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In last week’s article on CBA, I suggested you to conduct a similar analysis on ANZ (ANZ:ASX). The daily swing on ANZ was showing a down trend and the weekly trend had become uncertain. Due to the spike high on 18 October, we have seen the biggest pullback of the bullish move since the August low. This is known as an ‘overbalance of price’. In Chart 1, I have circled the swing ranges of some previous pullbacks for you to compare:
Chart 1: ANZ Bank Weekly Swing Chart Showing Overbalance of Price
click to enlarge
The next thing to do is measure the number of days in this pullback and compare this to previous retreats. This reveals that we also have an overbalance of time, as shown in Chart 2 below. An overbalance of price and time is a strong indication of the beginnings of a change to a downtrend, which means we should be on the lookout for more short trades. However, we need an upswing to give us a point C for an ABC short trade setup, whether that be on the daily or the weekly chart.
Chart 2: ANZ Daily Bar Chart Showing Overbalance of Time
click to enlarge
After such a fall on the weekly chart, I would expect at least a few days up, perhaps even an up-week. However, as Monday this week (19 November) was a down day lower than the whole of last week, to turn the weekly swing chart we would be watching for either an outside bar this week or an up-bar next week on the weekly bar chart. Another reason to expect a reaction at this point is a cluster of price support at the current level. This is worth exploring in more detail.
Take the repeating range in Chart 3 below, which is the range I was watching for overbalance. Note how the market reacted off the 50% and the 75% levels. It is currently hovering around the 100%. ANZ will need to break below this for support to become resistance.
Chart 3: ANZ with Repeating Range
click to enlarge
In the Safety in the Market Discussion Forum I mentioned several more price clusters at this level. These are illustrated in Chart 4 below and include 100% of the first ABC from 23 October and 75% of the second ABC from 12 November, 75% of the All-Time-High and twice the 2009 low. If you were shorting this market through here, this might be a good place to tighten your stops.
Chart 4: ANZ Daily Bar Chart with Price Cluster
click to enlarge
So where to from here? For the trend to change on the weekly swing chart, we need a weekly up swing, so keep an eye out for this. There is an expanding down range on the monthly swing chart but we have also seen consistently expanding up ranges since August. Watch for a lower swing top on the weekly and monthly charts for a big picture confirmation. In the meantime, there could be daily setups worth investigating.
It’s The Journey
Lauren Jones
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