Aaron Lynch


Aaron Lynch

The resistance card is just one of the many tools available to Gann traders. To me, they are one of the most important pieces of analysis, both for confirming an ABC trade and determining potential price support/resistance if you are expecting a change in trend.

I have discussed many times the value of the All-Time-Low (ATL) of $9.75 on Crude Oil from April, 1986. I recently used this technique to identify the lows formed on Crude, as posted on the Trading Tutors site.

I get even more excited when I see the same sort of signal being translated into different markets and different numbers. If you are not yet comfortable trading the moves on Crude Oil, Woodside Petroleum (WPL.ASX) is a good stock to watch as a proxy.

The charts below illustrate the use of lows resistance cards - Chart 1 for Crude Oil and Chart 2 for WPL. The differences are considerable when comparing price and the value of the All-Time-Low of $9.75 for Crude and $0.64 for Woodside. Having said that, their tendencies to make lows and highs as multiples of their respective ATLs can provide great confirmations of trading patterns and signals.

The Crude Oil Daily Bar Chart (Chart 1) shows that recent lows over the last six months have generally engaged the orange lines, which are multiples of $9.75. Indeed, the recent low of $87.70 from 3 October is a multiple of 8.99 of the ATL.

You can see that the price action has been supported and thrown higher from these levels and they could be used as places from which to close short trades or to open long trades.

Chart 1 – CL-Spot1 Daily Bar Chart

click chart to enlarge

I have used the same technique in Chart 2 for WPL, this time marking multiples of the ATL of $0.64 on a weekly chart. (I have actually adjusted the decimal point one place to the right here because using $0.64 when the stock is trading at $33 would mean that multiples of $0.64 would likely be crossed every trading session or two). You can see that the current market action has been supported on a multiple of $6.40 (orange line) and is currently providing an outside reversal week.

Chart 2 – WPL Weekly Bar Chart

click chart to enlarge

Independently, these markets and techniques can be helpful, but combining them offers a stronger analysis. If you are serious about a certain resource- or commodity-based stock, it pays to conduct a detailed analysis of the underlying commodity.

Both Crude Oil and WPL could be set for higher prices as long as they hold above their current support points, based on the lows resistance cards. Both markets could present a first higher swing bottom setup in the coming weeks.

Good Trading

Aaron Lynch