A full plate. Fri Nov 6

The US markets, as incorrigibly optimistic as ever, rallied around 2% last night and here in Australia, the land of drought and flood, boom and bust, we've temporarily shaken off our bearishness to rally 1.3% by 11.21 am.

11.39 The headline refers to the number of positions I now have because I've added 3 to the 10 I was already carrying. They all seem genuine to me and because I've defined my entries and exits more sharply I'm more comfortable with the book.

They're all long positions with the market reversing after a steep sell down. The first is in Axa, at an entry price of 417 and 421 for an average of 419. I didn't quite get a full position on here as the stock jumped ahead, it's now at 427.

This is a straight reversal after a very sharp, almost unremitting series of down days. It's bouncing off a point just above previous highs in July.

The next one is in Ipl, another reversal where I've bought at 262. This is after a series of down swings and given how many positions I'm carrying, I'm now wondering whether I need this one. These can reverse nicely but they're more likely to form a typical 1-2-3 buy signal so I can probably afford to wait. I'll see what the rest of the day brings before making a decision.

The third position comes from a stronger signal in Cey. I've been waiting for this for a few days and I'm long at 325 - the break was at 326. I do have some concerns, I'm surprised that it has taken until today to push on and there's not a lot of broker enthusiasm for the stock to help it along.

12.02 Most of my positions are going well to the extent that of my 4 short positions, 3 are square to marginally down and only Djs has rallied against me. This leads me to today's conundrum. My tightest stop here would be at 546, just above Wednesday's high. However, my take on this is that it's just a 3 wave rally from the break below 560 so it would be more rational to have a stop around there. As I'm also quite long, I'm happy to have any short positions on that I can justify. Part of me is questioning the motivation of this decision but on reflection I don't see this as a reluctance to crystallise a loss but simply as the most logical interpretation of the chart.

2.24 Not long back from lunch and I've cut Cey at 322 (v 325) as I realise what it is I'm uneasy about. This looks like the sort of retracement rally that Djs is having where a lower high has been made and the overall correction is still incomplete. I'm allowing my positions to run as a rule having discovered that I was missing out by being too trigger happy; however, in the case of Cey I think that I've probably misread the chart.

Meanwhile, Axa has gathered steam to be up at 432 and Fmg is showing signs of a Friday afternoon short covering rally as it is starting to run. I'm interested in a reversal buy in Qan as well. The stock looks like it could rally and unlike most of the market, it's still making higher highs and lows on a weekly basis, with the last swing low at 240 in early September.

4.12 Well, that's it then, a solid rise of 1.9% by the close. It finished on the highs too which bodes quite well for Monday. Quite a good day for me overall except that the biggest mover of the day was Djs which I'm short. I'm still quite happy with the position though.

Awe inspiring. Thu Nov 5

I don't know whether AWE is all that inspiring but it's had a straightforward buy signal - admittedly in the middle of a trading range and therefore not as significant as it might be. I've taken it nonetheless, going long at 267.The overall market is more mind numbing than awe inspiring with a small up night overseas being ignored as we've sold off from a positive opening to be down 8 points at 11.25 am. On balance my positions are going ok with Lihir up again after another gold price rise.

11.53 I've added two short positions this morning. The first is in David Jones, a department store, which has reported solid quarterly sales figures this morning. The stock fell through support at 560 a week or so ago having failed to make a new high. It had a sharpish retracement and I've sold the break of yesterday's low. It's a similar reversal type trade to the one I put on yesterday in Sgp. I'm short at 528.5 as the stock has jumped about after the sales figures, it's at 532 now.

The second one is in Gff where I've sold a half size position (so far) at 158.5. This failed to hold support the other day indicating that it might have completed a small retracement rally and be ready to trend down. I'm selling the break of yesterday's low, looking for a more impulsive move down towards 150. Otherwise, I've stopped out of Bxb at 701 (v 724) as this stock has performed much like Karoon. Like Kar, it's also now off my watch list. I've reduced my list to 24 stocks and I still have 6 longs and 4 short positions. It's not surprising in some ways because the market is starting to trend after a choppy topping out period and there are more opportunities than normal so I'm happy to have a focussed list. I think there are times when 24 stocks will generate 12 or more signals over a few days and other times when there'll be one every second day.

12.45 Gff confirmed the signal with sales below 157.5 and I finished my selling at 156 to average 157.25.
The market is now down 30 points and has fallen through the tentative support that had been building over the last couple of days. Telstra has surprised me by falling further today to 318, having touched the last swing low of 317. My stop is quite close now at 316.
Trading involves accepting that no individual trade can be expected to make money but that overall you will be profitable. One way to deal with this is to focus on successfully following your rules or guidelines so that as much satisfaction is derived from stopping out at the right time as from harvesting a windfall gain.

2.55 Not a lot to report, down 28 points now on 8 week lows for the index - actually, we're 10 points above the lows at present but...

4.10 A fall of 32 points and some unfriendly closing matches have meant it's a minor down day for me. However, with the exception of Telstra which has closed at 317, my positions are not close to stops so I've left everything on. Lihir had a reversal day, trading at 339 near the open but closing down 3 at 328. My plan is to expect a pullback and then another go at the high, so I'm prepared to wait a couple of days on this.

Turn around day? Wed Nov 4

I've got a few potential buys today but most uptrends are broken while downtrends are not necessarily established. It's probably a situation where there'll be rallies which just make or just fail to make it to the old highs in some stocks while others will confirm lower highs and start to trend down.

Overnight the Australian futures contract was up 12 and at 11.09 am that's about where we are, with the Xjo up 9 points.

Gold was the highlight overnight as India bought a large part of the IMF overhang at 1045 which sent the gold price up nearly 3% to 1085. The Dow managed a small loss after the pre-market indicators and European markets were weak.

I've added two positions, a long and a short.

Asciano has had 3 choppy swings to form an a-b-c retracement since the early September peak or at least, I hope so. I've taken the buy signal at 157 but I'm kind of sceptical. I think it's quite likely to be part of a larger scale retracement where the best I can hope for is a choppy rally back towards 170. I don't know that though so it's smarter to just take the signal.

Stockland Group is my short position. After chopping around to minor new highs for a month they've hit the skids. There was a 3 day rally and I've sold a break of yesterday's low to get short at 377. So far, so good, as it has hit 372.

My existing positions are generally steady with the exception of Lgl which is up 13 at 330 on the back of the gold price surge.

2.42 I got long Kar about a week ago as I began experimenting with reversal trades. They obviously succeed or fail but there are two general types of winners. Quite often they will chop around a bit and end up making a typical 1-2-3 buy (or sell) signal anyway and you could have got in a few days later at much the same level while at other times they'll shoot up and that's when you're grateful that you got in quickly. With my Karoon position, I bought at 771 and sold some out that day at 793. Subsequently it held support twice and I was slightly hopeful that it would generate a standard buy signal. Unfortunately it has failed to hold 740 so I'm out at 737 for my balance. Still, it was an interesting exercise and I'm glad that I gave the trade time to resolve one way or another. I'd realised that I hadn't been allowing my trades enough time to play out my way so this is part of it; dealing with the slow evolution of a situation.

Fortescue is really similar but I hope it has a different outcome. The reversal hasn't exploded up but nor has it broken the pivot low at 364. I've wanted to stop out of this trade a few times because I feel pretty sure that it will make a minor new low and then find support again. But the best thing is to wait and see and if that happens I might get another chance to buy.

3.01 It's possibly not the wisest juncture at which to be experimenting with bullish reversal trades because they work best early to midway through uptrends or towards the end of drawn out sell offs. It's pretty obvious that's not the case now and I have managed to put on a more rational bearish reversal trade in Sgp today. With that caveat, I've put on part of just such a bullish trade in Fairfax today as the stock has bounced hard off an early low of 152 to be up at 159. It reversed off 152 a month ago and ran to 175 in two days. It's possible that this could happen but, again, I suspect a moderate rally so I think I'll keep a tight stop on this because there's a good chance it's a countertrend rally. Long a half position so far at 160. 3.12 Overall, the market is down 4 points having hit a low earlier at 4518, 1 point above yesterday's low. The Nikkei is similarly subdued but the Hang Seng is bouncing back strongly and US overnight futures are slightly firmer so I think we might have reached an interim peak of pessimism.

4.16 Fxj finished close to the day's highs so I bought the rest of my position at 159.5 on the match out to average a tad under 160. There was a late market rally of modest proportions to leave the index up almost 9 points.

Cup day. Tue Nov 3

It's Melbourne Cup day and with very few paying much attention today we've only had a modest bounce in the market by 10.50 am with the index up 14 points. US and European indices were reasonably firm with gold having a decent bounce back as well.

I was discussing Lgl yesterday which has popped up to 310. I didn't buy then and although I've got a little breakout here I'm still reluctant to take the signal because it looks like a small rally in an interim pullback.

Unlike a lot of other stocks around, Lihir looks positive on a weekly time frame which is why I'm fretting over this trade.

The leg up in October was smaller than the late August/September rally but there was good acceleration. It suggests to me that it was just the first part of a larger weekly rally which should soon enter its next phase.

However, the reality that, despite Melbourne Cup day, this rally is anaemic tells me that we need to see another low before any sort of bounce. The 60 minute chart for the Xjo shows that the rally from yesterday's morning low hasn't caught fire and given that it looked like a 3rd wave down within its own little pattern, there's a good chance of another attempt at the low.

11.07 I discussed Gff yesterday and they've been unable to rally despite their defensive qualities so I've sold out at 159.5 (v 166).

11.24 With gold running another 4 USD in our session, I've jumped into Lgl at 313. It was starting to look a lot like the buy signal a month ago and the stock is firm despite the futures going nowhere.
Out of the office now until about 3pm.

2.58 The market is now down 9 points at 4532 and was actually lower, making an exact double bottom (so far, at least) at 4517.6. Rates have risen another 25 bp to 3.5%.

3.21 Shocking won the Melbourne cup and the market has woken again with a little rally to be up 2. I sold out of Fgl earlier at 549 (v 563).

3.54 I'm looking at Csr as a potential short.

Actually I've just shorted it at 179.5. It had a lower high, followed by a reasonable result but also a rights issue which will continue to pressure the stock this month.

4.12 The market has closed down 9 points. Lgl did well, finishing at 317 while Tls continued its retracement with a 2 c dip to 322. Fmg is neither here nor there, unchanged on the day and I was tempted to cut but since there's a potential stop fairly close by I decided to stay in for a while longer.

I bought back the rest of my short in Qan on the match at 268 (v 286). I've been doing work on what's a good time frame for me to hold positions. Trailing stops were causing me to leave too much on the table so I decided that unless it's an obvious peak, I would allow a swing against me and then close out a position if it continued on to a new high or low at the end of the first day. Slightly counterintuitive but for every stock that continued there was another that would make a 5th wave type peak or trough and then turn around.

So in Qan, below, instead of stopping out at about 280 3 days ago on a trailing stop, I've held on for a new low and then bought back at 268 on the match out. Obviously much better if you do get a continuation but since my signal is typical of the start of a 3rd wave then usually I am likely to see a continuation after some sort of retracement.

Time for a breather. Mon Nov 2

November trading has begun with a drop of more than 2% after the US resumed its focus on the fear that TARP programs will soon run off leaving the prospect of a double dip recession. We dutifully followed that lead with a fall which reached 130 points early on and is now (midday) at an improved loss of 96 points. It feels like time for a break and a probable retracement rally.

I haven't really done anything but watch. I'm fairly pleased that Fmg didn't just plunge to new lows as I'd bought a reversal in a risky market. It is down to 372, but for a volatile stock that's quite manageable.

Otherwise, Tls is having a pull back but I want to stay with it for a while longer so unless it falls to 316 I'm still long. Qan is down to 271, I did buy half of my short back at 273 (v 286), and the rest are slightly weaker.

A couple of interesting conundrums (conundra?).

Here's Gff.

I went long at 166 on a 1-2-3 breakout. It wasn't a perfect set up because it was coming from a lower low but nevertheless a buy signal in a defensive stock when the market is turning down is not too shabby. This morning it opened below my stop which was the low of 4 bars back. I didn't stop out because I wanted to wait and see; my guess was that our worst point would be soon after the open and I preferred to see if there was any sustained selling. The stock is back to 160 with the stop at 158 and I'm not out of danger here but it's an illustration that it can pay to use your judgement rather than to be too system driven.

The other puzzle is in Lihir Gold.

There was a potential reversal buy on Friday which I wasn't interested in because although the stock is still making higher lows in terms of the larger swings, the rally was perfunctory, there was a gap which means you have to chase the stock and in Elliot wave terms it looked like a 4th wave retracement which would make a new low. Today that new low hasn't happened despite the opening fall and the stock is close to breakeven on the day. Gold has held quite well in US dollar terms and with a 4% drop in the AUD over the last week that translates to a rise in our currency. What if it continues to rally today, or holds and then pushes through to make a little buy signal tomorrow?

I'm not sure what my response should be. I'm still leaning towards my initial summation that it's just a choppy rally but if gold were to move overnight I could be tempted to give it a go.

2.01 It's one of those days where it's too late to sell and too early to buy. The market is down 94 and hinting that it could sell off again intraday. However, the Nikkei and the Hang Seng are only down a touch over 2% and they often overreact one way or another. US overnight futures are firmer.

3.29 I'm wondering why we haven't had much of an intraday rally off the lows, perhaps it's the Melbourne cup coming up tomorrow so that most players are waiting till Wednesday before having a look.

4.12 The Xjo fell 103 points or 2.2%. We've had 3 waves down for a 5 wave pattern in the Xjo chart. The 5th wave could have further to travel of course but the risk reward suggests a retracement.