What is the major trend for the TSX?
That is the first point in technical analysis: you cannot invest against the trend. Take a look at the current 3-year weekly chart for the TSX.
It is evident that the major trend — being in effect for at least six months — is up. Over the last five months (August – January), the 50-day moving average has defined the trend.
This week, the 50-day average acted as support on a pullback. Another point to note on the 3-year chart is the area of major resistance which is currently 13,500. Major support on this chart would be 13,000.
The snippet of the chart at the right highlights the trend line and the areas of major support and major resistance. Trend line, support and resistance are important concepts in technical analysis. Future posts will explain these concepts in detail.
The next post will focus on the one-year chart with daily candlesticks (the price action for one day). This will give us a better picture of the intermediate (three weeks to three months) and near-term (less than two or three weeks) trends.
What are the appropriate trading strategies based on this 3-year chart:
- The TSX is in a consolidation phase. Do not add to long positions
- A close above 13,500 would would be a signal to add to long positions.
- A close below 13,000 would be a signal to liquidate some long positions.
- A close below 13,000 may also be a signal for some experienced traders to take short positions.
Note: Each candlestick on the chart represents one week of price action.
Note: The above analysis is for educational purposes. You should conduct your own analysis or contact your financial advisor before making trading decisions.