March futures expiry. Thu Mar 19

This morning saw the expiry of the March futures contract for the XJO index. There was the usual spike in volume and following a reasonably positive overnight lead from the US the index has continued to rally to be up over 50 points or 1.5%. Ben Bernanke announced further heavy liquidity injections into the US economy through bond purchases across a range of instruments and that led to a collapse in the US dollar and a sharp rise in the gold price.

The surge in gold has moved both lgl and ncm into buy territory and I've entered small positions in both at 326 and 3255 respectively.

My opinion on ncm is that the weekly move which started below 1800 in late October has probably completed and there's a good chance that any rally from here will fail to make new highs. But the stock is still making higher lows and having had 3 weeks of retracement from the recent high of 3717 there's a good chance that even a failed rally can go to 3400, say. Moreover, if confidence in the US dollar collapses then gold could run very hard indeed and the earlier move might just be the completion of the first phase of a much bigger run.

The daily chart actually spiked through 3240, the breakout level, on Tuesday but I decided against taking it as it was the day when the market ran 100 points on no news and it seemed like there was a bit of a short squeeze going on. After a pull back yesterday it's now bounced right back and looks much more convincing for having had a more complex correction. Here's the chart.
With the 30 minute chart, below, there's an opening gap and it's pretty clear that the stock could fail to run here and drift off to fill in the gap. If that looks likely, I might sell out what I've bought and try to re-enter at a better price. Because I'm looking at a bigger time frame I'm not so worried about entering perfectly although obviously every little bit helps.

For some reason I've taken this rundown out of alphabetical order so here's Lihir Gold or lgl. It has the same sort of 5 wave pattern as ncm but without the same loss of momentum so I'm more confident of seeing new highs here.

The daily chart is more problematic than it is with ncm because there was a daily break on the close yesterday and the opening gap took lgl past 318 the high of the previous week. I decided that the strength in the weekly chart was enough to look past this though I'm nervous of a gap filling retracement.The 30 minute chart shows that despite the opening gap the stock had a very tight range for the first couple of bars. If there were a lot of anxious longs they would have quickly sold it down. When they didn't I decided to jump in and buy.

1.18 It's halfway through the trading day and I've got 6 small long positions in aoe, bsl, ctx, fgl, lgl and ncm. They're mostly a little down on where I've bought them but nowhere near stops. The market has had a pretty fierce rally from a low of 3120 only 8 days ago to a high of 3500 this morning so I'm slightly uncomfortable having bought over the last 2 or 3 days. However, if I have to stop out I'll accept that when the time comes. For me, the hard part about stopping out is when you have to keep doing it. With the slower trading style I won't need to be doing it all the time and the stress levels should be milder.
I'd like to have some short positions for a bit of portfolio balance but although there are some stocks already in downtrends such as coh, csl and wow there isn't anything offering me an entry point right now. It's unsurprising really given that the market is in strong rally mode and many of the financials had set up bullishly over the last few weeks.

4.10 That's the close and it's a mixed day overall. The new positions in lgl and ncm went ok with lgl chopping around and closing at 326 where I got in and ncm racing up to finish near its highs at 3309. Aoe and ctx retreated around 3% but are a long way from stops. Fgl was weak early on but recovered most of the fall and bsl pushed up close to 3%.

A more holistic approach. Thu Mar 18

Over the last year or so I've swung between taking a more patient approach and wanting to work my capital harder, taking less overnight risk, with a shorter term approach. Having spent the early part of my trading career being very active in a short term fashion, trading in that way has been an itch I had to scratch. I felt that in recent years I hadn't properly tried my hand at intraday trading. The last 6 weeks have been about giving the shorter term approach a serious and methodical go. What I discovered is that it's too draining and too limiting for me nowadays and that the longer term opportunities when they arise are too compelling to miss out on. So, in terms of making money it's been a failure but I've learnt quite a lot and I feel like I can recommit to the method I'd been working with previously with more insight into how to improve it.
In brief, with the method I'm returning to, I would wait until there was a weekly signal implying a turning point and then I'd look at daily and intraday charts to try to time my entry. I'd obviously have a bigger stop but I'd also be looking for bigger moves. If I got the move right I would still sell some at target levels and use a trailing stop in the case of fast moves so I wouldn't necessarily be tied up for weeks in one particular stock but I'd certainly be far less active than with the intraday only approach.
Although this was profitable for me what I found most difficult was that I would often have very little to do but wait and I wasn't trained to deal with that. In order to feel productive I'd spend time punting around fairly haphazardly and I'd quite often become tense and exhausted so that I didn't have the energy to scan for weekly signals. I also wasn't clear on a lot of details, such as whether to pre-empt a turning point or wait until confirmation and the recent concentrated spell has helped to clear up a lot of these ideas. Time will tell whether I'll have the patience to do nothing but I think something in me has changed in this respect. I can't see myself trying to intraday trade at the same time in order to satisfy a misplaced work ethic.

Another thing about this method is that it's not actually so very passive. I put a position on in fgl yesterday on what I think may be a weekly turning point and after scanning through the top 100 stocks I've found another 3 stocks that I'm buying on the back foot. The market is having a well deserved pullback so far today so I've only bought half of my positions in the following stocks - aoe, bsl and ctx.

This is the weekly chart of Arrow Energy or aoe. There was a run in the first half of February followed by a consolidation. The stock broke through 265 yesterday which was the high of the last 2 weeks and could well accelerate. Weekly charts are generally smoother than dailies and a change in direction will usually persist for a few weeks. In this case, the stock has been building a base since October and has a strong chance of running up to 360 or 400 on any breakout.

This is the daily chart of the same stock. It actually pushed through 265 yesterday and I could have bought then. It looks like it could pull back in the next day or so but nevertheless the chart shows a lot of potential. Where the retracements in November (not shown on the daily) and January were quite deep the recent dip has been shallow. The move in February shows a bit of a 5 wave shape which could imply that it's the start - the first wave - of a bigger move. If this were correct then the next move would be stronger, say 120 minimum from the base at 240 giving a target of 360.

Bsl has fallen so far that the weekly chart doesn't show the pattern so clearly unless you blow up the scale but essentially it's made a higher low and is pushing on. The daily gives an idea. I'm not convinced that the fall is complete but a retracement rally could hit 300 without negating the possibility of a new low in the next few weeks.

The 30 minute chart above is pretty positive with a strong open and a slow shallow correction which is typically bullish.

The third stock I've bought today is Caltex, ctx. It was sold off heavily like much of the market but unlike the broad market it continued to fall past October hitting a low towards the end of November. The subsequent rally to 1050 breached the previous swing high of 1034 set in November implying that new lows wouldn't be reached before a stronger correction. After 3 weeks of limited falls the stock has rallied through last week's highs of 915. I've bought some at an average price of 910 and if a rally eventuates it could push on to 1200 or 1300.

The daily chart shows a strong consolidation, one where the second part of the pull back failed to go lower than the first part. 4.10 The market is about to close and there's nothing to do but observe my positions. Aoe and bsl have slipped back a little from where I bought them along with the market although they're both up on the day. Ctx has been the outperformer closing just below the day's highs at 930. Fgl, which I entered yesterday is down 7c on the day. I'm least optimistic about this position because it's been a safe haven stock and seems less likely to outperform in the near term. However, I'll wait and see what develops as the chart, while not marvellous, is really just in a trading range and does have a reasonable pivot setting up towards the bottom of this range. If it starts to run I'll probably just have a tight trailing stop on a daily basis. In the meantime I'm prepared to wait.

Bungee. Tue Mar 17

The bungee jump market continues as we've shaken off a flat overnight lead to be up over 1.5% with macquarie group the standout, up 166 or 8.3%, on what must be some massive short covering. Supposedly short covering is also driving the spi which moves over to the June contract in the next day or two.
A quick run down:
Spi - grinding up but has only just squeezed past the early high of 3400 and looks a bit tired.
Bhp - has had a 3 wave rally which could push up to new highs, but there was not a lot of strength overnight.
Ncm - a bit similar to bhp - up 32 c on the close, but short of recent highs and lacking momentum.
Wow - a good clean run this morning but it's pausing now.
Wpl - ran early but could be setting up for some sort of fall, possibly just a retracement of the morning surge.
Cba - looks toppy after making a marginal new high.

Mqg - still powering

Qbe - forming a tight range. Has underperformed other financials recently.

2.17 Having a very quiet day but short bhp now at 3150 as it tops out.

4.01 Tried and failed to close my bhp out at 3181 (stop was 3156 but I couldn't bring myself to cut - why not?) so now waiting on the match. The market is up 3% which is quite extraordinary given no news overnight but not in the context of a strongly reversing chart.

I've gone long fgl at 538 on a weekly break, implying a higher low at 517. I'm getting tired of the daytrading and since I'm not much good at taking time off I thought it better to return to something a bit lower key. There are also too many cuts in the daytrading, I find it wears me down.

4.10 Stopped out of bhp at the high of the day as it closes at 3190.

Clearing skies. Mon Mar 16

Overseas indices held up well on Friday adding a little to the already strong gains. The Aussie morning session so far has the financial sector performing strongly, partly at the expense of materials. As I mentioned in Friday's blog, there are some great long term charts and I'd like to put on some positions to hold for a week or two. The horse has bolted in a few cases but I'm just happy to be seeing signs of life and I'll be looking for the normal pullbacks to get set. It could be a fair bit later in the week though.

I've just bought some wow at 2500. They've been under pressure for a few weeks and I don't see them as investment material but they're looking promising this morning.

The spi is driving up as though it might keep running most of the day. It had looked like peaking fairly early. Bhp, ncm and wpl are all consolidating after early falls and may be worth shorting later. Cba, mqg and qbe are all very strong, up 3 to 5% but are not offering opportunities to buy yet.

11.54 Bought a few awc at 102 which has been a big underperformer and could be seen as an option on recovery. My entry price could have been better, 100 would have already confirmed a breakout from a congestion that lasted through most of Friday. However, it's the sort of chart that can accelerate so I bought half of what I might ultimately buy. It's slipped back a cent or so and if there is to be a pullback then there's a good chance it finds support at around 98.

1.35 Just bought some csl as I'm spreading my wings a bit and looking at my larger list. I sold a tiny amount of ncm a while back at 3140 and then realised it was too early for a short and I'd rather see another rally attempt. That's happened but I think it might be another hour or so before the fall resumes. Meanwhile, I'm still short a touch.

Here's csl.

1.56 Actually ncm has dropped quite sharply now so has probably completed the correction. I'm hoping to sell a few more on a slight recovery. Meanwhile the spi may have topped.

2.00 Just sold awc out at 102. It's been stalled here for a while and I got in a bit late at this price so I think I'll try again another time. Sold some wow at 2507. Got a slightly wider stop on the rest.

2.11 Stopped out of csl at 3340 and the balance of wow at 2497. Sold some more ncm at 3140 and 3131 as the bounce hasn't eventuated. Also shorted some wpl at 3640.

2.27 Here's a blown up chart of the spi. There was a new high at 3379 which beat the earlier high by a mere 1 point and now there's been weakness for an hour. I'd like to sell here but I think it would be wiser to wait for a failed rally. Nevertheless, I can see a weak session from now. Short ncm and wpl at present with no longs.

3.08 The spi had a little rally and has slipped down to new recent lows but I couldn't find a good level to get on board. I did just sell some wow at 2490 as the rally which I tried to trade completed and the bigger picture weakness reasserted itself. There's no real momentum in the pullback though and ncm and wpl are only marginally going my way.
3.48 Ncm and wow haven't moved much but wpl fell and I bought back at 3605.
3.58 Bought back wow at 2483 nearing the end of day. Still short a few ncm.
4.06 All the potential matches at 4.10 are showing big gains as if there is a buy on close portfolio around. I'm not willing to pay a premium of 48 cents to buy back ncm so I'll risk an overnight short there.
4.19 Ncm closed up at 3171, not as bad as the initial match but still awkward. I think it's a reasonable short but I'm not happy with running a position just because I didn't want to cut. However, the stock was so thin it wasn't for want of trying.
Overall, I was sitting up for the day until the late run in ncm and now have lost a little for the day on 6 trades, 2 winners, 2 losers and 2 breakeven.

The Real Deal. Fri Mar 13

The US indices were up strongly last night and for once we've followed enthusiastically. The xjo is up 100 points or 3.1% and so I doubt if there'll be too much more in it today. Maybe, a bit of a pullback as the early buyers get set and a tick up nearer the close.

I plan to put on a couple of longer term positions but I want to wait for a pullback. I've learnt to my cost over the years that you're generally better off buying at the end of the day if it's a strong open and there are a few stocks that are giving very strong weekly indications that they're going to continue to run. I'll throw in a few weekly charts to illustrate.

This one is ipl and as for most stocks, it's the first higher low for over 18 months.

This one, above, is wbc and there was a higher low in April last year which gave a bear market rally of a few dollars. This looks a bit stronger as the downside momentum is quite limited.

Cba is also making a nice clear set up.

There are a few others in various stages of maturity. Wpl and wes, bhp and rio are further along and asx shot up early in the week from similar formations.

1.11 Getting back to my regulars, I can't find any trades at this point as the market after peaking at up 110 points is now sitting up 101. There hasn't been enough of a retreat to buy a bullish resumption in the strong ones and the only weak one is wow and that's chopping around. The weekly trades I'm interested in are too far gone for the moment. There is a stock in the bigger group that I watch, Link energy or lnc, and that has been running. It had a sharp pull back of 37 cents back to a breakout level around 1.60 and I think there's a good chance it could rally late in the day. Ideally I'd like to see an hour or so of slow retreat from here to give me a chance to get in on a bullish candlestick.

3.11 Some of my stocks have resumed after a pullback but I didn't take any of the trades as they didn't quite seem to have drifted far enough. In retrospect, wpl would have been worth taking.

3.19 Just bought some mqg as they're looking very strong but I have to go soon so I need a quick turnaround.

3.30 I've got to leave shortly and a quick round up gives one trade in mqg, very short term. I'm hoping to buy some lnc to hold overnight as the stock is consolidating nicely and pushing up towards a breakout. It's touch and go right now.

The overriding theme is that a lot of stocks look very positive now for the first time in a very long time. I'd like to see a bit of consolidation sometime in the next few trading days in order to get set in some longer term positions.

3.39 The hoped for explosion into the close in mqg hasn't happened so out quickly at 1928. Hoping for lnc but nothing yet.