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The Australian ASX 200 index is made up primarily of resource and banking stocks. So far this year the resource stocks have shown weakness whereas the banks have held their own, resulting in an overall uncertainty in the direction of the index. The banks have won the battle insofar as we have seen rising bottoms (as shown in Chart 1), but this has been coupled with contracting ranges and no higher tops have been reached since October last year. This is just a daily chart but if you take a look at the monthly view, it is even more obvious. Chart 1: S&P ASX200 Index Daily Bar Chart
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A break-out of this pattern is inevitable at some point and in previous articles I have discussed watching stocks such as Westpac for indications of which way it might move. While Westpac is showing signs of an upward break-out, Macquarie Bank (ASX:MQG) has had a pull-back from the price level of twice the 2009 low, as shown in Chart 2. So far this week MQG is pushing higher and could potentially retest the late March top. I’ll be keeping an eye on whether it pushes through this resistance level or falls again. Safety in the Market students who have studied the Ultimate Gann Course should also take a look at the 2x1 trading day angle from the 2009 low. Chart 2: Daily Bar Chart of Macquarie Bank
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At this point I would like to revisit some terrific setups across the US Banks that I have been stalking for the past few weeks. I have mentioned Wells Fargo (NYSE:WFC) in previous articles but I am watching many of the banks that have double top patterns appearing. Take a look for yourself at Bank of America, Bank of New York Mellon and Capital One Financial, to name just a few.
Chart 3 shows Bank of America and there is a double top formation at 50% of the 2011 yearly range. This lines up with the 1x1 Gann angle from the 2009 low and hence we have seen a pull-back. The first lower swing top under this double top ran to 200% but on the daily swing chart the trend has just changed from down to uncertain, so we might have a bit of a rally before further falls. Chart 3: Bank of America Daily Bar Chart
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At present the US Banking Sector is looking weaker than the Australian banking sector. A move in either direction can be profitable for the trader and part of your daily routine should include a check on some of these US and Australian banking stocks so you will be ready to take advantage of any potential trades that appear. If you have never taken a short trade or have never traded the US market, one of these banks might just provide a breakthrough learning opportunity.
It’s the Journey
Lauren Jones
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