Crunch week. Mon Nov 16

We're back up again this morning after a solid rise overnight and the index at 11.20 am has rallied 1% which is slightly more than Friday's fall.

The Xjo index made a new low this month but the first leg of the bounce back was impressive. My take is that we may well get a new high on the index as we form an expanding top.If Friday's low turns out to be a pivot point then wave equality would take us to a new high quite comfortably. However, a clear new low such as we got early this month relative to October's low is significant so I think that, new high or not, time is running out for the bull run.

Many of the individual charts parallel that of the Xjo index and I've gone long or topped up existing longs in a few stocks.

First up though, I was a little too conservative in Cgf as it gapped open this morning. I tried to buy on the open at 407 - versus a close of 403 - but I was too conservative as it gapped to 412 and pushed as high as 425 before settling around 420. Although it wasn't completely clear on the daily chart, the 60 minute chart suggested that - on that scale - it was early in a 3rd wave and hence I could have left some of my position running. I'm not altogether bothered, with a bit of luck I might have managed to get long this morning at a good level to compensate for the oversight. For example, if the market was opening flat it probably would have done much the same thing but without such a big opening gap.

11.32 First of all, Arrow Energy. I erred on the cautious side last week and sold out with a trailing stop because my entry had been late. This turned out to be wise and this morning I've bought about half of my position as I'm toying with the idea of it having made a higher low. Long at 395 and it has ticked down since then to 393. I'd like to see this close towards the highs of the range and I'll hold off buying more till I'm confident of that.

Bsl got whacked on Thursday last week as the chairman's address hosed down profit expectations and a raft of analysts were forced to cut their forecasts. Most of them still rate the stock as a buy albeit with a lower target and I've gone long on a potential reversal at 290 and 291. I am wondering, though, whether there's enough serious buying as the action today isn't altogether convincing.

Ipl is much easier. I bought last week at 262 and sold out about half, as a compromise, in the low to mid 270s. It reported this morning and gave a reversal buy signal so I took it back up to a full position with more stock at 268. It's up to 274 now as it rallies post its full year report.

I've also gone long the other steel stock in my watchlist, Onesteel, as I try to pick a reversal and again, I might have been too gung-ho, as it's not too far to a clear 1-2-3 breakout; 319. Long at 314 and it's 313 now as the market has slipped 25 points from the 11 am high. 1.14 I've just cut Onesteel, above, at 308 (v 314). Not something I like to do, but it was an incautious buy and with Bsl looking good now at 293, it looks more and more as if there's a switch out of Ost going on. When I looked at analyst targets for Bsl, the numbers were well above the present price while Ost was trading at only a small discount to expectations.

2.30 Bought the rest of the Aoe to average 396 as the stock is firming on good volume.

4.10 The market steadied and firmed to close towards the day's highs and it looks like there's room for more tomorrow. To that effect, although I had the opportunity to close out a couple of stocks, I decided to only sell half, mindful of the acceleration in Cgf today. So, I sold half my balance in Cey at 348 (v 328), Fmg at 425 (v 402), Ozl at 128.5 (v 120.5) and Sgp at 409 (v 385.5). Here's the chart for Fmg as an example. My general idea is to sell the next new high after a swing against me but in all these cases I think there's a strong chance that the open tomorrow will be stronger.

A good day all round with my two short positions slightly weaker as well. I was trying to buy back a few Gff on the close on the new-low-after-a-swing approach but just missed out on the match.

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.