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While equity markets have continued their upward surge, one stock has grabbed my interest, thanks to a student posting on the Discussion Forum. It has excellent time and price harmony on the daily picture, which we can examine and compare to the bigger picture.
The stock code is QBE on the ASX. QBE is an insurance company, so perhaps summer in our land “of droughts and flooding rains” is impacting the share price at the moment. But I would suggest that the pullback since 21 January was very predictable, based purely on the charts.
Chart 1 shows the daily bar chart and contains quite a lot of information. The previous lows in August and September line up with a gap that formed in November. The market ran down for 47-days from October to December and then back up over another 47-days to 21 January, when it halted on that gap. Although that gap formed before we had the range from October to December to measure, we can now put a resistance card on that range, and blow me down – the gap is right on the 50% level. So what have at this point is a 50% price and 100% time alignment. Chart 1: QBE Daily Bar Chart with Time and Price Balance
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I was expecting some resistance on the small picture, caused by the gap lining up at 50% of the previous lows but when the time balance came in, it was almost certainly going to fall away from there. A ‘stop and reverse’ below the low of the 21 January would have had you out of any long position and enabled you to take advantage of the ensuing fall.
Now to the big picture: why might we have been long into 21 January? On the monthly chart (Chart 2 below) there appear to be double bottoms, although the second bottom is slightly higher than the first. Whenever I see that pattern, I look for a price cluster beneath to support to a bullish move out of the lows. The main price support is the nice round $10 price that the market was pulling up from, and 25% of the All Time Range. But there was no clear 50% level or multiple of any low that clustered with this. Chart 2: QBE Monthly Bar Chart with Double Bottom Pattern
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However, if you refer back to the daily chart, there was terrific Time by Degrees harmony with the 5 December low (the second of the double bottoms) and the market gave a lovely first higher swing bottom entry on 18 January, which ran well past 200%. Chart 3: Time by Degrees Harmony on QBE
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So where to from here? On the weekly chart we’ve had an ABC short that would have been filled yesterday, and today (Wednesday) a daily ABC short is appearing. Until that gap is challenged and closed, it will act as resistance for any further bullish moves, though I would suggest the $10 mark will also act to hold up QBE. The time and price harmony in this market make it quite attractive to seek out further opportunities and if you are yet to specialise in a market, this might be one to investigate further.
It’s the Journey
Lauren Jones
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