CHART WATCH

QBE (17.33)

Along with other insurance stocks, QBE has fallen on hard times between the currency and Queensland floods. Looking at the weekly close chart, it has made a series of spike lows – 16.71 on 17 Jun, 16.69 on 15 Jul – with significant resistance at 17.75. It, too, needs to demonstrate accumulation for eventual recovery and confirm a major bottom. It could well be trapped in a broad trading range up to 19.20. Newsletter ‘bottom pickers’ have it on their buy list. The point and figure chart clearly defines the significant resistance levels, which rather suggests a slow recovery. There is enough action to keep the traders active.

RESOLUTE (1.38)

Here is a gold producer with a technical track record of booms and busts within the big price swings during gold’s primary bull market. It is best followed with a daily close chart and point and figure charts. The highs and lows tell the story: on 16 Mar 2011 a low of 0.96; on 11 Apr 2011 a high of 1.37; on 17 May 2011 a low of 0.97; on 1 Jun 2011 a high of 1.17; and on 28 Jun 2011 a low of 0.99. There are good Parabolic Stops for exiting long trades and one could be coming up shortly as price moves into resistance highs. Parabolic Stop on the daily chart is 1.34.

SUNCORP (7.73)

Caught up in a series of natural disasters that could not have been forecast. The all-time high was 21.48 on 31 Oct 2006, and there was a lower high of 20.28 at the 31 Oct 2007 market top; but a horrendous point and figure chart foretold most of the extent of the bear market decline. After the 31 Mar 2009 low of 4.36, a rally to 9.76 was the best it could do. It is coming under the seller’s hammer again and breaking the 8.00 support – there was a recent new low of 7.58 on 19 Jul. Here is another one for the recovery basket eventually, but in the meantime good for traders. First serious resistance is at 8.21.

STOCKLAND TRUST (3.14)

An horrific decline from the all-time high of 8.86 on 31 Dec 2007, with a big ‘bearish engulfing’ candlestick on the monthly chart – one where you run for cover. The bear market low was 1.96 on 31 Mar 2009, after which it managed to rally to 4.23 on 31 Mar 2010 – hardly a 50% retracement – before heading south again with a price pattern of lower highs into its new recent low of 3.08. There was Directional Movement crossover on 24 May with ADX at 17.6; it is currently 44.3, mirroring the strong downtrend – hardly a respectable performance from an area that continues to be touted by the experts as offering long-term gains from property. Will a bell ultimately ring at the bottom for this one?

TELSTRA (3.06)

Buying at the possible lows of a 10-year major bear market has so far proved profitable and defensive in the wake of the recent overall market correction heading towards resistance at 3.34. There is an interesting monthly chart, with +DI 19.6, –DI 18.4, and ADX 20. The 30-month moving average gives resistance at 3.88. Ironically, it has been more rewarding on the long side of the market. At least, long-term holders have been getting a good yield and now there is some capital improvement for the bottom pickers.

TEN NET (11.40)

There was little, technically, to suggest a long-term recovery for this ‘billionaires’ stock. The low of 10.30 has now brought in a rally, before falling back again to a 10.20 low on 15 Jul. This could now well be the making of a double bottom. A good Directional Movement stock crossover occurred on 3 May at 13.10: +DI 19, –DI 24, ADX 24.1. ADX moved up to 64.7 on 30 Jun, and is now declining as the current price action is more indicative of a bottom formation. There was another good story from the monthly chart, looking back in time to 30 Apr 1998, when a high of 27.72 led to a huge top in Dec 2000. You have to look at the big picture before jumping in at the deep end of the pool.

WESFARMERS (31.21)

Overall, this stock has produced a better performance for long-term holders, especially those who bought in at the bear market low of 14.24 on 3 Dec 2008. It is as well to look at the monthly chart all-time high of 42.54 on 29 Jun 2007. The recent recovery high of 35.26 on 28 Feb 2011 brought in sellers, with the current low of 29.64 marginally below the 16 Mar 2011 low of 30.07. Overall, this is proving extremely defensive considering the fate of other retailers. It makes a good support and resistance study. Support at 29.64 now needs to hold. Next pivot support is at 27.68.

CURRENT & NEW CHARTS

AUD vs USD – (1.0846)

There is no chart in this issue, but here is a brief comment. Our currency is headed towards test highs and after the recent correction could well move up to the 1.1200–1.1250 area in the weeks ahead. The gold price would be supportive. The AUD vs USD is another market where you will benefit from a proper set of long-term charts. Point and figure and daily close charts will serve you well, especially if you hand-plot them. My MarketSource G3 is also great for tracking the dollar. It does 5-minute and 3-box point and figure charts, which clearly define the consolidation areas prior to breakout moves.

COTTON FUTURES – Daily range chart

I have included a daily chart from Vantage Point showing the range from 20 Apr 2011 to 20 Jul 2011 because it is yet another good example of Vantage Point’s trend-following system and predictive indicators. The clusters of the three moving averages are a very important signal that is not to be ignored. This chart is well worth studying for the cluster of the three moving averages coming together above the 160 area. Vantage Point’s predictive indicators were also into a top area, giving a powerful combination to go short cotton. The indicators are currently coming into what will be a bottom area. It is worth following this commodity with your own software. I recommend combining it with Directional Movement and the triple 5, 15 and 30 period moving averages.

NATURAL GAS FUTURES – Monthly close (Semi-Logarithmic) (4.51)

Taking the top-down approach advocated by Dr Dologa, the monthly close chart is well worth investigating for a potential bull move. This splendid eSignal monthly close chart with harmonic moving averages provides important technical information. The 2008 high to 2009 low was approximately the same percentage retracement as the prior retracement from the 2001 high to 2002 low. I recall a prominent newsletter writer having a long position in 2006; I believed there was no technical justification for being long at the time. He rode the downtrend right to the lows and finally closed out right into the bottom. It happens!

More recently, the evidence points to potential for a major bull run. Just look at the sequence of the higher lows and the clustering moving averages. I have been following this contract on Vantage Point, where they have captured some nice trades with their methodology. It is worth having a good set of charts and a point and figure chart for what could prove a winner in another bull market. Natural Gas may be a late starter in the global commodity bull.