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Monday, December 1, 2008

The Big W / 综合指数 2008年 11月 28日 / Composite Index 28/11/2008

The Big W Zhuge Liang

Double Bottoms provide visual reference points that map the entire reversal process. Once located, these signposts identify most key price pivots and flash early warning signals when violated. The most common of these, The Big W, begins at the last major high printed by a downtrending stock, just prior to the first bottom.

The first bounce after this low creates the center of the W as it retraces between 38% and 62% of that last downward move. This rally fades and price descends back toward a test of the last bottom low. At this moment the trader listens closely for the first bell to ring. A wide range reversal bar (doji or hammer) may appear close to the low price of the last bottom. Or volume spikes sharply but price does not fail.

Better yet, a Turtle Reversal develops where price violates the last low by a few ticks and then prints a sharp move back above support. Should any or all of these events occur, we mark the potential second leg on our Big W.

Trade entry can be initiated aggressively near the bottom of the second leg if the bells ring loudly. The top of the shorter move marking the partial retracement of the last downward impulse (middle of the W) now becomes our main pivot price for analysis and further trade entry. For price to successfully return to this point, it must retrace 100% of the last fall (from the second low). This finally breaks the lower high, lower low bear cycle. In strong DBs, price will quickly surge to this price right off the second bottom.

A less aggressive long position can be entered when this new impulse retraces strongly through 62% of the fall into the second low. However, if a short-term exit is desired, sufficient profit potential must exist between the entry and the pivot price for this trade to make sense. Longer-term traders can hold positions as price mounts this pivot. At this point, it will often pause to test support. However, another upward leg is then expected.

Price returning to the height of the middle of the Big W has a very high probability of surging beyond this point. Under normal conditions, it can easily retrace 100% of the original downward impulse, completing both the DB and Big W patterns.. This tendency allows for further entry at the expected return test to the pivot point after the second surge has begun.

综合指数 2008年 11月 28日

如图中箭头A所示,综合指数再度在布林中频带(Bollinger Middle Band)的动态阻力线遇到阻碍,所以综指未能突破此阻力线。不过若综指接下来能成功的突破布林中频带的话,那就表示综指接下来有转强的迹象。无论如何,只是综指突破了布林中频带并不能代表综指开始出现涨势,因为要确定综指出现涨势的话,届时布林频带(Bollinger Band)必须是处于一个明显打开的状态。



如图中箭头C所示,平均乖离的振荡指标(MACD Histogram)开始有形成一个圆底(Rounding Bottom)的迹象,这表示综指有望结束整数周的调整巩固。通常当综指形成一个圆底时,综指将有出现短期上扬的趋势。


Composite Index Daily Technical Analysis 28/11/2008

As indicated by A, the KLCI is still resisted by the Bollinger Middle Band on Friday, and therefore, the Bollinger Middle Band dynamic resistance remains in place. If the KLCI should break above the Bollinger Middle Band, the immediate outlook would improve, but still, we will need to wait until the Bollinger Bands Width to expands with the KLCI maintain above the Bollinger Middle Band in order to signal any bullish signal.

As shown on the chart above, the Bollinger Bands Width contracts another 3%, suggesting the KLCI is still in its consolidation stage. Which in another words, suggesting that the KLCI is gearing up for a new movement. Support for the KLCI is still at 800 points while the resistance is at 887 Fibonacci Retracement.

As indicated by B, total market volume declined 17.5%, with volume below the 40-day VMA level. This shows that the overall market participation is relatively low as most investors are still on the side lines.

As indicated by C, the MACD histogram is forming a rounding bottom, suggesting that the KLCI short term movement is gaining strength. If the MACD histogram should continue rising, the KLCI movement is likely to improve.

In short, the KLCI is still consolidating, and we are still waiting for the Bollinger Bands Width to expands to give a clearer signal of the next direction.


1 comment:

Ivan said...

hi Zl,

will you mind if you post this article on DA daily prior the market is open?

hence, reader can learn and study from it :D

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