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One could be forgiven for wanting to give up on the markets in recent weeks, but this is where patience and perseverance pay off. At Safety in the Market we give you the tools and techniques, but it is up to you to learn about yourself. How do you really cope with risk? How do you handle profits? Do you panic and take them before they have really run their course?
Using ASX:CBA as a recent example we can see a big picture setup in Chart 1. There was a double top on 16 September showing nice price harmony just above 50% of the recent range, and time harmony with a repeat of the 22 days cycle. I have also included a 1x1 angle for those who’ve studied the Ultimate Gann Course. Whilst using a point size of 0.05 isn’t conventional, it is something I have had a little success with on CBA. Chart 1: CBA Daily Bar Chart with Double Top Setup
click chart to enlarge
Taking a bearish view of the market for a moment, the First Range Out from the April high repeated to 50% then retraced to form the double top. If we expect the double top to go to 200% then this comes close to a 100% repeat of the first range out. This is best illustrated on the weekly chart as shown in Chart 2. Chart 2: Weekly Chart of CBA Showing Price Targets
click chart to enlarge
Looking at more recent action, however, we haven’t seen a runaway market providing us with instant profits. We could have entered the market “short the closers” on 16th September or, if we waited for a first lower swing top, we would have entered on 22nd September. The trade made it to 50% before coming back up to provide a mini double top on 28th September. We then saw three strong down days with increasing daily ranges and I was sure we were into our run down. The market reached 100% of the ABC from the first lower swing top, however it didn’t quite reach 200% of the small picture double top. Refer Chart 3. Chart 3: CBA Daily Chart with Small Picture Setup
click chart to enlarge
Would you have taken your profits or would you still be in the trade, keeping your stops behind swing tops? If you held on you would have seen CBA hit 200% of the minor double top today (12th October). The question is would you be adding to your position with the bigger picture target in mind or would you be sticking to the smaller picture? There is nothing wrong with taking smaller trades when you are starting out, as this can help you apply the techniques with low risk positions while you build on your analysis and trade management skills. But if you are interested in some bigger profits then you need to learn how to trade the bigger moves. One way is to look for the bigger picture setups and then trade the smaller moves within, as I have in this example on CBA.
It’s the Journey
Lauren Jones
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