How will the near-term lateral trading range be resolved?
Determining the trend and trading in the direction of the trend is the most important rule of technical analysis.
Yes, the TSX Index has a negative technical profile. The major trend (past year) is sideways. The intermediate trend is down. And the near-term trend is sideways with resistance at 11,700 and support at 11,200. Trading online is all about evaluating the probabilities and at this stage there is a higher probability that the TSX Index will break support at 11,200 and test major support of 11,000. A breakout above resistance of 11,700 will see the index meet resistance around the 12,000 level.
You have three options when you trade online. You can buy the market, short the market or stand aside with a comfortable cash position. At this stage in the market, irrespective of relatively low valuations, the safest bet is to do nothing and rest comfortably with your above average cash position.
Reference the last chart analysis of the TSX Index posted on May 18, 2012.
What are the critical support levels for the TSX Index? What is the downside risk for the TSX Index? Reference my post from October 3, 2011 which is just as relevant now.
Don’t forget to evaluate the longer-range charts for the major indexes. You will miss a lot of important price information it you do not take the occasional look at these charts. I posted a logarithmic chart of the TSX Index on November 21, 2011 which is still relevant today and covers the period from 1988 to 2011. I will publish an updated long-term chart showing the overall trend and support levels.
Relevant articles picked from the Web:
- The payout kings of Canadian stocks — Globe — June 22, 2012
- Eurozone crisis pushes smart money back to cash — FP — June 19, 2012
- Blue chip yields flashing red — Globe — June 14, 2012
- A few Canadian ETFs attracting all the cash — FP — June 14, 2012
- Canadian dollar weakens as relief rally fades — FP — June 11, 2012
- Gold may be heading for a bear market — FP — June 11, 2012
Note: This technical analysis is for educational purposes so you can learn to trade online using candlestick charts. Please conduct your own chart analysis or consult your financial advisor before making investment decisions. The chart snippets are from BigCharts.com which I recommend and have used for fifteen years. The author of this article may hold long or short positions in the featured stock or index.
© 2012 TradeOnline.ca