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.
The intermediate trend is down and the near-term trend is sideways: cash is king at this stage in the market. I am monitoring the support and resistance levels as indicated in the above chart. A break below the support level of 12,000 would be an indication to liquidate more of your long positions.
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.
Weekly candlestick chart for the TSX index showing support at 13,500
The tsx index sold off last week as shown by the long dark candlestick and bounced off support at 13,500. The chart for this week shows the spinning top candlestick which is neutral and indicates uncertainty in the market. The positive point here is that the index is currently—as of the close on Wednesday—holding the support level.
TSX Two Year Weekly Candlestick Chart
The overall online trading strategy at this stage in the market is to raise the cash level in your portfolio and not add to your long positions. Some so-called value investors are adding to income producing stocks on the dips which include real estate investment trusts (REITs) and some of the financials. And the day traders will be trading the range of 13,500 and 14,000 in their online trading accounts: buy at support and sell near resistance.
Take a few minutes to customize BigCharts so you can view the above chart with the same settings on your computer. Take a look at the two-year annotated chart for the tsx index for a historical perspective of the market. This story from the National Post lists some of the fundamental data moving the markets.
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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 most important point of technical analysis is to determine the trend for an index or equity.
This post will summarize the price action for the TSX over the past week. You can trade online using the graphical representation of candlestick charts.
The snippet of the first chart to the right, taken from this 3-year weekly chart of the TSX, reveals that the major trend (over six months) is up. You can draw a trend line under the lows to define the trend, but in this case the 50-day moving average is a good trend line. The snippet also shows two congestion areas on the weekly candlestick chart for the TSX: prices never go straight up but advance like the steps in a staircase.
Now, I will focus the analysis on the daily candlestick chart to determine the intermediate trend (three weeks to three months) and the near-term trend (less than two or three weeks) for the TSX.
TSX Daily Chart - Jan 28, 2011
The snippet of the second chart taken from this 6-month customized daily chart of the index focuses on the January congestion zone which is highlighted in the yellow box on the first chart.
Trend can go three ways: up, down and sideways. And, any index or equity can spend a lot of time trading sideways in a lateral trading range. The near-term trend for the index is sideways with support at 13,200 and resistance at 13,500.
Let’s focus on the price action for the TSX over the past week of January 24-28. You can review posts for some notes on the daily action.
Daily Chart - TSX
On Tuesday, the shadow of the spinning top bounced off support at 13,200. On Wednesday, the bullish candlestick was very encouraging. On Thursday, there was no follow through on the bullish candlestick and the spinning top spelled indecision with a feeble attempt to break 13, 500: this was not encouraging. Then, on Friday, the shooting star flamed out on its attempt at 13, 500.
This congestion zone must be monitored carefully as the rally that started in August looks a little extended. A close below 13,200 would be taken very seriously by most traders.
Technical analysis gives you a guidepost to make investment decisions and takes some of the emotions out of those decisions.
TSX Daily Chart - Jan 24, 2011
The snippet of today’s chart is snipped from a customized 6-month daily candlestick chart of the TSX. I use the 6-month and the 1-year daily charts to establish the near-term trend (less than three weeks) of the TSX index. The 40-day, 20-day, and 10-day moving averages are used in conjunction with the candlesticks as confirming indicators: the 40-day average is currently a support level on the chart. The following is a summary of the price action on the chart:
Bearish Engulfing Pattern (highlighted in red) formed last Wednesday which was very negative after the TSX broke 13,500 on Tuesday.
On Thursday, the market gapped down and a spinning top candlestick formed with the shadow touching the 40-day moving average. This candlestick shows indecision in the market with a battle between the bulls and bears. The plus on this day was that the 40-day moving average was not breached.
On Friday, the market sold off on heavy volume but held the 40-day average.
Today, another spinning top candlestick formed. There are two pluses for the day: the market bounced off the 40-day and closed above 13,300.
Conclusion:The major trend (in effect for six months to a year) as seen on the 3-year weekly chart is up as defined by the 50-day simple moving average. The 40-day moving average as seen on the 6-month daily chart and in the snippet is also a good approximation of the the trend. But, as discussed in today’s analysis; the short-term trend is moving in a sideways (consolidation) pattern. The recommended strategy at this stage is to invest no new money in the TSX until there is a confirmed break above 13,500. If the market breaks down through the 40-day moving average on the daily chart, it is time to liquidate some long positions. Major support is at 13,000 and a break through this level could see a retracement to the 12,500 level.
Note: This analysis is for educational purposes. Please conduct your own 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.
Technical analysis reveals — in graphical form — what is happening in the market: it does not tell why.
TSX - Daily Chart
On Tuesday, the tsx closed above 13,500 which was good as this was an area of resistance over the last three weeks. On Wednesday, the tsx did not hold 13,500: this is not good from a technical perspective. Today (Thursday), the market gapped down at the open — through 13,400 — and traded in a tight range as indicated by the candlestick pattern called a spinning top. In the snippet to the right which is snipped from this full size chart , you can see where the 40-day moving average was tested: look at the spinning top candlestick pattern and note where the shadow touched the 40-day moving average. The spinning top represents a battle between the bears and the bulls.
At this stage in the market, do not add to long positions: you may even consider liquidating some longs. The chart pattern is telling you to be on guard. The tsx could trade sideways in a consolidation pattern and then make another run at 13,500. Or, it could close below the 40-day moving average which defines the trend: this has negative implications for the market.
Major support for the tsx is 13,000. If the index closes below this level, all bets are off.
Stay tuned to the continuing story.
Note: This analysis is for educational purposes. Please conduct your own analysis or consult your financial advisor before making investment decisions
