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My last article for Trading Tutors focused on the interesting position of Macquarie Group (MQG). Since then we have seen a drive in the price action and we now have more data to analyse. Chart 1 below shows how the previous lows around $36.70 were broken in the run down from the $39.77top of 12 March.
The 10-day run down was reversed by a strong rebound off the $35 price level and broke through the previous lows. The challenge now is to deciding whether this is a false break or whether we will now head higher. Or even whether we have a first lower swing top on a two-day chart.
The current 11-day run up to today’s price bar has stalled at 50%. We could call this a 50% retracement in price and approximately 100% in time. The ‘Gap Up’ is a sign of strength and could be critical as support if the price action can close the gap.
Chart 1 – Daily Bar Chart MQG
click to enlarge
Another tool we can use to understand the strength of this move is the Volume. Chart 2 reveals a spike in volume on the Thursday before Easter. Whether this spike was a sign of investor confidence or a sell-off of MQG shares cannot be known as volume is simply a measure of turnover and is not directional.
The Volume Bar for 2 April (while incomplete at the time of writing) was very low three hours into the trading day.
Chart 2 – Daily Bar Chart MQG
click to enlarge
Gann Angles is a third dimension technique that can be used to rate strength and weakness as well as support and resistance. Chart 3 displays an angle from a significant high in 2009 and you can see that the current price action is being held by that angle. This will be a key area for me to ascertain future direction. If you are familiar with the use of squares in terms of strength and weakness, an examination of natural squares may provide further insight.
Chart 3 – Daily Bar Chart MQG
click to enlarge
Another price tool that could assist in establishing an indication of direction is a ranges resistance card for the major range from the $15 low of the GFC to the $58.80 high of 2009. For me, the 50% price of that range ($36.90) still holds as a ‘prime’ number in this market.
Chart 4 – Weekly Bar Chart MQG
click to enlarge
When establishing key areas of support and resistance, you must ensure that you have a trading plan that enables you to mechanically trade the desired direction and to quit losing positions without emotion. It is possible to make a case for MQG to rise or fall in the near future. Following a trading plan that can harness big picture analysis will help to generate profits.
Good Trading
Aaron Lynch
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