Monday, September 27, 2010

Top40 - end of the day recap for week ending on September 26th

We haven’t seen much from our market last week. Out of four days we had only one decent day and that was Monday’s session with real direction. Tuesday, Wednesday and Thursday were not even worth the mention as all three days had small body with Tuesday having hardly 150 points daily range.

There is funny coincidence that out of last nine trading days only two were with some direction –both bullish and both were Mondays. Knowing that Friday was public holiday in South Africa and that US and European markets performed nice rally on Friday, there are good chances that we will have third Monday in a row with nice direction. Will the rest of the week be the same like the case of last two weeks, it is to be seen, but I hope that it is not going to be the case.

If we examine chart we can see horizontal resistance at 25800 and Top40 (J200) spent last week just bellow it. If J200 follows international markets then on Monday it should break that resistance with next possible stop around 26550 level, which is year to date high.

What we can also see on this chart is that 10 exponential moving average (green line) was acting as perfect support. From August 31st, when it was broken for first time, it was tested five times. So, if I was to short this market based on end of the day chart, I would consider waiting for 10 exponential moving average to get broken and it would be ideal for J200 to close below it. (Moving averages are, for me, the most important indicators and very often market stops exactly on them. I would highly recommend to traders with no experience to go and study moving averages, because one can trade with moving averages only and be very profitable.)

Indicators on top did not change much when compared to where they were last week. So, MACD is above signal line and above 0, RSI is still around 65 and it is not moving much, but that is expected when it deals with market with no much momentum. Stochastic is well above 80 and it is bouncing around 90 and it is not moving much, but, again, that is expected when we deal with nice trending move.

Last directional move on J200 from August 25th to September 23rd recorded 2111 points or just above 9%.

Trade with trend!