Novice traders often find the easiest way to be profitable is to trade a trending market. And when we can’t find clear-trending stocks in the Australian market, we should look to the U.S. You can trade U.S. stocks from Australia using CFDs and you should contact your broker if you have any questions.
In recent weeks we have been watching the U.S. indices (Dow Jones and S&P 500) for a downturn as a double top appeared to be forming. But the index has stalled and is perhaps waiting for the right ‘time’. I won’t go into a lesson on time analysis here, but while we have been waiting for a potential change in trend, there have been plenty of long opportunities to trade with the trend on U.S. stocks.
Many Safety in the Market clients have been trading Apple into all-time-high territory and there plenty of others in a similar vein - have a look at charts of any of the following: AXP, CAT, CMCSA, GD, GE, HD, LOW, MSFT and DIS. Chart 1 displays the U.S. company Nike with multiples of the 2000 low illustrated by the dark blue lines. It is currently sitting at a 50% multiple of that low and is perhaps positioned for a turn.
Chart 1: Nike Daily Bar Chart with 2000 Lows Resistance Card
click to enlarge
If you haven’t been trading into the highs, then watch for an overbalance in price to the downside lining up with a price cluster, as many of these trending stocks are starting to look oversold. At the time of writing the Dow Jones has (finally) had its biggest move – a fall – in months. That said, some stocks could make a further lunge higher. Nike, for example, has a price cluster at about $115 with the 2000 low and the 2009 low as illustrated in Chart 2.
Chart 2: Nike Daily Bar Chart with 2009 Lows Resistance Card
click to enlarge
The Australian market has stalled in recent times. We have seen moves in some sectors but the banking sector is looking decidedly sideways. Others such as mining (check out RIO and BHP) appear to have started a downtrend and if this continues there could be some nice profits to be made from short trades.
I have chosen to specialise in a few areas and I won’t be taking my eye off them even while they are not in a clear trend. But I am also happy to look for other areas to trade. If you are new to trading or still ‘finding your feet’, look for the easier profits. We teach students to take trades where the minor and major trends are in sympathy. Find a clear trending market and half your work is done!
It’s the Journey