Post OH and S slides. Fri Nov 13

After a 1% fall overnight, the Australian market has followed suit with a drop of 35 points after an hour or so. It's steady as she goes really with no big movers in the stocks on my watchlist. Like a slide in a modern children's playground, there's no exciting dump just a barely perceptible drift down.
I have no new trades, I'm just managing my existing positions with Cgf the most interesting as it has gained 5 to 393. If it pushes above Tuesday's high of 396 then I'll be selling out later for reasons outlined yesterday.

12.10 Cgf made it to 397 then retraced in a market which is continuing to fall slowly, now down 56 points. I've sold out half at 394 (v 392).

3.07 There's been a recovery since lunch and Cgf has been a beneficiary, pushing convincingly past 396 to a high of 406. I'm still planning to sell my balance out on the close although I can see that the stock could be moving into a larger scale pattern. I'm quite happy with this trade because previously I might have kicked myself for a poor entry and just cut it for 380 something. With a little more patience and my assessment that the risk/reward favoured more strength, I've been able to get something out of the trade.

4.10 Out of the last of the Cgf on the match out at 403 (v 392). The market closed down just over 40 points. I've held the rest of my longs and shorts. Off to yoga, more on Monday.

Subdued. Thu Nov 12

The US market rallied modestly on low volume affected by a public holiday.We opened firmer but have the look of a reversal day about us, with the index, at 10.42 am, already 20 points below its high albeit still holding a small gain of 11 points.

The property trusts ran hard yesterday but I noticed that there wasn't a lot of follow through buying on the open. Since Mgr had run particularly hard I decided to take my profit there, selling out at 157 (v 143) which on a small time scale was a good move because they've slipped to 154.5. I also tipped out a couple of Sgp at 406 (v 385.5) as they were also selling off and are now 398. Generally, I want to hold for a pullback and retest of the highs but in the case of Mgr it was a very quick 10% move with subdued follow through. Perhaps, I'll get a chance to re-enter after a pullback as I think the move is unfinished.

Despite the subdued tone of the day, most of my positions are moving in my favour with resource stocks generally firmer.

11.33 Good employment numbers have given us a little boost and the market is back up 25 points.

1.40 The market is definitely undecided now but is still up 19 points. My positions have outperformed generally today. One exception is Tse, a short at 412.5, which is up to 426. As with a couple of my other recent short positions, it's not as high quality a signal as the long positions because I'm looking for a 5th wave move which can be harder to pick than a straightforward 1-2-3 breakout for the start of a 3rd wave. Anyway, the stop is quite far away at 444 so if it turns out that yesterday was a failure to make a new low, then it may start to rally with the general market. I'll just wait and see though.

In the meantime, Csr, which I bought on a reversal, has confirmed some strength with a nice breakout today.

Cgf was one of the few longs where I took a substandard signal, buying a short term peak at 392 when there had actually been two recent buy signals at 373 and then 381. It was a new stock in my watchlist, replacing Axa, and I got carried away thinking that everything in the sector would just surge. It's back up to 392 now and in terms of the swing which started from the higher low of 8 bars back at 346, it's probably moving to a 5th wave high. Not the end of the run by any means, but I think that a new peak around the high 390s would allow me to escape an impetuous trade with a small gain.

2.09 Bsl has just dipped sharply as the company chairman is talking down prospects due to the AUD etc. I sold out at 300 (v 299) and although I'd be surprised if any of this is news to the analysts I felt it was better to be safe than sorry. I had been curious as to why Ost, another steel producer, was performing better. It could easily make a nice buy signal on a resumption of strength but I'm happy to be out and as I write it has slipped to 295.2.44 The market is still setting up for a reversal day and the index is just up 3. I've been hunting around for opportunities to take some profits. I decided earlier in the day that Qan looked complete in the short term. A judgement call, but one where the stock had surged, consolidated for a couple of days and popped up to 284 only to fail there. I sold a few earlier at 284 and 280 and now the rest at 278.5 (v 268).

This is kind of interesting because my general intention is to accept a pullback and expect a second run up in a case like Qan, but sometimes it seems fairly easy to get out when a run is faltering without chasing the stock down. There doesn't seem to be a correct answer anyway because over the last few days I've also been happy to ride out a move against me. Perhaps, a case by case approach is the best one with a preference to stay in for longer most of the time.

4.11 The reversal blew through but without much impact, a fall of 9 points in the Xjo index. Other markets in the region had modest sell offs and US futures are lower. I generally reduced my exposure today with no new trades and exits from Bsl (closed at 289), Mgr and Qan. I also sold small amounts of All, Awe, Ozl and Sgp. Fmg closed even after promising strength for most of the day, while Tse rallied against me but Cgf and Csr more than compensated.

So it goes. Wed Nov 11

Another good start, the Xjo is up 24 points as we approach 11 am. My positions are slightly down despite this although it's not unexpected. My approach is to hold on to most of a position during a minor retracement because usually I'll get an opportunity to sell out at a better level. But it means that if all the signals have come close together it's quite likely that a fair few of them will be (hopefully just) pulling back together. For example, I like Cey and think it will push above 350 but it's trading down 6 at 340. I have sold about a third of my position in the low to mid 340s so perhaps that's the compromise solution that allows me to have the patience to stay the course for the bulk of the position. Yesterday's buy signal in Stockland Group was confirmed and I bought at 385.5 early on. It has pushed on to 396 quite quickly. I've also got a new short position - hurray! - that I'm working my way into. It's in Transfield Services, project managers, and I'm short a few at 416. The stock looks like it has had a completed retracement rally and reversed from a minor new high yesterday. It's most likely I'll just get a spike down to new lows if it works out but it's had a big enough rally since July that there's room for it to develop into something more.
11.48 Shorted more Tse at 409 for an average of 412.5 as the stock tests the lows for today.

12.37 Stopped out of the balance of Aoe at 405 (v 405). This is a judgement call but I suspect it will pull back and make a higher low and because I got in at 405 rather than 398 when the signal was made and my stop would be 380, I felt like the risk/reward equation didn't stack up.

I probably could have thought that through when I got in but I do remember that I had a contingency plan to stop out on a quick surge to 425-430 if that happened.

2.52 The market has been bumping along the top of the day's trading range for most of the day, up near yesterday's high.

It looks like it might be topping out soon, but not quite yet. It looks more likely to chop around like the last few days. If it was to open strongly and quickly reverse in the next day or so that might signal the end of the recent run up.

I just sold a couple of Sgp at 403 (v 385.5) to take advantage of today's surge. Otherwise, Mirvac Group is also doing well today, up 8.5 at 155.5 and it's in the same sector.

3.51 I'm struggling to concentrate today, not surprising as there has been a more normal two signals - buy Sgp, sell Tse - today after the plethora of the previous few days. Not a lot has changed although my new trades have had immediate benefit today, unlike yesterday, with Sgp up at 403 and Tse down at 407.

3.58 Chinese IP numbers came out along with import figures showing reductions in purchases of copper and iron ore from last month but seasonally this doesn't seem to be considered negative. In fact, I'm reading more and more comment that it's about time the resources sector went for a run.

4.13 The market has closed with a gain of 23 points. There have been significant pullbacks in a few of my longs, eg Cey down 10 at 336, Cgf down 6 at 380 and Ipl down 6 at 268 while a couple have continued to run. It amounted to a very modest up day.

Not a good look. Tue Nov 10

Well, I've got very little in the way of shorts on having bought back Sgp and Csr as the market continues to rebound. The US and European indices were up around 2% last night as cheap money and excess capacity in the Northern Hemisphere drives a renewed sense of optimism.
The Xjo seemed to anticipate some of these gains in our session yesterday so we're not up 2% but we're still up a healthy 1.3% or 60 points at 11.10 am. I've done some fiddling about with my positions, some of it signal based and some where I needed to make a judgement call.
The best one was in Fxj which has been a straight reversal but has been grinding up rather than surging. I sold out half of my balance at 169 and half at 167.5 (v 160) and the stock has rapidly reversed to be 160 on the back of some corporate comments. Now that Axa is in play it's not going to suit my trading style so it occurred to me that a good sector equivalent in the right price range might be Challenger. I realised it had made a good buy signal yesterday afternoon so I bought at 392 as there looks like plenty of scope for it to run to new highs especially with the focus on the sector. The analysts came out with valuations around 575 for Axa and the stock has settled around 585-595. I sold out the last half of my position at 589 (v 419) as momentum stalled.

Looking back at Fmg, I realise that impatience got the better of me having done most of the work of waiting after getting in a bit early. Anyway, I bought on the open at 402 and now I'm quite excited about the prospects for this. It's got the look of a big move about it.

I'm not too unhappy about having to buy back the shorts. Sgp was a late entry hoping for a quick burst down for a 5th wave low. Although I had thoughts of using the recent high at 385 as my stop, I decided to pay 378.5 (v 377) since I'd got in relatively late especially since Djs which had a similar chart has rallied right back to its highs and might be a reasonable precedent given the bullishness of the market.

Csr was a much easier decision. I'd realised that it was making a nice reversal pattern over the last few days and off a higher low so it occurred to me yesterday that this is the sort of thing I should be buying. I've waited till today for confirmation and have paid 186 (v 179.5 and a 2.5c dividend I was short).

11.42 I've been in Telstra for 11 trading days and sold out this morning at 325 and 326 for a touch more than my entry price of 324. I was happy with the buy signal and was looking for another swing higher after it started to fall from the subsequent high at 333. Unfortunately, there's no rule that says it has to do this and on this occasion it fell for 4 days right back to the previous pivot low at 317. This was just above my stop and although it has recovered there's nothing very compelling about the rally so I was happy enough to get out, having given it time to play out.

By contrast, Asciano has managed to swing back up after a pullback following my initial buy signal. It doesn't particularly look like a 5th wave high within it's own little swing - it's too choppy for that - but I'm planning to be out of this by the close of trading because it's a reasonable fallback strategy and I don't have a strong counter opinion. I've sold out half of my balance at 164 (v 157). I've also sold about a quarter of All at 466 (v 430), Cey at 342 (v 328) and Ipl at 275 (v 262) as after the opening surge there was always a good chance of a pullback, given that it's the third strong up day in a row. I'm still long about the same dollar value as I was overnight as well, because of buying back the shorts and getting into Cgf and Fmg.

2.18 The market has been pulling back for a couple of hours now. I realised earlier that I might have bought Cgf at a short term peak and almost cut the trade for 389. It's 384 now and although I like the trade, it was an impetuous point at which to buy. I've bought Csr at 185.5 after more consideration. Meanwhile most of the other longs are slipping back with the market. They're not positions I want to close out yet but I'm glad that I've taken some profit here and there.

3.53 Approaching the finish line for the day, we're rebounding slightly. Cgf has recovered from 378 to 385 but another of my day's purchases, Csr, has slipped to 182 so my intraday trading hasn't been too sparkling today. Stockland Group, in which I cut my short earlier, has actually made a small buy signal with a trade at 386 and as it's charting uncannily like Djs, I'm tempted to take it. The price has dipped to 382 so I'll probably wait till tomorrow and buy if it goes through 385 again. My initial thought with this, as it was with Djs, is that there could be a rally which would stop short of resistance at 400. The clue here is that the retracement so far has been quite strong which is not typical of a normal 4th wave. Therefore, rather that over analysing, it makes more sense to simply take the signal and see where it takes me. Preferably tomorrow though as I'm quite full again today.

4.18 A close of up 59 points so pretty steady after the first hour. I think there's more in this, I keep getting buy signals and I'm trying to methodically take each one. This has meant that I've been fully long at a good time so it's been a good solution to allow the signals to direct my positions, rather than having a strict quota of longs and shorts. I've reduced my overall positions slightly - old habits die hard - with a few little sales. The balance of Aio, as planned, at 164.5 (v 157), and a small amount of All at 457 (v 430), Aoe at 411 (v 405), Cey at 346 (v 328), Mgr at 147 (v 143) and Qan at 280 (v 268).

A post script on Lihir (and a rule of thumb for closing out positions) which I sold out yesterday afternoon. It made a minor new high early but reversed to close down 3 at 338, tending to confirm my thought of it being a short term peak.

That's a yes, then. Mon Nov 9

I've been asking myself the question whether it's a good idea to trade reversals because, a, you have to be pretty careful and b, I'm getting so many buy signals with the market itself reversing sharply after a steep drop. I got my answer this morning with Axa up 30% after a takeover bid from Amp.I sold out half at 550 (v 419).

Otherwise, the market has shrugged off a neutral lead and surged 1.6% by midday as we're undoing our recent weak performance. I've stopped out of Djs at 564 (v 528). I gave myself a wider stop here and obviously that didn't work in this instance. In addition, I've cut Fmg at 385 (v 386) as I've had this for a while and it still can't seem to rally despite a big bounce in the index. I'd be happy enough to try to buy this again, especially if it can get through 392, 393 which is, respectively, the low before the last swing down and the high 8 days back.

Encouraged by Axa, I've added 4 more bullish reversal trades in All, Aoe, Bsl and Qan and missed another 2 in Bld and Ost. I've also bought back into Cey as some more serious buying confirms the tentative 1-2-3 breakout that I was sceptical about on Friday.

Here's Aristocrat Leisure. They've been downgraded by all and sundry and are not helped by a strong AUD but it's a decent reversal and it looks like there's a 5 wave shape to the sell off.

Arrow Energy has been trending up on the weekly chart and it looks like the choppy correction could have completed on a daily basis. Long at 405. I'm expecting a 3 wave type rally, perhaps to 435, 440. If it was to spike to 425-430 in the next day or so I think I'd take that.
Bsl is perhaps the most encouraging of the latest reversals. It has bottomed out with a minor new low after a couple of tentative attempts to reverse. This at a level where it found support in September and October. I bought at 299 and it has edged up to 300.
I wrote about the Qan chart last thing on Friday and although it closed towards the middle of the range then, it has rallied above the highs of the last 3 bars now and is up at 271. Long at 268.

The other position is in Cey, where I've re-entered at 328. Goldman Sachs JB Were has upgraded thermal coal prices in their modelling and that's helped the stock to rally more convincingly.

2.13 Well, long yet another reversal with Awc at 163.5.
Ozl has produced a nice 1-2-3 buy signal and I'm unsure what to do about it because I'm long a lot of stocks now and pushing the budget too. I will be closing out Lgl later today because it's pushed on again after a pullback and I'm using that as a compromise solution for taking profits but I'll still have quite a bit of exposure.

I've got 23 stocks on my watchlist and I'm long 13 of them. I've also missed buy signals in Bld and Ost. One observation is that my list is too big so I think I'll cut Bld out as I lean towards the lower dollar stocks. A further point is that although there are a lot of signals now, it's an unusual turn of events that suits the approach I'm taking and if I delete too many stocks from my watch list then I could miss opportunities in future. I don't want to get into the habit of overriding signals when I don't have a good reason to so I think what I'll do is take the signal in Ozl with reduced size and cut back the size of my other long positions by about a quarter across the board.

Mirvac Group gave a reversal buy on Friday but there seemed to be very little momentum so I left it alone. It has crept up again so I've put on a half position at 143.
I also bought into Ozl - half size again - at 120.5.

4.10 Market closed up 81 points. I eased out of bits and pieces over the afternoon. A third of the Aio at 159 and 159.5 (v 157), about 15 or 20% of the dollar value for the following stocks; All at 445 (v 430.3), Aoe at 409 (v 405), Awc at 164 (v 163.5), Awe at 267 (v 267), Bsl at 304 (v 299), Cey at 336 (v 328), Fxj at 165 (v 160), Ipl at 273 (v 262), Qan at 272 (v 268) and Tls at 323 (v 324). These trades were taken because I have more trades than I anticipated and I don't want to pick and choose which ones I take.

I also closed out Lgl at 341 (v 313) as my general plan is to wear one swing against my trade and then sell at the close of the day when a new high is made for this type of trade. What I mean is that I've bought at a third wave breakout, had the surge, watched the pullback and then am selling out on a fifth wave - which could of course go higher. What I've noticed as a rule of thumb is that the stock will either kick a lot higher or that will be pretty much it for the run and it will often reverse. This seems to be a compromise which reduces my holding time, allows me to sell into strength and on balance delivers a profit outcome as good as holding on for the occasional big winner.

Fortescue closed well at 390 and I'm regretting selling out. My conservative entry point is in the mid 390s so I might have to watch out and buy early tomorrow.

A good day today, I'm pleased to have followed my signals with very little interference or second guessing and Axa was the cherry on top. Still long some as it closed up at 570.