Noel
Campbell

The banks have been one of the big success stories for those who have been buying stock since the major low of the broader index early in March. In Chart 1, you will see weekly charts of ANZ, NAB, CBA, WBC and SGB and the XAO. With the big banks clear heavy weights in the make up of the overall index the parallels between the banks and index are not surprising. A number of the banks have currently reached some potential resistance levels that should prove to be significant testing areas over the coming few weeks.

Chart 1

This week I have hand picked ANZ to place under the microscope for further analysis using price with a particular emphasis on ranges. You will note the distinct similarities between the analysis used here and the analysis on RIO in Issue #1 of the Trading Tutors Newsletter. The focus will be the power of milestones and the 50% ‘danger zone’ with an additional emphasis on the clustering of pressure points.

Re-enforcement of a principle and repeated use is the only way to really have a technique become an intrinsic part of your trading

ANZ has made a top of $19.02 week ending 2 May 2003; this is a double top with the top of $19.02 in the week ending 8 November 2002. In Chart 2, the double tops have been labelled in addition to some range analysis points. ANZ had a major bull market cycle range from $13.97 to the all-time high of $20.60 giving a total range of $6.63. The bear market cycle low, following the top occurred in February this year at $15.69. Adding 50% of the $6.63 range to $15.69 low gives us a danger zone of $19.00, a very tidy cluster with the old top of November 2002. This alone would certainly be enough to raise significant interest in the swing chart of ANZ over the next few weeks. It should also be noted that we are using the weekly chart here allowing us to ‘stand back for a better perspective’.

Chart 2

There are clearly cycles within cycles when it comes to the market's charts. Which cycle you focus on depends upon how close you are to the market. The best method of analysis is to overlap time frames and add to the number of clusters you have at a price level. In Chart 3, we have stepped in closer to the market action, focussing on the current bull run, since the February low, to see what insight can be gained that may support the bigger picture work.

Chart 3

The first half of the chart (to the left) shows the milestones of the second most recent weekly upswing added to the $17.59 low. The 50% milestone here calculates out to be $18.89. Stepping in to take a look at the latest weekly upswing of $17.59 to $19.02 and adding percentages of this range to $18.16 gives a 50% level of $18.87.

What does all this mean? ANZ in the short term could have major difficulties breaking through the resistance around $18.80 to $19.00. How might we use that knowledge? Gann’s safest place to sell is the first confirmed lower swing top. This strategy of taking the first confirmed lower swing top following a major double top is one that is well worth testing for inclusion in your trading plan. Once again, the market will make its own decisions on where it heads next, but I for one will be keenly interested to see how things unfold for ANZ over the next few weeks.

All the best with your trading and analysis,

Noel Campbell