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Aaron Lynch The dust has settled and the bad jokes have started to fade away when talking about AMP. It was not that long ago that the talk of the town was how this long standing insurance company had broken the hearts of the retail investors with a dramatic fall in price through 2001 to 2003.
The weekly chart below highlights the rocky road it has travelled in that time and shows the more positive movement in price for the retail investor in recent times. The chart shows how the recent top in February this year coincided with the 37.5% level in the Gann retracement tool.
Chart 1
click chart for more detail The question that is starting to rise in people's mind would have to be “…is this current retracement a pause in the bull run or the start of something more sinister?” Equipping yourself with the ability to trade both sides of the market is a key factor for success and looking at the setup on AMP there may be some more downside left to come. For those trading off the swing chart you may have already seen some strong setups to short AMP.
Gann talked about “Sections” in a market which one could also call “Defined Movements”. This is where we start to see some cross over between the works of Gann and RN Elliott who developed Elliott Wave Theory. Waves or sections can be easily defined in hindsight, but present a challenge to identify as they are forming. To remove some of the subjective nature of this style of analysis I keep it as simple as possible and look for evidence to support my view. Overall I am looking for harmony in the market.
The current pullback in AMP is shaping up with some easily defined sections, just to back track for a moment, Gann talked about three main sections in a bull or bear campaign. The chart below details how we have potentially seen two of these sections complete. To confirm that a section has completed we would like to see a balanced pull back in both price and time. The top that was formed in March this year was exactly 50% of the first range down we can suggest than this is in balance.
As its stands the second section has seen a pullback in price, over a limited time frame so it may be a little early to call section two complete. In trading you will not always be right but it is better to have a plan and modify it rather than no plan at all.
Chart 2
click chart for more detail If the sections in the current bear move are as I have laid them out, we could expect to see some more downside on AMP, with this is mind we can start to project a price point and a time for a potential end to the bear run. In this example we might see the $6.00 price point reached later this month.
Good Trading
Aaron Lynch
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