|
Aaron Lynch Well, most would have seen the most recent bullish rise on James Hardie JHX. My colleague Noel Campbell called the double bottom run and strong push in his article Trading Tutors Issue #105 29 Apr 2005 and it was a trading example that was discussed at the corresponding Trading Tactics workshop. This move has provided solid ‘ABC long' results and been a great market to trade.
Well, to update you on the position of this market, it's now July and this trade has come up again at the Interactive Trading Workshop in Adelaide as an example. The chart below outlines the current position of JHX. I have applied the manual ABC pressure points tool to the recent double bottom. Applying the rules that David Bowden laid down for trading double tops and bottoms, we can see the price action has crossed the 200% milestone. Looking at the price run in July it is likely to say that JHX is overbought and a correction may be due.
Chart 1
click chart for more detail We watch this area for significant resistance and looking at the chart below we can see that the price has managed to push through the 200% pressure point only briefly, and has then spent the next few days holding below the 200%. Using Gann's basic premise of the safest place to sell being the first lower top; we were presented with a lower top entry on July 26th.
Chart 2
click chart for more detail With any setup in the market we want to combine the use of time and price. Leading into this area of the market, the Time by Degrees technique was signalling that this market was moving in an identifiable harmony (refer to Noel's article for more information). Using the time techniques there is a case for the current top holding as a point of resistance. The chart below looks at cycles using Time by Degrees. Measuring back from the current top on the July 21st we see that at 180 degrees, or half a cycle, there was another high.
Chart 3
click chart for more detail Trading price setups with time rules can harness an extra level of confidence to ensure that we can get a low risk entry. The closer we can enter to a turn, the more we can minimise our losses if we get it wrong. Sticking with the swing chart to define the entry and exit points will give you a defined plan to ensure you manage the psychological side of trading.
Good Trading
Aaron Lynch
|