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Commonwealth Bank of Australia (CBA) is currently offering an interest rate of 4.4% p.a. on a five-month term deposit, yet by trading CBA stocks or CFDs over a six-month period from around February to September last year, you could have more than doubled your money! More about that later…
Following those falls from February to September, 2011, we could have traded the subsequent bullish move in CBA that has recently completed four clear sections, as shown in Chart 1 below: Chart 1: CBA with Four Sections
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Could the completion of this fourth section mean CBA is due for another fall, similar to what we saw in 2011? The fourth section is a 100% repeat of the first section but we need more reasons to be looking for a change in trend: the low of September, 2011 was supported by a cluster of price levels, so we should be looking for similar price level resistance at this current high to decide whether we are seeing more than just a retracement of the uptrend.
The following three charts include ranges and lows resistance cards, with the 31 July top sitting on 87.5% levels and at a 100% multiple of the All-Time-Low. But this alone isn’t convincing me that we are looking at a major turn.
Chart 2: CBA with 2007-09 Ranges Resistance Card
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Chart 3: CBA with 2010-11 Ranges Resistance Card
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Chart 4: CBA with All-Time-Lows Resistance Card
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The monthly chart tells us that CBA hasn’t reached the 50% repeat of the range from the 2009 low to the 2010 high. If the market was to pull up right on this price on a pressure date, I would be looking for a stronger turn, as this would also be a double-top with the 2010 high. This might be one place to watch for our forecast dates later in the year.
Chart 5: CBA with Monthly Ranges Repeating
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Chart 5 illustrates what could be a false break of the 1x2 angle from the All-Time-High, which was also falsely broken in April, 2010. If the market falls from this angle, this could signal a weakening market. The failure to reach even 50% of the 2009-10 bull range also shows weakness. A change in trend on the big picture might see this market fall straight through to the 2x1 angle. Chart 6: CBA with Angles
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We have recently seen a change to a down-trend on the daily and 2-day swing charts but the bigger picture trend is still clearly up. The down-swing from 31 July overbalanced the one from the May top and a short opportunity presented with a lower swing top forming on the seasonal date. At the time of writing, there is an ABC short appearing that is worthy of further investigation.
Keep watching the trend on the big and small picture on CBA. Whichever way it goes from here, there is likely to be potential for profit.
At my Trading the Banking Sector webinar on 25 August, I will run through the series of CBA trades from February to September, 2011 that I mentioned at the start of this article, in greater detail. We will analyse this period trade by trade, showing you how early entries on predictable turns (combined with basic ‘with-the-trend’ ABCs) made it possible to more than double your trading account in less than six months! Don’t miss it.
It’s the Journey
Lauren Jones
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