Tim Walker |
In the lesson of this name in the WD Gann Stock Market Course there is the following passage:
Next to the 30 day change in trend, the most important are those that occur every 7th, 10th, 14th, 20th and 21st day…Sometimes the change will occur on the 28th day from the previous top or bottom, and at other times, on the 33rd or 34th day…
Since we have seen Gann’s lessons on swing trading, combined with David Bowden’s lessons in the Smarter Starter Pack and Number One Trading Plan, work perfectly in Santos (STO:ASX) over the past few months, maybe it might be of some value to check some other lessons as well. We will start from the top on 12 April. Chart 1 – Time Frames
click to enlarge With such a small time frame as 7 or 10 days we are not going to expect major turns, merely swing tops, and you can see that is what we have here. From the 12 April top there were turns 7 and 14 days later, followed by a longer run down to the 7 May low. From that low, again turns came 7 and 14 days later. Starting again from the 21 May low, we had turns 7 and 14 days later, leading us to expect that the 11 June might see a turn. If you have a play with these time frames you’ll see there is even more you can learn.
This brings us to 11 June. This was a strong up day, with a gap and good volume. The next day produced a down day, giving an ABC long trade signal. Should we take this trade? Remember that we have been long since 21 May. We bought 50,000 CFDs at 11.40, and added a further 25,000 at 12.11 on confirmation of the first higher swing bottom. Since then the market has rallied further, and we would move our stops up below each successive swing bottom.
On 15 June the ABC long trade is signalled. This would give us the opportunity to buy a further 12,500 CFDs to continue our pyramid. By now you have probably worked out that I will be looking to see if there is a 50% resistance level supporting or negating the trade. At first glance the trade looks good, as the market gapped over the 50% line from the 12 April high to the 21 May low.
Chart 2 – ABC Trade
click to enlarge Point C is holding above the 50% line, the retracement is only 22% from B to C, and the swing chart ranges support the trade.
Let’s try another perspective.
Chart 3 – Bigger Picture
click to enlarge
While the March 2007 low is a yearly low, the September 2008 high is a lower monthly swing top. This is not the strongest range in the stock, and yet if you look carefully you can see that a number of other tops and bottoms have occurred along this line. Further, the market has regained the 1 x 1 trading day angle from the October 208 low, but not yet broken decisively above it.
Would you take this trade?
On 16 June, the day of writing, the entry has been triggered. With 12,500 CFDs your risk would be $3,500. On your original 50,000 CFDs position, stops are now below the current swing bottom, locking in $95,500 profit, and similarly your 25,000 CFD pyramid has $30,000 profit so far. Are you happy to take this risk, even though the time and price indications in this article would indicate the potential for a turn?
Knowledge is Power!
Tim Walker
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