Day Trader column for March 17 - 2015

 

The All Ords and the ASX/S&P 200 both moved down early last week, which is what I would expect as part of the consolidation process around the 6,000 level.    Thursday however saw the move down reversed in a daily pivot point to the upside.     Friday saw the market trade in a narrow range around the top of Thursday’s trading range on slightly reduced volume.     It is likely any further consolidation, if it takes place, may take place between 5,750 and 5,950 on the All Ords.

Friday the gap between the All Ords and the ASX/S&P 200 close a little closer at twenty six points which indicates to me there continues to be increasing interest in the smaller stocks.    This interest usually occurs as the general public begin moving back into the market.

For any new readers and as a refresher to understanding one of my often mentioned market reversal signals I will try to describe in words what a pivot point looks like.   Firstly a pivot point can be seen in any time frame from a few minutes to a month or more.    By definition a market reversal cannot occur in any time frame without a pivot point being formed.    Note also that a pivot point in one direction cannot occur unless a pivot point in the opposite direction has formed first.  

The two time frames I concentrate on when trading shares are daily and weekly.     I do my initial market scans on weekly charts and any stocks highlighted are then examined more closely on a daily chart.

For the purpose of explanation I will describe weekly pivot points.  In the case of daily pivot points just substitute daily for weekly in the definition.

Firstly as the market moves up I look to see if the market has made a new high for the week.   If so no pivot point, and so on each week until the market does not reach a new high.    If the week does not reach a new high I then look to see if the weekly close is below the lowest price of the high week.   If so a pivot point to the downside has formed.   

After the downside pivot point, I look each week to see if a new low has formed.    When a week occurs with no new low, I look to see if the close for the week is above the high of the week with the lowest low.    If so then a weekly pivot point to the upside has formed.

Last week I was asked about stop placement and specifically how I place my trailing stop for Australian Pharmaceutical Industries (API).

This is a difficult situation because the price has not had any sort of pull back since it moved up from $1.10.     I have found using the previous spike low as the trailing stop to work for me, but it does leave me vulnerable to giving back a lot of profit if a big percentage move occurs without a pull back as in the case of API.    However because I am expecting it to move closer to its next serious resistance around $2.00 I am prepared to wait for the pullback which looks likely to occur this week and take my chances the pullback will not be too painful.

 

To find past columns, information and DVD’s on my methods goto:-      www.thedaytrader.com.au.    

Portfolio Position

Stock

No. of Shares

Purchase price

Stop

Fridays Close

API

5,000

$1.08

$1.085

$1.505

NAN

4,000

$1.57

$1.70

$1.73

CAJ

5,000

95c

$1.00

$1.025

 

Cash       $299,864

Shares    $19,570

Total      $319,434