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I have been in cash since January, 2008 and am still not feeling any great desire to get back into the markets, unless there is a compelling reason. The markets are still skittish despite promising moves in the last week.
Lately however, I have been feeling like a flutter – maybe the Melbourne Cup is putting me in the mood! I also think I need to brush up on my trading skills and be ‘match fit’ for when the markets are set for a good run. And BHP could be a good place to start as I see plenty of movement in the coming weeks.
BHP is somewhere near a wave five low, as evidenced by the following two scenarios:
The 90-day chart suggests it is just about there:
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By contrast, the 150-day chart says there may be just a little more to go:
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Either way, the completion of the wave five low is not far off.
I don’t plan to take this current move higher - it is just a little too late. The Bollinger Band indicates it is not cheap as it is well above the lower band:
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And there seems to be no hurry as the current insipid oscillator suggests the development of a strong trend is unlikely:
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So for the moment I am assuming it will eventually move higher to wave four:
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It will move into an oversold zone by year’s end and I may just use a CFD to get set and short.
I can see a possible over-bought scenario ahead, co-incident with the wave four:
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So BHP at around $41/$42 would be the wave four, the midpoint of the Bolinger Band and a possible turning point.
It will take some time for this action to unfold so there is no rush and we can patiently stalk the stock. This is not a market in which one should be too anxious.
I will review my prognosis on BHP in the weeks ahead and will post the details of my trade on tradingtutors.com on the day I make it.
Stay tuned.
Enjoy the ride
Tom Scollon
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