NWS has been in a steep down trend for the past 18 months with the sellers in control. This month has given us a confirmation that the buyers have taken over control.

On the weekly chart, it can clearly be seen the down trend has been broken and a Higher Trough and Higher peak have formed above it. The trough that was confirmed with the close of today’s bar is being supported by the 50% Fibonacci Retracement and a past support line. This stock now has a high probability chance of reaching at least $15.00.

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TOL has been making consistent Higher Peaks and Higher Troughs in a channel since the beginning of March. Now at a significant support what could be the next possible target for this stock?

A potential Double Bottom could forming on the $6.45 weekly support line. Should this be validated with another Higher Trough it is likely TOL could head to at least $7.50 which is the next resistance level in conjunction with the overall down trend.

If the Double Bottom fail a retest of the next support level down at $5.85 is likely.

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The Fibonacci retracements pattern is a powerful tool used by technical traders to identify reversals on a stock chart. Let’s take a look at the Fibonacci sequence and show some examples of how you can identify this pattern.

Fibonacci numbers were developed by Leonardo Fibonacci and it is simply a series of numbers that when you add the previous numbers you come up with the next number in the sequence. Here is an example:

1, 2, 3, 5, 8, 13  - See how when you add 1 and 2 you get 3? Now add 2 and 3 and you get 5, and so on. So how does this sequence help you as a technical trader?

Stocks have a tendency to change direction when they come to the 50% and 61.2% levels. There are more level used in Fibonacci but these two are the most common and powerful to use.

To use the Fibonacci tool take the low point and high point of the move. If a stock has been bullish, place the tool at the bottom of the move and pull it to the top. This will give you your levels. You will also notice that the two levels of 50% and 61.8% will be support and resistance levels. This tool can be used on any time frame chart. Below is an example of the tool being used and how the stock reacts.

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Over the last couple of weeks, the XAO has been consolidating at the 3700 level after a strong bull run. Regardless of whether this is the bottom of the market or not, it’s likely there will be a pull back in the market before it can continue. The question is how far is it going to pull back?

For this we will have to wait and see, but the there should at least be a retest of 3300. This level is a significant weekly support line and the 62% Fibonacci level. If the XAO retests this level and bounces, this will be a bullish indication as Higher troughs are now forming and strength is building, possibly giving it enough strength to continue climbing higher.

However, should this level fail and the XAO continue down, this would be a trend continuation of the current bear market. The next level of support would be 3000.

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Over the past weeks the Dow Jones (DJI) has been rallying but showing signs of weakness. Last night was another strong bullish up day but does that mean it is breaking up again?

Not yet! When looking at the daily chart the weakening of the rally can be seen as the DJI consolidates under 8200. Though yesterday was a rally, and it did move out past the current 6 month channel, you can clearly see it failed to close above. This means the channel and resistance at 8200 is still valid and holding it down. Over all the probabilities are still in favour of a strong pull back to come.

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This week we saw the XAO start to retreat a little. If this weeks closing bar is placed on the weekly chart from last week, with the exact same trend lines, you will see how strong the resistance is at play right now.

This leaves the analysis for coming weeks much the same as last week it has been a side ways movement, respecting resistance.

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The XAO has recently broken a 12 month down trend line which will create a Higher Peak (HP). This is an indication it is gaining strength. But is this the bottom?

Though the charts are showing some strength there is not enough confirmation to call a bull market yet. Let’ look why. The overall down trend is still in place and the key Moving Average (MAV) is still holding it down. Until we see a Higher Trough, which we know tells us buyers in control, created above the MAV or overall down trend there is no confirmation.

There is still reason to believe this could continue the bear run. This week ended at a significant resistance line. As the down trend is still stronger than the recent run up we have had, probabilities say there will be rebound coming soon. Also when a market runs hard in a short amount of time, the way it has in recent weeks, there will be a pull back and pausing period. If there is a pull back support at 3300 could be enough to hold the XAO up with it’s recent strength. This could be a Higher Trough with an Inverted Head and Shoulders, giving more power to the chart enabling it to push through 3700 and continue a stair step up the MAV.

So overall this is still a bear market with the potential to turn bullish soon. Always wait for confirmation.

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After some week of a bull run on the market, there are signs that things could be trying break out of the bear run. It is times like these, reading the market is crucial and understanding what could happen, so we may be ready for if it happens.

To build a case scenario so we are prepared for what may come, we take some of the basic powerful tools we know. Peaks and troughs, to see who is in control, and support/resistance lines to see where the stock is likely to bounce and rebound.

Take ANZ for example. After respecting a down trend channel for the past 18 months, it has broken free of it and also broken through a major resistance at $15.50line to make a major Higher Peak (HP). Right now it seems to be stalling at a resistance line that was valid in the past and has some validity in the last 12 months. Where it rebound here or at the next resistance line up, this will now be a Major Higher Peak(HP). Once it rebounds it would be reasonable to think it would use the $15.50 line (past resistance) as a support line. That would then create a Higher Trough. Higher Peaks and Higher Troughs = Buyers in control.

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This week was a short week on the XAO, with the Easter long weekend and an early close on Thursday.

In the news, the reserve bank dropped interest rates by 0.25% but banks are keeping most of it, ANZ only passing on 0.1%. This had not much affect on the charts. Looking at last weeks chart then to this week, you can see the market never actually made any significant moves. The candle is a sideways move the XAO still sits under a major resistance line with it is still possible for a Double Top to form. Next week is another short week on the market, coming back after four days off. Will investors still be treading with caution, looking for direction from the DJI?

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With America’s economy seeming to have some level of influence in the world economy, I thought it would be good to see what the Dow Jones (DJI) chart looks like.

Last week the XAO closed on an area of a pinnacle point (see last post). Should it break up we are likely to see alot more upside, should it rebound off the resistance the bear market still has a strong hold. Will the DJI help us see some possible foresight of what the XAO may do?

On the weekly Chart, the DJI is showing us, it too is at a pinnacle point. After channelling down for 6 months, it has spent the last 4 weeks rallying to an intersection of a strong weekly resistance line and the top of the 6 month channel. If the rally still has enough power to break through, the next point of resistance is at 9000. If the rally is losing strength we could expect to see a rebound off resistance and the channel validated once more. Either way, it is likely to have an influence over what the XAO does at it’s own pinnacle point.

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