Finding the Trades

Those clients who have attended a Trading Tactics Seminar in 2004, have been part of the new improved format. The feedback from those clients who have come back in 2004 as re-attendees has been excellent. If you haven’t been to a Trading Tactics Seminar for a while and qualify for the lifetime re-attendance, it may be wise to visit our website or call one of the team and book in. Part of the new format is to give attendees current market trades for the following week. Recently at the Brisbane seminar we put together the Trading Plan for a long ABC Trade on the weekly chart of the stock, QBE.

Prior to the seminar I run ABC scans and reviewed weekly charts looking for possible long trades on the ASX. Then using criteria from my Trading Plan, I rate the various trades, hand picking the best trades for the seminar. This week we will run through the basis of picking the QBE trade and risks associated with taking the trade using a $20,000 account. In Chart 1 we have the weekly Swing and Bar Charts for QBE.

The first piece of information from the chart that attracted me to this trade was the size of the A to B Reference Range. Point A came in during week ending February 6, 2004 at $10.06, Point B during week ending March 5, 2004 at $11.50. Giving us a Reference Range of $1.44. Comparing this to the previous up swing on the weekly chart of $0.79, we had expanding ranges. Secondly, the Estimated Point C for this trade calculated out to be $10.78. The actual Point C for the trade occurred during week ending March 26 at $10.91, rating this as a strong trade, based on a less than 50% retracement. Finally, the market had made two upward waves and a third up wave seemed in perfect order.

The 25% entry limit for this trade was $11.27 and the stop loss was placed at $10.90. Making the theoretical risk per share on this trade, $0.37. With a $20,000 account you can risk a maximum of $2,000. To determine how many shares we can buy for this trade and stay within our capital rules we just simple divide $2,000 by $0.37. ($2,000 /$0.37 = 5,405 shares.) The problem now becomes the fact that we cannot afford this many shares with a $20,000 account. Basically for this trade we can buy as many shares as we like with our $20,000 account and stay well within our 10% rule. For some 10% is too much risk on every trade and this situation would suit them fine. For those who wish to get closer to the 10% risk, increasing their exposure, but also increasing the potential returns, Individual Share Futures would be the way to go. At the Brisbane Trading Tactics Seminar we covered the orders for taking this trade using both the physical stock and ISF’s.

Last week the market crossed the 50% Milestone for this trade and puts us in a no risk or profit situation depending on where the trailing stop has been place. The trade was entered at $11.19 and the market closed on Friday at $11.56, currently seeing us up $0.37 per share. Using 5 ISF contracts (equivalent to 5,000 shares) that’s a profit of $1,850.

A number of clients who were at the Brisbane seminar took this trade, for some it was their first entry into the market. We plan to continue highlighting our favourite ABC Trades for the upcoming week at future Trading Tactics Seminars, so like I said before, it might be wise to book yourself in and get along.

Until next week......

Noel Campbell