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Aaron Lynch The Trading Tutors articles are designed to be short and sweet, though on more than one occasion you get a set up in the market that tells a much larger story. There are so many styles of trading and a variety of tools to analyse the markets. Looking at the current action in AMP there is more that can be said to back up last week's discussion on the outlook for this market.
Just to recap, last week as I wrote AMP had closed at $6.58. As I am writing now we are waiting for the market to open and last night's close was at $6.46. We have seen the markets come off more over the last week and being a bear in this market I am feeling very comfortable as the Dow has closed down 103 points last night. We should expect a softer opening this morning and this aligns with my view that AMP has some further downside. The chart below brings us up to date with the price action before Wednesday's open.
Chart 1
click chart for more detail Continuing lower tops and lower bottoms support the bearish sentiment. Taking a clear look at your swing ranges will also support this view. So now that I have set the current scene let's move to the next level – where to from here? It is often said that the only certainty is that there is no certainty! I am looking for history to repeat and for a “plan” or strategy to move forward. One of the tools I use in price forecasting is the Tubbs swing tools. The idea of market geometry is not new and Tubbs, like so many other traders, subscribed to the view that we can use patterns as a way to analyse markets.
The chart below uses the Tubbs 2 point swing rule to highlight potential areas of support and resistance. The Tubbs rules are laid out in his correspondence lessons that are becoming quite hard to find in print these days. The tool requires us to measure a swing in the market – in this case from the February high to the February low. We take this range and project it down to give us price targets.
Tubbs looked at the 100% level or an exact repeat of the range to be the most important. However, including the half and quarters allows for some interesting observations. I have circled in orange where AMP has found short term support at the 25%, 50% and now at the 75% level.
Chart 2
click chart for more detail If this market runs out, as it has been in its bearish move, then the area around $6.06 would be an area to watch for support. Using the more advanced techniques of time will allow you to pin a time frame to it as well. Tubbs' concept is a logical extension of Gann and it overlaps in some areas. It does, however, give you a stronger grasp on market geometry and is one area I encourage you to further your studies in.
Good Trading
Aaron Lynch
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