What a funny expression this is. David Bowden uses the cow/calf analogy to teach us about specialising in a few particular markets. Recently I took some time out from trading my favourite stock (ASX:CBA) in favour of stalking some great setups on the US market. But I never took my eyes off the Commonwealth Bank because I knew the time would come when I would want to trade it again and I didn’t want to miss it.

I watch a particular timeframe on CBA and with that timeframe now approaching, I am excited to see a potential setup in price as well. The formation of my favourite pattern – double tops on 50% - is a strong possibility, as is shown in Chart 1 below. I have also circled where this price level has previously acted as resistance and support.

Chart 1: CBA Daily Bar Chart with Double Tops on 50%

click chart for more detail
click to enlarge

Safety in the Market students might also notice a nice Time by Degrees pattern lining up with several day counts that I use. All this, combined with the fact that the double tops are touching the 1x1 angle from the All Time High presents a strong case for a pullback of some sort.*

I am not convinced that a fall will take out the March low, but if it does then it may well drop to 200%, which would almost reach the level of last September’s low. The milestones and the previous lows are displayed in Chart 2.The scenario I am more inclined to expect would be the creation of yet another higher low following the September, November and March lows, and then a break of the $52 level that is presently holding.

Chart 2: CBA Daily Bar Chart with Double Top Milestones

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click to enlarge

If this double top produces no pullback at all, this would be a sign that the market is continuing to show strength and I will be putting my bull hat on as it will have pushed through some strong resistance to do so. By the time you read this article we should have the answer to that question, unless CBA stalls for the rest of this week.

Casting my daily scans across the wider market while retaining specific application on a couple of chosen markets has helped me further my understanding of the techniques of analysis and trading. Knowing one or two markets well can give you the confidence to apply more advanced entries to get in early when the market turns but some of the best trading comes from a sustained trend in one direction and the simple use of trading-with-the-trend techniques.

Your daily routine should include looking at setups across the broader market but if you specialise in one or two markets, then your routine should also include checking your saved charts in ProfitSource to ascertain whether those markets are trending. That should ensure you will be ready to trade it when a setup - such as this - appears.

It’s the Journey

Lauren Jones

*If you want to learn more about the Time by Degrees technique and other strategies studied by Safety in the Market students, please call 1800 622 858 or click here to register for a FREE seminar.