Aaron Lynch
Aaron Lynch		 Scanning the market as I did after Tuesday’s market action, you may too have found WBC was a potential long trade for September 29th. The next step I take is to analyse the basic information that our charts give us like swing ranges, trend, patterns and also the overall position of the market.

The chart below shows the ABC long trade on WBC and we can see the pattern of higher tops and higher bottoms on our chart. The price action in September has been a little sideways and the current A to B range is $0.62, roughly 200% of the previous up swing of $0.30. We could say that the ranges are in proportion.


Chart 1

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Taking a look at the weekly chart is an absolute must as it adds a perspective that is often missed by only focusing on the daily chart. The weekly chart below shows since the March 2004 high, there has been a successive series of lower highs and lower lows. This pattern confirms a down trend in effect and it’s not surprising that the ABC long trades have not performed well in this time frame. Most of the ABC long trades have been “ambushed” at Point B. That is, the price action from Point C has failed to take out Point B.

The current swing range up on the weekly chart is $0.75, this is in proportion to the previous up swing of $1.26, however, is far smaller. We are not seeing the classic pattern of expanding ranges on the upside and contracting ranges on the downside even though the weekly trend is up.


Chart 2

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I have also included the ABC pressure points tool on the range from the August low and the current weekly swing top. You may note where the orange line is circled is the 50% pressure point Chart 3. WBC last week closed exactly on the 50% and at this stage has not managed to close above the 50% $17.37. This pressure point is proving to be a strong resistance point at this time.

Chart 3

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Finally the last reference you will want to make is the chart of the sector. This is a good indicator of overall strength in the broad market. In Chart 4 below the XFJ or S&P ASX Finance Sector is shown as a bar chart with a swing overlay.

Since the bullish run in March 2003 we have seem some short term trends, however, of recent times the sector is clearly sideways as marked in orange.


Chart 4

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Learning to differentiate between ABC trades is a skill that you will want to master; this ultimately improves your trading results by selecting higher probability trades. Based on the sideways sector, week position on the weekly chart with contracting ranges this may well be a trade to leave until a stronger confirmation of a bullish move was at hand.

Good Trading

Aaron Lynch