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Australia’s Macquarie Bank copped a credit rating downgrade this week, following recent downgrades of three of the big four banks from ‘AA’ to ‘AA-‘. What does all this mean to traders? Not much, until the banks break out of their contracting sideways trends. This downgrade hasn’t resulted in any substantive changes to share prices, so I am left waiting and stalking my chosen markets until something happens.
It has been quite a while since I covered the banks in a Trading Tutors article and the monthly chart for Westpac Bank (ASX:WBC) explains why. The stock has been going sideways in a contracting wedge pattern that will have to be broken sooner or later, as illustrated in Chart 1 below: Chart 1: Westpac Bank with Contracting Price Pattern
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Last week I wrote about U.S. stocks surging onward and upward and last night we saw a further strong move on the Dow Jones and S&P 500 indices, supported by strong volume. Now a word of caution: volume on the futures contracts have increased at this time due to contract rollover, so while it looks like the start of another run up, I am wary that this could be a false break. I will be looking for a safe, first higher swing bottom entry before I go long.
At this point I would like to share a U.S. stock I am currently stalking. There is a double top appearing on Caterpillar (NYSE:CAT) and in Chart 2 below I have shown these double tops lining up on a multiple of the 2000 low. A one-day first lower swing top was taken out last night, so I will be watching for a two-day lower swing top or perhaps a triple top to form. Of course, if the double tops are taken out, this will be a strong signal and long trades will be in order. Chart 2: Caterpillar Weekly Bar Chart with Double Tops
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In Chart 3 indicates some additional resistance at the double tops - at 50% of the leg up from the 2009 low to the 2011 top. This clusters with 100% of the weekly swing up from the October, 2011 low as is displayed in Chart 4. These two price levels, combined with the multiple of the low and the double tops, have me very interested. Chart 3: Caterpillar with 50% Milestone
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Chart 4: Caterpillar with 100% Repeat of Range
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While the Aussie banks aren’t giving me much to trade at the moment, running daily scans on U.S. and Australian stocks (and looking at the bigger picture) has provided interesting and new markets to stalk. Patience has been essential in recent months and, as St Augustine taught us: ‘Patience is the companion of wisdom’. Keep an eye in CAT over the next few days and you might just be on a great trade.
It’s the Journey
Lauren Jones
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