Reading the signs is the key to profit

ALTHOUGH the All Ordinaries fell nearly 80 points last Friday it was only 25 points lower on the weekly chart.

However, it meant we did not see the weekly pivot point to the upside, but the sideways pattern is still in place.

During the week I had an email from a reader telling me most emphatically that the market is not going to “take off” and that we will see 5000 points before 6000.

Most readers will be aware I do not make emphatic predictions on where the market is going.

If I was sure the market was going up then I would have much more money in the market at the moment, as there are many stocks set up prior to a move up.

I am always cautious and wait for the market to give me a clear indication and then I use risk management strategies to ease into the market.

An excellent example of one of the set-ups I am monitoring is Lynas Corporation (LYC) which broke out of the consolidation pattern forming part of the cup-and-handle formation I have described in the past.

This breakout is the trigger I am looking for in other stocks.

LYC also formed another pattern I look for when it moved up strongly to 13.5c and then traded either side of that level for two days. The stop is now 13c, the bottom of these two trading days.

I don’t believe small stocks like LYC would be breaking to the upside if the overall market was poised to fall to 5000 as has been suggested to me.

I would need to see the index close below 5700 for me to become bearish.

Big Un (BIG) closed below its $1.52 stop on Monday this week and was sold on Tuesday at $1.54 for a total of $7680. BIG may just be consolidating after the strong move up from 80c.

I am watching it closely for any sign of another move up.

I was also stopped out of A2 Milk Company (A2M) and bought back into it after similar consolidation. Some of you noticed the buy price was incorrect in the portfolio position for a couple of weeks, but was amended to the $3.88 buy price a couple of weeks ago.

The stop on A2M has been adjusted up to $3.96.

I have been asked about finding the SPI figures and the code.

I believe with most data providers the futures data is a separate package so it will be necessary to start there and the codes for the various futures contracts can be different depending on the provider.

I have also been asked why I don’t look at the market a few minutes before the close and buy or sell then, instead of waiting until the open the next morning when the price may be lower in the case of a sell, or higher in the case of a buy.

The final closing prices are adjusted 10 minutes after the market closes, meaning there may not be the buy or sell signal you thought was there as the market closed.

Also, as in the case of BIG, the opening price the day after the sell signal was several cents higher.