Market Wizards

The Dow continued its triple digits wild swing but trade within the range of a symmetrical triangle. Breakout above the upper border of the symmetrical triangle will rally to key barrier at 12,000 ( H&S neckline + 200MA ). Breakout below the lower border calls for a pull back to 10,600.



The Straits Times Index mimics the volatility of Dow swinging between positive and negative every other days. We found beacons of light in the chopping waters out of technical indicators include RSI, MACD and Parabolic SAR. Unless affected by the performance of Wall Streets, we may see STI staging a short term rebound to 2.890.

IndoAgri - Parabolic SAR buy trigger soon
Noble - Parabolic SAR buy trigger soon
Both are meant for long trades aiming at 10 cents ~ 15 cents of gain. Tight stops are necessary since the long term trends are still bearish ( these are counter-trend trades ).
GOLD 10US$ - This is Gold ETF and can be traded in multiple of 10 lots. It is tracking the movement of Gold which has been in a strong uptrend ( This is trend trade, buy on dip )

Despite the market volatility, I have made many trades in August. So far, all of them have been profitable ( the profits are quite small though since all of the trades were intra-day ) except two trades:

1. August 18 : Yangzijiang ( Long Trade ) - My stop loss was triggered (entry 1.115, stop loss 1.09)
2. August 19 : SGX/Wilmar ( Short Trade ) - Exited at cost because prices didn't dip much, lose $150 in commission

I have learn several things from these trades:

1. This market is all about "tikum", not technical analysis. If you have made a correct bet on how the market may behave the next day and buy ( or short ) today, you win. If you bet it wrongly, you lose. The market is not giving you a chance to make money if you enter the very day itself ( ie: if you didn't short or bought the day before ) because it will either gap up or gap down. There is no meat left when you jump in ( this is especially true for shorting ).

2. The market not only required us to "tikum" but it has been very tricky too. Within the same day, the market can move up and down to cross the zero mark 3~4 times!

3. Brokerage commission is very crucial. Take the 2nd losing trade ( SGX/Wilmar ) for example, even with cost in cost out, my losses are $150 ( Poems CFD DMA ). I have resolved that I should focus on my CityIndex CFD account where the commission is $10.70 flat per trade regardless of trade size.

There is no change in my market view per the last post. I suspect we are heading toward the first down leg of 2008 bear market. I will be watching for sign of recovery but for now what I see is lower high, lower low ( which is a bear trend ).

Dow Jones Industrial Average

The Dow lost 172.93 or 1.6 percent on Friday and closed at 10,817.65. It was down 4 percent for the week or 15 percent since July 21, some 4 weeks 1 day.

After a brief rebound last week, the Dow has reversed and is now retesting the support at 10,588 ( which is the Head & Shoulder break down target ). There are two scenarios :

1. The Dow survives the support level at 10,588 and form a small double bottom. When this happens, we may see a more sustained rebound since the Dow is quite oversold;

2. The support level at 10,588 is penetrated decisively. When this happens, we will see 9,600 which is a Fibo 50% support level

It is not easy to predict the market direction as it is behaving like a wild monkey jumping up and down. We shall see how it is going to unfold itself. Bottom line, 10,588 has become the most important defense.

The STI is mirroring the movement of the US market. There is not much point analyzing it independently. That said, we shall watch whether the last significant low at 2,720 is taken. If it does, we will be looking at 2,600 ( Fibo 38.2% ) as the next target ( This level is coincide with the magnitude of the 2008 first leg plunge depicted by the vertical golden color line ).

SembMar has become one of the weakest stocks lately. During sell down, it is usually one of the top losers. During rebound, the gain is usually quite minimum.
The vertical golden color line is how much the stock prices have fallen in 2008 before it found a sustained support. When we super-imposed this line into the chart, it coincides with a key support level at $3.00, which is also Fibo 61.8%. Therefore, $3.00 could be where SembMar may find a strong support before a sustained rebound.

Congratulations! Mr Paul Truscott

Market Wizards LLP would like to congratulate Mr Paul Truscott from Western Australia who has been awarded not only a distinction grade in the April 2011 STA Diploma Examination but also become the recipient of the prestigious Bronwen Wood Memorial Award.

Anyone planning to sit for the IFTA CFTe II ( Certified Financial Technicians ) or STA Diploma examination may obtain help from Market Wizards main website:

http://www.marketwizards.com.sg

It was a roller coaster week for the Dow, a wild volatility not seen in history!

Monday -634 points
Tuesday +429 points
Wednesday -519 points
Thursday +423 points
Friday +125 points

Technically, the Dow appears to have found short term support from the H&S chart pattern target and rebounded from there. Parabolic SAR buy phase has been triggered. We may see Dow trying to retest the neckline ( 12,000 ) in the near future. However, my intuition tells me, the rebounds may be short term. Dow may eventually head down to 9,500 by year end after a series of rebounds.

Locally, resistance for STI are 2,913 (Fibo 38.2%), 2,974 (Fibo 50%) and 3,034 (Fibo 61.8%).

The DJIA lost 10.4% in 10 out of 11 losing streak, a consecutive fall unseen since 1978. The sharp plunge by 512 points on Thursday is the biggest single-day fall since 1 December 2008, the height of the financial crisis, when the Dow plunged 679.95 points in one of the market's worst days ever.

By now, it is clear that I was completely wrong on my bullish view of STI but on the other hand I was completely right on my bearish view for DJIA. I guess when STI and DJIA show an obvious divergence, I should have taken DJIA instead of STI.

STI dips back into the symmetrical triangle after the initial breakout. Technically, this is bearish as it implies we may have encountered a bull trap. However, it is too early to dismiss the bullishness we have seen in STI unless the Head and Shoulder chart pattern for Dow Jones is true.

The volatility today is a gift sent by God. I have personally profited from two intra-day trades on Biosensor and Yangzijiang. After taken profit from these two intra-day trades, I went on to pick up some SembMar to keep overnight in anticipation for a rebound tomorrow. There is no specific reason why I picked SembMar, I guess I like the long tail ( hammer ).

STI closed with a doji today at star position. This is usually followed by a technical rebound. I hope it remains true this time.

I have often mentioned about Point and Figure charts in this blog. In case anyone interested, you may follow the link below to download an article I have written. This article was one of the two I have prepared for the INVEST magazine for publishing. They have chosen to publish the other article I wrote called "Profit Through Swing Trade" instead of this one. Since I have written, I thought might as well to share it.

Here is the link : Point and Figure Charting Method