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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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To consider a longer term trade, it’s best to find a stock that is at resistance for a short position and at support for a long position, before entering. Take a look at the example on STO to get an understanding of why.

STO, when it produces an entry signal would be good for a short position right now, as it is at 3 areas of resistance on the weekly chart which is likely to push it back down.

These resistances are:

1. A two year support trend line that is now acting as resistance

2. A weekly resistance line

3. And a valid Moving Average (MAV)

The weekly chart has also now made major Lower Peaks and Lower Troughs, telling us the sellers are in control.

There are 2 significant Fibonacci levels that are proven to have ha high probability of success and one of them is 50%, which STO is currently consolidating at.

The weekly chart has also now made major Lower Peaks and Lower Troughs, telling us the sellers are in control.

There are 2 significant Fibonacci levels that are proven to have ha high probability of success and one of them is 50%, which STO is currently consolidating at.

On the daily chart there is a rising wedge that has been forming since October last year. A break out of this wedge with supporting volume and indicators could be an opportunity for longer term trade.

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Waiting for confirmation of a chart’s signals is crucial to successful trading. Though a chart may show high probability signs of breaking one way, it is still possible for it to break in the opposite direction.

WOW is a good example of the above happening. Technically, the charts have been bearish on WOW for some time, due to the 16 month down trend and weekly resistance meeting at the same point, giving the expectation of it being pushed down again. Yesterday and today the stock clearly broke up and out of these two lines making the view now Bullish.

To add to the bullish view yesterday was a breakout and confirmation of a bullish flag (flags spoken about it previous postings). The potential price project the flag gives is around $30.00. However, there is a weekly resistance at $29.30 which could cause the stock to temporarily retrace or consolidate before attempting to break through to $30.00.

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WDC has been in a strong down trend since September last year. At the beginning of the year the stock took a sharp fall away from the weekly down trend.

Once WDC reached $10.10 it found strong support from past trading patterns, bounced and has now come back to touch this support again. This is the beginning of a potential Double Bottom pattern (DB). If this week was to produce a Bullish Up Day breaking past the short term down trend, WDC is likely to see $12.00 again, which is a cross section of a medium term weekly down trend and past significant support. Should the stock bounce off $10.00 this week, $12.00 would be the 50% Fibonacci retracement level as well.

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– First of all, let’s cover what we mean by this phrase. We use the term ‘Renting’ our stocks, because everyone understands this in terms of property. We buy a house or apartment, we become a landlord, and we rent it out to someone else. We receive money (rent) over a designated period.

Well, we can do almost exactly the same thing with stocks. We can buy stocks and then rent them out. If we already own stocks, we can rent them out. We choose the rental price at which we want to rent them, we choose the rental amount we are happy with, and we choose the time period we want to rent them out for.
And the stocks we ‘rent out’ can’t trash our house, can’t be late with their payments, and they can’t keep asking us to fix things for them. They are a lot less demanding tenants than real people!

However, if we go to our stockbroker and say, “I have some stocks I want to rent”, he will no doubt think we’ve gone crazy, and will have no idea what we’re talking about.
So, what we need to do first is understand how to talk like a stockbroker!

What new language do we need to know to speak like a stockbroker? It’s called options.
You may have had some experience with options, or heard about them, and may have even been told they are very dangerous (by ill-informed people un-educated or inexperienced in option trading, no doubt!)

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photo credit: zombieite
photo credit: zombieiteRenting Shares

The XAO is now showing clear signs of sellers in control after a push higher late last year and the beginning of this year.

Last week produced a Lower Trough (LT) and this week saw the first Lower Peak (LP) telling us the sellers have taken over control from the buyers. This has also now made a short term down channel.

When looking at probabilities of what a stock will do, there are now alot stacked in favour of The XAO continuing down. A few weeks back a bearish flag was identified with a medium term view of reaching around 2500 mark. Now the sellers have taken control producing LP and LT and a support that was pushing it higher is now a resistance keeping it down.

(click on image to enlarge)

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The Resources sector is one that has had a hard fall in this bear market. Companies that have always been seen as good stocks to buy are not fairing too well.

BHP has been a popular stock in the past. Let’s take a look at what this stock is doing right now. As seen in the chart below, for the last 12 months it has been in a down trending channel. November and December saw BHP pushing higher, only to hit the top of the channel and a major resistance line at the beginning of the year. This channel and resistance has now been forcing the stock back down resulting in Lower Peaks (LP) and Lower Troughs (LT), indicating the sellers have taken control once again. There is a small amount of short term support at around $28.00. If the stock moves through this , it is likely to $25.00, the next major support.

(click on image to enlarge)

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This week on the XAO there was a rise of 172 points over all. Is this move to the upside likely to continue? Let’s take a look at what the stock chart chart is showing us.

Tuesday was a bounce off a support after downward momentum failed to continue on from Friday. As the week progressed there was small movement s up. At the close of Friday, the XAO rests at a cross roads of two validated trend lines. The first is the top of a channel that has been forming over the last 5 or 6 months and the second is a resistance line that has been well respected particularly in that last 2 months.

The direction of the XAO next week with the higher probability is down to re test 3300. If it was breach up and out of the channel and resistance that it now sits at, we could see 3700, which is the next major resistance.

(click on image to enlarge)

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