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While it’s been an exciting few weeks on Westpac, I would prefer to say it has been a profitable time! Last week I was presenting at a Gann Jump Start workshop in Sydney and one of the trades that appeared early in the week was a one-day short on Westpac. As Melbourne-based Safety in the Market students know, I had been stalking this one for some time. If you have been studying the Number One Trading Plan lesson on ‘breaking of multiple chart lows’, you will have seen an interesting example on Westpac over the past few weeks. Chart 1 below shows these lows.
Chart 1: Westpac showing Multiple Bar Chart Lows
click to enlarge
The market broke these lows and we could have traded a short order one or two points below the lowest of the lows and placed our stop behind the gap that was created on 14 July. Unfortunately the market gapped back up after a strong move on the US markets overnight and these short positions would have been stopped out.
What we saw wasWestpac moving up to retest a previous gap, which sat on a strong price cluster as shown in Chart 2. This price cluster includes 50% of the 2009 low to 2010 high range, 150% of the 2009 low, a previous low from last year and 50% of the swing down from 30 June.
Chart 2: Price Cluster Around Equal Bar Chart Lows
click to enlarge
We might have watched for the market to come back, sat under the resistance and then shorted out of there. But the market continued up and created an eight day island indicating a false break of the multiple bar chart lows. Why did this happen?
Our resistance cards indicate there was support under the 15 July low from a previous low in July last year, as well as 37.5% from the ‘07-‘09 bear market range and 37.5% of the All Time Ranges card. Building on that with 3rd dimension analysis, there was also support from a 1x1 angle from the ‘09 low. All of this is shown in Chart 3.
Chart 3: Price Support under July Low on Westpac
click to enlarge
So where to from here? At the time of writing we can see a 2-day short and a 1-day long on Westpac. I wouldn’t consider the short trade due to the gap from B to C but it certainly looks like there is some support under the long trade, 100% of which lines up with the June top. (It is pertinent here to remind students that we don’t have to be in the market all the time and during periods of uncertainty it is best to stay out.)
Keep layering all aspects of your analysis to find support and resistance and use this both for entering trades and setting profit targets. I’ll be watching Westpac in the coming days and weeks to see if there is a strong move off the 1x1 angle or a break below it. Keep stalking!
It’s the Journey
Lauren Jones
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