Chief Editor

Over the last several weeks we have brushed aside bad news and it has been very much a case of “don’t rain on my parade”. Sorry but for a while now we are going to see a few showers – because we have had brilliant sunshine longer than expected and it is time to bring us back to the reality that there are four seasons!

The Dow Jones, which covers 30 stocks on the New York Exchange but nevertheless gives a lead to world markets, has had a remarkable 24% run up since March 12 – a day earlier than our low. It is almost “London to a brick” that some profit taking will take place especially as the probability of this pace being maintained is extremely low.

The extent of the profit taking and the orderly manner in which it happens will be the key determinant of where to from here. Everything points to an orderly retracement, as many investors will not want to depart the market when there is still a new high to be reached a little down the track.

You will note from the chart below of the Dow Jones that the market has been well supported with a strong OBV and an oscillator that has matched the new high of the index. This is supported by the strength in individual stocks on the Dow Jones with only a small number actually looking weak. In particular IBM, 3M, Johnson & Johnson, Microsoft, Eastman Kodak are heading down and all represent great “put option” trade opportunities.


Contrast the Australian market which has experienced a more modest bull run, in the chart below.


You can see where the OBV has been slow to rise but more particularly the oscillator has diverged from the increases in the market. The market has made new highs but the oscillator has moved in the opposite direction. That is short term bearish. Although I still believe the Australian markets can still move higher after some short-term apprehension.

Contrast the divergence in the above daily chart with the weekly one below and you will see that the oscillator runs convergent with the increase in price. This gives us some confidence that the upward movement can be sustained after a pullback.


There are a number of Australian Top 100 stocks that are looking bearish and that also offer “put option” opportunities: AMC, LLC, MAY, PRK. If you would like to obtain an inkling as to how options can widen your trading strategies – in both the Australian and USA markets - click on

Over many issues of Trading Tutors Weekly Review I have spoken about taking the contrarian view – that is what gave us a head start in picking some early movers when many players stood aside. It is now time to stand aside and wait for retracements to complete and then top up with stocks that still have lots of steam left in them – and there will be plenty. Keep up your sector analysis, as even though some sectors and stocks will take a breather others will move against the trend.

Enjoy The Ride!

Tom Scollon