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Noel Campbell In this week’s article I have something that has the potential to be extremely exciting and profitable. Over recent weeks the focus of my articles has been on futures markets. Now CSL is not available as an Individual Share Future (ISF’s), however it can be sold short using the physical stock or Contracts for Difference (CFD’s). The rise and rise of CFD’s has increased my leaning toward considering more of the stocks that make up the ASX100, rather than just those with an available ISF. A number of traditional futures brokers offer access to more stocks listed on the ASX, through the introduction of direct access CFD’s. A discussion on direct access CFD’s versus market maker CFD’s is an excellent topic for another time.
CSL has been a darling of the ASX during this incredible bull run, with the stock rallying from a low of $11.57 in May 2003 to the recent high of $32.64, that’s just under a 300% increase. Incidentally CSL has been one of the successes of SharesBulletin (www.sharesbulletin.com.au). Anyone who has owned CSL for the long haul knows this rally has just been a recovery of some huge losses in the stock since it made it’s all-time high of $52.00 in January 2002. It’s this range down from the all-time high to the 2003 major low that becomes the first part of our technical focus. In Chart 1 you can see where we have the Ranges Resistance Card for the range from an all-time high of $52.00 to the bear market low of $11.57.
Chart 1
click chart for more detail
The 50% retracement level for this major bear market range comes in at $31.78. The most recent top is $32.64, with the stock recently retesting the $31.78 level. The second key point of interest is not related to Resistance Cards, but is basic support and resistance theory, with some old bottoms (support) in October 2000 and February 2001, now becoming a potential high (resistance). This is our first cluster of potential Pressure Points.
The next points to consider takes us back to Resistance Cards. W.D. Gann’s teachings say that percentages of old bottoms will help call future tops. The all-time low for CSL is $2.25 in November 1984. Taking percentages of this low we find that 1450%, or 14.5 times this low calculates out to be $32.625. Next we will look at percentages of the recent bear market low of $11.57. When you construct the Lows Resistance Card for $11.57 you will find that 275% of the low comes in at $31.81.
Putting this all together, we have the major 50% retracement, the old bottoms and percentages of the two most important lows CSL has ever made. Now this certainly appears to be a cluster of tremendous interest. Knowing how to trade this set-up requires a completely separate set of skills. This is certainly a time when those who have advanced entry skills into the market are best placed to take advantage of this set-up safely! Of course should CSL have the strength to break this most recent high, the stock will certainly look destined to move to higher pressure points. If you again review Chart 1 you will see where I have marked the 62.5% and 75% retracement levels for the major bear market range. If the stock does push higher, these will be the next levels to watch. For now the stock has to prove itself before those targets become possibilities.
Until next week......
Noel Campbell
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