MAP has been channelling down since October 2007. May 2009 saw the stock break up and out of the channel which was the first sign that a change of trend could be happening.

The second indication of a possible trend change was the Higher Major Peak. A higher major trough would confirm the bulls have taken control.

The third indication that the trend could be changing has happened in the last two week with the two well respected Moving Averages (MAV”s) crossing over to a bullish move.

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LLC has been channelling down since February 2008. Now the stock ha broken free from this channel what can we expect?

Late March of this year LLC broke out of a 16 month down trend channel to form the right hand shoulder of an Inverted Head and Shoulder pattern (INH&S). The neck line is at a resistance line of $7.85. Should the stock breach the neckline the target (distance measured from the top of the head to the neckline, then projected forward from the breakout), is $10.50 which is also a significant weekly resistance line.

If the INH&S fails and the $7.85 resistance line is validated again by a rebound a retest of $5.00 is likely.

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March and early April saw all the banks rally hard with the rest of the market. After this rally there are signs of weakening in many. NAB is one of those stocks.

Nab found resistance at $23.50 after the rally. This resistance level has been valid as far back as 1999 and is also the intersection of well respected Moving Average (MAV). From there the stock consolidated between $23.50 and $21.00. $21.00 has been a strong support made by a weekly support line, a 6 month up trend line and the 38% Fibonacci retracement level. The consolidation is showing signs of failing with a Lower Peak (LP) being formed.

The Support and resistance that has been keeping NAB in consolidation, are strong a there is multiple resistance and support lines at each level. Probabilities suggested a pull back is more likely. If this is to happen the next support is $19.00 and also the 62% Fibonacci retracement. Should NAB break up$26.00 is the next major resistance level.

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This week the XAO closed with a bullish candle above the resistance it has been struggling at for the last 4 weeks and has now created a major Higher Peak (HP) indicating the Bulls are trying to take control.

Now sitting at the nest resistance level of 3950 a break through here would indicate a run to 4250. A respect of the current resistance would complete the Higher Peak and likely see a retracement of 62%, the next support level of 3300, possibly giving enough to support a Higher Trough (HT), confirming buyers in control.

However if a pull back occurs at the current resistance and the 62% retracement fails to give support to a HT, the market is now in conflict and neither buyers nor seller are in control.

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BSL is another stock that recently rallied with the strength of the market, but is now showing significant signs of continuing with the overall bearish trend.

As the rally tried to break through the 4 month down trend it lost strength and failed to make a higher peak or higher trough above the trend line. This failure, created a Head and Shoulder pattern.

The short term up trend line that was supporting the rally has been breached as the weekly resistance line and 4 month down trend crossed together and forced the stock down.  Today produced good volume with supports a strong down move.

The next line of support is at $2.20. 

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The end of this week saw the XAO break above the 12 month down trend channel. Does this mean we can expect the XAO to climb higher?

Not yet. Though it has broken free of this channel it is still being held down by a strong weekly support. If this resistance is respected once again, a Double Top (DT) formation has been made. This is a bearish pattern. This also keeps the major lower peaks and lower troughs going.  The Seller are still in control.

Should this be broken through and the XAO starts to climb higher, a higher peak will now be formed and the resistance could possibly become support and giving the higher trough. This would then mean the buyers have taking control. But beware; there is still the overall down trend that needs to be broken to truly consider a bull market again.

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TZN is a mining stock that has been hit hard in this bear market, but it’s showing some positive signs, for the short term at least.

After coming off a $4.00 high in May 2008, TZN plummeted to a low of $0.31. The stock broke up through a 5 month down tend, came back down, used it as support and headed up again. In doing this, TZN has formed a small bullish pattern referred to as an Inverted Head and Shoulders (INH&S) See previous posts for an in depth explanation of this pattern. Should the stock break the neckline of the INH&S, there looks to be a clear run up to $0.86 before meeting any sort of significant resistance.

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At the beginning of October Last year, and large Head and Shoulder Pattern (H&S) was Identified and confirmed on the weekly chart of LEI. This set the stock up for a longer term view of bearish, with a likely target of $12.00.

This week, LEI has hit the top of a downtrend channel and weekly resistance after a healthy counter trend. A valid Bearish Down Day breaking past the counter trend, with higher volume and supporting indicators could be an opportunity for a great short term trade. Keep an eye on this one.

]]> http://planetwealthblog.com.au/short-term-trade-lei/feed/ 0 http://planetwealthblog.com.au/support-and-resistance/ http://planetwealthblog.com.au/support-and-resistance/#comments Fri, 27 Feb 2009 02:45:46 +0000 Planet Wealth http://planetwealthblog.com.au/?p=346

Support and Resistance lines taken from a weekly chart are considered to be stronger than medium term daily support. This is why taking a short term trade off these support levels give higher probability trades.

Here is a case scenario built on ORI. Long Term trend is down. Medium term trend is down. Short term, there is a down trend channel. Today’s candle is at the top of the channel which is also a cross section of a weekly support line that has become resistance and is well respected in the last 3 months (note the highlighted bounces). If tomorrow was to give a bearish down day with good volume and supporting indicators, this could be a high probability short trade.

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