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If you’ve been reading the Discussion Forum you’ve probably noticed that quite a few students are watching double tops appearing at 50% levels on several markets. Last month I went through a setup on ANZ:ASX which was on a 50% level with a gap. This month I want to compare similar setups on two other banks WBC:ASX and CBA:ASX. Let’s start with WBC. You can see on Chart 1 that the market has retraced exactly to 50% of the price range from April to July, but can we expect a turn?
Chart 1: WBC daily chart with 50% retracement
click chart to enlarge
Let’s look at some other price reasons we might be expecting a turn. Notice in Chart 2 that we have also reached 100% of the previous 1 day ABC, right on this 50%. But is this enough of a reason to go short? The 1-day, 2-day, 3-day and weekly swing charts are all showing an up-trend at this point. If you look closely at Chart 3 you will also see that the upswings are expanding and the downswings are contracting.
Chart 2: WBC daily chart with 1-day ABC
click chart to enlarge
Chart 3: Split screen of WBC swing charts
click chart to enlarge
Let’s now take a look at time to find if it is also balancing out. We find from Chart 4 that it took 82 days from the April top to the July low. Half of this is 41 days which would take us to the 16 August. Will the market hover around this price for another 2 weeks? We have some good price reasons to expect a turn, but not so much with time.
Chart 4: WBC daily chart with balancing time
click chart to enlarge
Comparing this now to Chart 5 of CBA:ASX, we can see a similar setup with a retracement around 50% of the range, but with the gap now closed. We can also see that CBA hasn’t quite reached 100% of the previous range up from the July low.
Chart 5: Daily Chart of CBA with Range resistance card
click chart to enlarge
Now if we look at the swing charts for CBA on Chart 6, only one is clearly up and the others are uncertain, though we also see expanding up ranges and contracting down ranges.
Chart 6: Swing Charts for CBA
click chart to enlarge
Looking at balancing of time in Chart 7 we find it is much closer to balancing out than WBC and for those of you who have studied Time by Degrees in the Ultimate Gann Course you might find something else interesting about that date.
Chart 7: Daily chart of CBA with balancing time
click chart to enlarge
So would you trade WBC or CBA or both or neither? With WBC we have strong price harmony, but weaker time harmony and since the swing charts for WBC are suggesting an uptrend we might find that all we get is a retracement against the trend. A good measure for this will be the previous retracement in July. If the market retraces less than it did in July then this shows strength to the upside, but if it retraces more, then this is showing a weakening. This might be an opportunity to look for a first lower swing top entry.
With some uncertainty in the swing chart trends and a balancing of time as well as price in CBA does it look like a better trade to you? An aggressive entry for either stock would have been using the Openers Rule (No 1 Trading Plan) on 4th August, with stops behind the high of the day. Would you take this trade if you are using milestones from the 15th July retracement to manage your stops? As always watch to see if volume confirms any movement to the downside.
As you build a Trading Plan for your chosen markets and your style of trading, these types of questions will become easier to answer. The exercise now is for you to follow both of these markets in the coming weeks to determine if your decisions paid off.
It’s the Journey
Lauren Jones
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