Thursday, 24 December 2009
Description of Amazon as "the river of no return" in the excellent Daily Reckoning have proved wide of the mark as Amazon looks to be one of the success stories from the dotcom era.Nevertheless after stellar performance in 2009 the stock has reached significant resistance,with time cycles aligning with price targets on the square of nine chart.This is one of Gann's more esoteric tools.Square of nine levels can be derived from a table or calculated.The low of 36 and the high of 144 are both significant Gann numbers,36 is the square of 6 and 144 is the square of 12.Effectively the square of 9 is a calculator that relates numbers to each other by taking their square root,incrementing by 1,2,3,4 etc and re-squaring.Some traders use increments of 0.5,0.618,1.618 etc.When price targets align with cycles such as 3 months (90 degrees in time ) 4 months,6 months ,1 year (360 degrees) and other natural divisions of the year,resistance is indicated.
Squares are significant resistance (or support)in their own right - witness the recent high in gold at 1225,which is the square of 35. This can be applied to time as well eg 25 weeks,144 weeks etc.
Wednesday, 23 December 2009
Tuesday, 22 December 2009
This is an interesting chart from a Gann perspective.There are 3 reasons to expect resistance at 30 - doubling the low of 15,50% off the high of 60 and the 50% retracement of these levels all coincide at 30,making it a very strong level to expect resistance and possibly a change in trend.The simple trendline reinforces the case for caution.Microsoft could be traded using the same principles as in the Apple video,using the $30 level as would apply to $ 200 for Apple. From a time perspective we are at a a 10 year cycle from the all-time high,making this a compelling situation.
Coffee has not been one of the more exciting commodities yet a glance at the yearly chart shows there has not been a lower yearly low since 2001 which is very positive.I 2009 looks like being a bullish yearly engulfing candle suggesting that 2010 may be an exciting year like 1994 or 1997.
Sunday, 20 December 2009
Japan's bubble burst 20 years ago.At the time Nomura was regarded as a core holding for international portfolios and Japanese management techniques were being studied globally.As we approach the 20 year cycle from the all time high (an important Gann cycle) Japan is still in deflation and the Nomura chart still looks vulnerable !
Longer term the dollar is toast,if we are to believe Jim Rogers.However even he believes bearishness toward the dollar had become too extreme,and now we have the inevitable rally.Speculators had been borrowing dollars because of the low rates and buying risky assets.Now they are having to close these trades.Looks like more pain to come.
The FTSE completed a Gann squaring of price and time when it rallied 1800 points in 180 days.Such relationships often signal at least a temporary high or low.Friday was a weak day and the market looks poised to break the rising 10 point per day Gann angle from the lows .The FTSE250 (not shown) looks even more vulnerable.Smaller cap stocks are likely to suffer a flight to quality if markets correct.
The Dax is attempting to break through its recent highs but is unlikely to succeed if the US market corrects.The weaker Euro will help German exporters,which may explain the relative strength in this market.However problems with sovereign debt with regard to Greece,Ireland and other European economies are likely to keep Germany in the eye of the storm.
Price resistance is heavy in the 5900 area,as shown on the charts.In addition the Dax has peaked around the end of the year in both 2007 and 2008.
The S&P has been unable to break through the 50% retracement and has not advanced further following the 180 trading day cycle.There is now a triple top on the daily bar chart indicating a correction could have started.The trigger for this is most likely the sharp rally in the dollar
This chart shows equality in the price and time ranges for the most recent rally and the one that preceded the previous top,so there is time resistance as well as price resistance.Also the time factor is a "natural" cycle,one year.Two attempts to break 200 have failed.Using Gann's rule we can short Apple if it fails on the 3rd attempt,or buy it if it breaks out.
The U-tube video points out that after a breakout a stock should not retreat more than 3 points below the breakout level,yielding a natural stop loss level eg 4 points away.
I believe Apple is more likely to fall from here in which case the stop could be 4 points above the last high.Weekly MACD (not shown) is rolling over.
There is an interesting video on U-tube showing how Gann principles were used to trade Apple when it broke through 100.It subsequently shot up to 210.Will Apple break through 200 and have another spectacular run,or could we see a sharp selloff ?