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At the end of March, we finally saw Westpac Bank (ASX:WBC) breakout to the upside from its contracting monthly ranges. Does this mean there are some potential long trades in store? Or should we be watching for a reaction to the downside before a clear trend emerges? The breakout on the monthly chart is illustrated in Chart 1: Chart 1: Monthly Bar Chart of Westpac Bank showing Breakout
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What I like about this move to the upside is that it has pushed through an important price resistance level, which (at the time of writing) appears to be acting as support, as shown in Chart 2. There is a one day ABC long trade at present with point C on the cluster of 50% of the 2009 to 2010 range with 1.5 times the 2009 low. You might like to set up these resistance cards yourself and see if you can find more price support for this setup. Safety in the Market students who have studied Time by Degrees should also look for the time harmony with point A and Point C, which is looking quite interesting. Chart 2: Weekly Bar Chart of Westpac Bank with Price Support
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Wells Fargo Update: Recently we have been watching a triple top setup on Wells Fargo (NYSE:WFC). There has been no strong move down from this setup and the last session saw equal tops form on the daily chart. There has been low volume during this period, even on the big up day (shown as the last bar on the chart) that brought us back to the equal tops. I have highlighted this in Chart 3: Chart 3: Wells Fargo Daily Bar Chart with Equal Tops and Volume
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I will be watching for a break of these multiple bar charts for a sign of strength in the market and the possibility of long trades. But I will also be watching for another fall from here as I am seeing a better setup with regards to Time. Between the double top pattern formed by the February, 2011 high and the current April high, there were a series of multiple lows from August to October. The average of these lows gives us approximately equal timeframes down and up again, which is a nice balanced setup for a double top, as shown in Chart 4: Chart 4: Wells Fargo Daily Bar Chart with Balanced Double Tops
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There is plenty to watch in both the Australian and US markets at the moment. With the US index generally trending up and areas of the Australian market looking set to begin new trends, potential setups such as the Wells Fargo multiple top scenario and the Westpac Bank setup are worth stalking. You might just find a nice little trade or two.
It’s the Journey
Lauren Jones
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