to lead to a further move.

After the weekly pivot point I wait for the price to have a slow pull back, preferably of a few days on low volume.

If this all happens at or near a resistance/support level then the confirmation of the daily pivot point is the buy signal.     

 

 

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

 

Portfolio Position

 

Cash       $291,066

Shares    Nil

Total      $291,066