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Hello and welcome all Safety in the Market students to this month’s dedicated newsletter.
I’d like to share a setup on Mastercard (MA.NYSE) that we discussed at the recent Interactive Trading Workshop in Perth, but before I do, I want to revisit a previous setup on this stock from last year. On 20 September, 2011 we saw a top on Mastercard that could have been a yearly top., as illustrated in Chart 1 below: Chart 1
click chart to enlarge
History has shown that this did not prove to be the ultimate top and a check of the swing charts coming out of that top gives us clues as to why the setup failed.
Chart 2 below shows the first lower swing top entry which proved to be profitable: Chart 2
click chart to enlarge
I remember taking profits on 4 October, with the goal of getting back into the trade on confirmation of the next lower swing top – in other words, the next ABC Short Trade.
But Mastercard proceeded to rise for several days. I placed orders for short setups that weren’t filled and watched the market make an expanding swing range to the upside, as shown in Chart 3 below: Chart 3
click chart to enlarge
At this point (an Overbalance in Price back to the upside), you get a pretty good idea the top is not quite ready and that there is the potential for more upside. I had another crack at this short trade when a Double Top formed on 14 October (as shown in Chart 4 below) but when this was stopped out I decided to leave Mastercard alone and wait for it to give me more information. Chart 4
click chart to enlarge
It is now time to revisit Mastercard, which is currently trading around its All Time High of $428.57 - approximately 207 squared. In Chart 5 below, we can see that Mastercard has recently exceeded 100% of the previous major bull market range: Chart 5
click chart to enlarge
Within this 100% repeat of the previous range, there is a smaller bull market range that has run to 150% of its previous, as shown in Chart 6 below: Chart 6
click chart to enlarge
Remember that your Road Map Chart from the Smarter Starter Pack calls this 150% milestone a “Potential Point A” for a reversal. Also, keeping it nice and simple, we can see that the monthly swing chart has just repeated 100% of its previous range, as shown in Chart 7 below: Chart 7
click chart to enlarge
There is also some Time by Degrees and Squaring Time and Price harmony around the current levels and I recommend you investigate these yourself.
29 February provided a nice Outside Reversal Day entry for Advanced Traders but Gann and David tell us that the safest place to sell is the first lower swing top.
At time of writing (Thursday, March 8th), there is a potential Overbalance in Price short setup, as shown in Chart 8 below: Chart 8
click chart to enlarge
Note the Overbalance in Price, with 22.29 (the AB downswing) more than twice the size of the previous downswing of 9.95.
The only thing missing from this setup is a nice 50% or 100% multiple of one of our major lows resistance cards but there is enough there to have me interested in how this Overbalance in Price setup unfolds.
By combining Price Forecasting with our swing charting, we can identify potential pressure points for a change in trend and look to trade into and out of these levels with safety.
This level of analysis is the focus of our Interactive Trading Workshop and the Advanced Trader Coaching class. If you haven’t been to an ITW yet, what are you waiting for?!
Be Prepared!
Mathew Barnes
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