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Many of you will have heard of the regular ‘Christmas Rally’ that occurs on stocks at the start of the ‘silly season’. If you do your homework, you will find it can start at any time from mid-November to late-December, or not at all. Two-years ago I wrote about my back-testing of CBA and this year I thought it might be interesting to talk about the recent moves on ANZ in the same light.
In a recent Trading Tutors newsletter, I suggested traders should watch for a breaking of multiple bar chart tops entry on ANZ, in anticipation of a rally from the 19 November low. The breakout came even more quickly than I thought it might, with the market pushing higher on 29 November, as illustrated in Chart 1 below: Chart 1: ANZ with Breaking of Multiple Bar Chart Tops Entry
click chart to enlarge
As the fall from October to November slightly overbalanced time and price compared to any previous fall in this down trend, it is possible that this rally might be short-lived, setting up a lower swing top on the weekly swing chart. An alternate view is that the 19 November low is the beginning of a fourth section of the bull market, so we will need to keep an eye on the swing charts and support and resistance levels.
With that in mind, a stop behind the low of each day would potentially still have us long in ANZ at the time of writing (the morning of Wednesday, 12 December), though the market seems to have reached the gap created in early-November and hit resistance: Chart 2: ANZ Daily Bar Chart with Gap
click chart to enlarge
So, is the rally we’ve seen since 29 November a ‘Christmas Rally’? Back-testing tells us that ANZ often commences a rally in November, then pulls back into an early December date before rallying again. Do this research yourself and take note of the trend at this time each year. You might find that will impact the outcome.
My analysis shows there were very few years where there was no Christmas rally and that in most cases the November rally was the more rewarding. That says to me that we may have already seen our rally on ANZ for 2012 and that unless it breaks through this gap, a fall from here may be more likely.
Keep your eyes out for other opportunities as different stocks will rally at different times. Just this morning, the CBA broke above its week of equal bar tops, only to hit the 150% milestone of the most recent ABC. It will be interesting to see where it heads from here.
It’s the Journey
Lauren Jones
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