Ready, Set, Nearly Ready To Go

Over the last 12 months I have focussed many articles on the benefits of the ABC Trading Plan. These examples have highlighted the profit that is achievable when your efforts are focused with a plan and using great tools like swing charts and the Starter Pack Software. The local equity market has been trending extremely well and this has tied in fantastically with the trend trading principles of swing charts. On one occasion this year I penned an article on a great ABC trade that occurred on Dell, the American computer hardware manufacturer. This led to more than one trader pursuing these great opportunities in the US equities market.

Back testing a market is an absolute when you try any new market. The US equities are something I have been following recently and with some level of excitement I might add, as the results have been very encouraging.

In the charts below I have included a few key markets on both the NYSE and NASDAQ that have caught my eye using the ABC plan.

Oracle Corporation ORCL a large IT company has been in a downtrend and the four most recent trades that have been triggered here on the down side have all seen a profit returned. Four trades two saw exits taken at the 100% milestone, one at 75% and the most recent would have seen us stopped out just above the 50% for a $0.22 profit per share.

The diversity that is offered in the world’s largest arena avoids some of the issues that we sometimes find trading here. The amount of companies that are liquid and creating ranges is almost overwhelming. The next chart below of Microsoft MSFT is shown as a swing chart currently trading around $25. Trade 1 was triggered at an entry price of $26.84 and safe exit at 100% was possible at $25.23. In this strongly trending market you may have chosen to use the Swiss Franc style of stop loss and you would still be in the trade. Trade 2 was also profitable with our stops being triggered just above the 75% level for a $0.53 profit per share.

The third example below Merrill Lynch & Co MER is a high priced stock currently trading around $60. Price action of the March 04 high signalled an ABC short trade and safe exit was possible on March 24 (marked Trade 1). Following that exit, a higher top higher bottom day was made giving us another potential short trade that you may want to follow for your reference (marked Trade 2). The entry price as per the chart below is at $58.66 with initial stops being placed at $59.48. Due to the large reference range and the high price of the stock, our stops seem quite wide though it is exactly in line with the plan. If we see a lower top and lower bottom we may see this trade executed on March 26. Failing that, we are still in a position to trade short, another plan would need to be created though.

Going back over the last 12 months the ABC trading plan results have been excellent on nearly all the companies I have investigated. Trading the stock alone seems encouraging enough when you see the results, though I am sure a lot of people will deem the cost of buying and selling stocks as being prohibitive. When you consider most people baulk at purchasing Rio Tinto RIO at $35 on the ASX, trading high priced stock like MER at $60 US starts to seem limiting. That’s why understanding the use of derivatives like options, futures or even CFD’s becomes appealing as it limits the outlay required to control high priced stock.

So where to from here you may be asking, and how can you get your hands on this data for your own trading? Rest assured that we are working hard to bring it to you, as this becomes available I will be in contact with all the Safety in the Market traders to update you on the how’s and when’s. Watch this space.

Good Trading

Aaron Lynch