Thursday, 15 March 2012

Thursday Plan

Morning All

There was a very interesting Bearish reversal yesterday in Chinese stock markets that I thought should be highlighted from the outset in today's post. The trigger was comments from Chairman Wen who continued his tough tone on property prices and stated that home prices were "clearly far, far away from reasonable levels". The government there is going to keep restrictions on the real estate market and restrict lending. The A-Shares tumbled 2% and the Hang Seng reversed sharply closing on its lows. This is what happens in real markets which are not being supported by trillions of free dollars.

I had this chart saved on my desktop and I find it very interesting that these comments came out at this exact juncture:

A Shares 60mins:
Double Top zone and the intersection of the wedgelines that have been in place for months.

The Daily left a very bearish reversal candle indeed. Last time I saw a reversal candle like this, it lead to the onset of a new downtrend:

A Shares Daily:

In the short term, this market is probably oversold BUT at a minimum I would be looking for follow through to the downside in coming days and weeks. This is not exactly new news as Wen has been adamant on driving out speculators and investors in the overheated property sector. From a technical standpoint, you just have to heed that reversal candle.

Now does this have any impact in Australia? Sure we are not directly correlated but no doubt we have underperformed global indicies in no large part due to China's inability to catch a strong bid.

In the short term, the XJO is up against the top end of the range as I cited yesterday:

SPI Continous 60mins:
Top end of range. Given that the trend is still very much up, I would be looking to buy a pullback into supports cited and short fade key res zones with tight stops as per yesterday at 4300 for shorter term trades.

Today it is March futures expiry in the SPI. Thus, today my primary vehicle will be the June contract. Obviously there has not been that much volume thus far in the Junes and there will not be many chart reference points at this stage. Thus, it is important to have the Cash, Continuous and June charts up for at least a few weeks.

My SPI range (JUNE): 4265 to 4305. Outlier levels 4250 and 4315, 4335

My SPI day trading plan: I will leaving the March contract alone today. There will be a lot going on with expiry and thus I think it is important to step aside unless u know what you are doing. Technical levels probably go out the window here. The first 30minutes will swing around.

We are indicated at 4289 (JUNE). As per yesterday, I will look to short fade into previous highs at 4310/4315 with tight stops. The trend is still very much up so these trades need to be nimble and if there is no confirm, you have to cut quickly and get long. Breaks of this level open up 4320 March which is approx 4335 June. Given the moves in Asia yesterday, I do think we are likely to see a deeper pullback and possible gap fill into 4265/4270. Thus, if we do see bearish reversal candles on the open, I will be looking for this as a possible target zone.