A week is a long time in the mar­ket


JUST like pol­i­tics, a week in the mar­ket can be a long time. Last week a di­ver­gence oc­curred be­tween the ASX 200 and the SPI fu­tures con­tract it trades against.

There was also a sig­nif­i­cant di­ver­gence be­tween BHP and RIO, an­other pair of stocks that con­sis­tently move in the di­rec­tion the di­ver­gence in­di­cates. In the case of the in­dices, the ASX 200 did not trade be­low the low of two weeks pre­vi­ous and the SPI very clearly did, in­di­cat­ing both would move to the up­side.

BHP traded well be­low the early May low and RIO did not trade any­where near that low, again in­di­cat­ing both would move to the up­side. As of Wed­nes­day this week the in­di­ca­tions of both these di­ver­gences have come to pass as all four have moved to the up­side.

It is also pos­si­ble that we will see weekly pivot points to the up­side on the All Ords and the ASX 200 by the close of trade to­day (Wed­nes­day). This will re­quire the All Ords to close above 5826.

The strong stocks in the mar­ket are still health care and tech stocks along with many re­source stocks.

None of the stocks held was stopped out last week, but there has been no op­por­tu­nity to raise their re­spec­tive trail­ing stops as yet. How­ever, on Wed­nes­day The A2 Milk Com­pany (A2M) traded down to a spike low of $3.80 be­fore re­bound­ing to be up on the day. This tells me the $3.80 stop is def­i­nitely strong sup­port and a break be­low that would war­rant sell­ing.

Pan­toro (PNR) also spiked down to its stop level of 23c on June 23 be­fore mov­ing back up to its open­ing price for the day, con­firm­ing the va­lid­ity of its stop.

If you are look­ing at stock charts, Bougainville Cop­per (BOC) is a small re­source stock form­ing a clas­sic cup and han­dle pat­tern, but the vol­ume is far too low for me to con­sider trad­ing it.

An­other stock I men­tioned some time back, Pep­per Group (PEP) had formed a clas­sic half­way can­dle pat­tern on the weekly chart. The tar­get for the rest of the move would be around $3.80, which also hap­pens to be its all-time high.

It will be in­ter­est­ing to see how it per­forms.

Be­cause the stop on A2M is above break even I have been look­ing for an­other trade and on Wed­nes­day I had to de­cide be­tween two stocks that formed daily buy sig­nals. They were Big Un Ltd (BIG) and Ly­nas Cor­po­ra­tion (LYC).

BIG formed a strong con­sol­i­da­tion pat­tern be­tween 60c and 80c with a pro­jected tar­get around $1, and has now traded just short of the $1 tar­get. Wed­nes­day’s buy sig­nal is in­di­cat­ing it will likely move above $1– a sig­nif­i­cant sup­port/re­sis­tance level. I de­cided it would be more pru­dent to wait un­til it has bro­ken above $1 and had a pull­back to test that level be­fore look­ing for an­other buy sig­nal.

LYC has tested the 10.5c level three times in four months, telling me it wants to break this level. So I bought 40,000 shares yes­ter­day.

PORT­FO­LIO PO­SI­TION Cash ......................... $327,782 Shares ........................ $27,905 To­tal ......................... $355,687 Start­ing cap­i­tal of $50,000 in July 2006. www.the­day­trader.com.au

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