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Welcome all Safety in the Market traders to this month’s dedicated newsletter. Since I wrote to you last month the market has continued on a roller coaster ride. Things hung in there until right on one of Gann’s ‘Seasonal’ dates, topping on 21 June. From there we saw almost 2 full weeks of down trading days and then bang, now things are moving up. The low on 6 July for the SPI200 is at this stage a false break of the 21 May low and needs to be watched. Things are in the balance as the June top is part of multiday Island Reversal top, while 6 July is part of a multiday Island Reversal bottom.
This month I’m going to follow up on the work we did on ANZ regarding the potential for the ambush of the weekly short and how, with a more advanced approach, you might go about turning things around. You will need to have a print out of last month’s article handy to get the full picture.
Chart 1 is the latest update I have of the ANZ weekly bar chart. You will see I have applied the Swing Overlay and volume using ProfitSource.
Chart 1 – ANZ Weekly Chart – Ambushed ABC Plan
click chart to enlarge
The original ABC trade was ambushed by a ‘bad outside’ week which did not have particularly high volume. The following week (week ending 18 June) represented a second opportunity as a revised Point C. Remember this is based on what we discussed last month and is certainly a slightly more advanced approach. Entry was achieved for the ‘new’ Point C at $22.85 during the week ending 25 June. This is one cent below the low of the Point C week (18 June).
The week that ended triggering the second trade is what we more affectionately refer to as a ‘good outside’ week. In this case your milestones need to be adjusted using the high of the good outside week (in the case of a short). This good outside week as not affected the A to B range or your estimated Point C. You can see I have worked out the new milestones using the ABC Pressure Points tool.
Initially the re-entry on the ambush and confirmation of the ‘revised’ Point C was like a dream trade, day after day down. The market conjured up an ambush, yet with some trading smarts we were able to turn the tables. So this leads to the ambush beginning to be all but forgotten.
Of course with the last few days up and paper profits starting evaporate away it is time to test your metal. When you are in a big picture trade there are going to be times when a market is moving against you. The first rule is, do not let a profit run into a loss. The second rule is, you have to develop the ability to hold in through what are hopefully only short term moves against you. The thing is that when these moves occur (whether bull or bear) they can quite often be shorts or longs covering, and therefore move very quickly, but not for very long (just a couple of days or so).
I’m going to hold firm to the long term view that the market has further south to go for now. There would need to be some significant tests past on the upside before I started writing off the 21 June top and more importantly the 16 April top on the SPI200. These are volatile times and you need to stay sharp and on your toes.
Until next month...
Noel Campbell
Professional Derivatives Trader
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