Back on to the market rollercoaster ride. At the start of the week the markets continued to move lower with momentum, but in the end recovered much of the earlier losses. In don’t think I have ever seen that many big bullish pin bars (open and close at top of the bar) when going through the stocks of the week. Still too early to say if we have found the bottom yet (that’s my point of view).
In times like this it is easy to get emotional about the market and to feel like the market has turned against you. Let me tell you this is the natural cycle of the market and even moves like this present lots of opportunity to make money for people that keep their cool. I know this is easier said than done. The actual opportunity to use this period to make nice profits may not come immediately and it might take weeks, months or even years for you to benefit from this move.
What I mean is not part of the Home Study Course and I won’t elaborate too much at the moment, but if you understand what price action is, it is definitely worthwhile to watch your bars when price returns back to any major low or in the current case to big moves up or down.
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First my sincere apologies for missing a week of updates. I just got caught up with a few things over the weekend. Many people thought, we will see a rise in the Australian share market following the low in June. After a week dominated by losses the Australian 200 index is just 4 points away from the June low and looks like it will march straight past it. Once again, the Australian market seems to be weaker than its US and European counterparts. However there is still a lot of underlying strength in the markets considering the global news.
The Euro zone is still under a lot of pressure, with Italy being the latest country in difficulties and the situation in the US does not look very promising either. There are doomsayers who reckon that what we saw during the financial crisis is nothing compared to what we can expect if the USA defaults on their bills. S&P already indicated there is a good chance they will downgrade the credit rating of the USA.
It just does not look like the market itself beliefs this and they are expecting another last minute parachute. The markets are moving cautiously lower and once we see a positive resolution should start a nice rally up.
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The Australian share index finished the week stronger following the major European markets and US market, but still lagging behind their strong performance for the week. The rise in the markets follows the avoidance of Greek’s bankruptcy (at least for now). Interesting though the world focuses entirely on Greece and you hardly hear a word of the debt crisis the USA faces. If the US fails to raise the debt ceiling by August 2nd, it will have to inform creditors that it cannot pay its bills. I reckon the closer we get to the date the more nervous the markets will become.
Back to our share portfolio and the HSC. As mentioned last week WPL (Woodside Petroleum) had two closes below the uptrend band and hence triggered a sell on Monday. What I forgot to mention was that it showed already weakness early May triggering selling half of the position with a small profit. Overall though WPL resulted in a 3.6% loss. For this week I also have OSH (Oil Search Limited) with two closes below the trend band. For anyone that didn’t agree with my take on TCL (Transurban Group) it has now very clearly two closes under the uptrend band.
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This was another interesting week in the share market. The XJO (Aussie 200) finished the week 20 points lower compared to previous week. Looking at the weekly bar chart, the bar for the week is a bearish outside vertical bar, which gives a bearish outlook for the next couple of weeks. Based on this my prediction two weeks ago was wrong. I had a look at my cycle charts and noticed that we are currently in the orb period of the 19 week cycle. Based on this it is very likely that we see another low somewhere between now and the first week of November, just in time for a nice rally leading into Christmas.
I expect the low to be somewhere between 4500 and 4375 points. I personally find cycles a great tool when looking at the overall market and there is high probability that the market follows the previous patterns. Looking back at the post from 6th February I mentioned that I expected the low of the 53 week cycle to be between February and middle of May this year. The final low was actually on the 21st of May and the market retraced just over 38%.
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In midst of packing for our upcoming holiday, I managed to review the portfolio for the week. Again there wasn’t much movement in the portfolio, with the profit of our open positions declining due to two more additions (GPT and MGR) that finished the week lower. Just as I wanted to keep it short for the week, I have noticed quite a number of stocks that have given the buy signal for Monday and others that could be a potential buy during the week depending on the price development.
The buys according to my analysis are: TEL (Telecom Corporation of New Zealand) and ERA (Energy Resources of Australia). Following stocks need their monthly swing to point upwards in order to be a buy: SGM (Sims Metal Management Limited) 18.75 or higher, PRY (Primary Health Care) 3.79 or higher and TOL (Toll Holding Ltd) 6.14 or higher. PRY looks particular interesting with a double low for the dates 21st November 2008 (3.46) and 2nd July 2010 (3.45).
I also have a sell for the portfolio. WDC (Westfield Group) had two closes under the uptrend band.
The transactions for last week were: Read more…
