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I last wrote about CBA:ASX looking at another 50% retracement in price and 50% in time lining up with a Time by Degrees date. We see from Chart 1 that this lined up with an almost 100% repeat of the previous range up and there was also price resistance around this point from the ATH Highs Resistance Card and the 2009 low Lows Resistance card. The combination of all these price pressure points form a price cluster which had us expecting a turn in the market. Trading this run short, however, required use of some of our advanced entry methods.
Chart 1: CBA daily bar chart
click to enlarge
For those who have read Safety in the Market’s No 1 Trading Plan a ‘short the opener’s’ entry was possible on August 4. Others may have waited for a lower swing top, thinking it might line up with our 7th August date. The lower top came in on 10th August, but entry was outside 33.3% of that swing and even outside 33.3% of the previous weekly swing down from 21/6 to 2/7.
The next ABC short also opened outside limits, then there was a 1-day ABC entry on the 19th and a 2-day entry on the 20th. The 1 day ABC reached 100% on 25/8 but stopped short of a 100% repeat of the weekly range and short of 75% of the 2-day ABC.
What else should we have been looking at on 25th August, to warn us to take our profits?
This is where our resistance cards come into play as there was a price cluster looming at around $48.00. When we analyse a trade we should be looking at all the resistance cards to determine possible support and resistance for a trade. Looking at the 1-day ABC we would have seen the following price pressure points all lining up under 100% of the trade and lining up above the 100% repeat of the weekly swing range. Refer Chart 2 which shows us a price cluster of 75% of the All Time Ranges resistance card at $48.07, 62.5% of the ATH to 09 low Ranges resistance card at $47.86, and 200% of the 09 Lows resistance card at $48.06.
Chart 2: CBA daily bar chart
click to enlarge
We use these price pressure points from our resistance cards to help us determine our profit target and hence which stop loss management we would take on each trade. For those who shorted the opener’s from 4th August, they might have liked to trail stops behind swing tops until they reached this price cluster and then considered taking profits. This would have seen approximately a 16:1 reward to risk ratio.
For those who traded the 1-day ABC short they might have preferred to use the currency style of stop management, taking profits at 100%. This would have given them a little over 2:1 reward to risk for a basic ABC trade.
Chart 3: Weekly CBA Chart
click to enlarge
Some of our clients have been posting on the Safety in the Market Discussion Board about a weekly long trade on CBA. I have shown this for you on Chart 3, and we can see that it is currently past 50%. I’ll leave this one with you to watch over the next few weeks to see how it pans out.
It’s the journey
Lauren Jones
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