ANZ Pressure Points in Price and Time

Traders that have taken the opportunity to study Gann’s material on time analysis would agree that combining these two dimensions together is a very powerful tool in the market. In a number of articles this year we have focused on the importance of price pressure points and how they can be calculated. Generally speaking we see the 50% milestone as being a danger zone in any market move. Traders using the Safety in the Market methodologies would be very comfortable in calculating these areas.

Looking at the ANZ chart below, using the Gann retracement tool in the Starter Pack software we measure the range from the July 2002 highs to the recent lows in February this year. This then allows us to measure the key percentages of 25%, 50% and 75%. We can easily note where ANZ has held more recently at the 50% signalling some strong resistance. ANZ has held tightly on either side of the 50% line since early July, making a number of attempts to trade above this line, however, in more recent times even if ANZ has traded above the 50% danger zone, it has failed to close above that level. The price of $18.14 is holding as a key resistance level.

The second dimension or time analysis draws our focus to the position of a market. We can then rate the position as either being strong, weak or balanced. The simplest and easiest tool to identify this is the use of Geometric lines as outlined by WD Gann in his original texts. This couples time and price together and treats them as the same concept. That is if a market had risen 100 cents in 100 days we could say that the market is balanced. Then looking at variations of this theme if a market had risen less than 100 cents in 100 days then the market is weak, and if it had risen greater than 100 cents in 100 days we could say that the market is strong when comparing time and price together. The same can be said in a falling market.

Looking at ANZ further, using the geometric angles that balance time and price we see the three lines running down from the June 2002 top for ANZ. The orange line represents a neutral market, the blue line represents a strong market when measuring price against time. Markets are often seen to find support and resistance at these levels.

The basic consensus in 2002 was that the markets were weak. ANZ price movement was consistent with this as it went on to make the eventual low in February this year. The price movement remained below the orange line and each time it challenged this balanced view in the market we found resistance came in and proved too strong to overcome.

As ANZ ran out from the February low we could say that its price was weak when comparing its position to the orange line. Managing to hold above the orange line in late March, the market then turned resistance into support and began a solid run out. As the price activity continued to rise, we look at the blue line, this represents the next key level that balances price and time. We see that ANZ has found resistance at a number of points along this line, signalling a strong area to watch in the market.

We see that using both styles of analysis strengthens the view that there may be a strong area of resistance above the current price of ANZ. As with any view in the market you must be prepared to change your opinion if signals exist to prove your theory no longer holds true. So if ANZ can hold above the 50% danger zone and also show some strength above the blue price and time line then there may be some further upside in this market.

The study of geometric angles is a subject that I will be covering at the upcoming Safety in the Market Annual Traders Conference in November this year I hope to see you there. Go to www.sitm.com.au/atc for more details.

Good Trading

Aaron Lynch