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I will be on CNBC SquawkBox for the full 3 hours on Wednesday July 25(8am to 11am Sydney time). Send your chart analysis questions to Squawk@cnbcasia.com and I will try to answer them.

The race towards support continues. The consolidation pause is created by stunned disbelief rather than any change in the power of the downtrend. The next confirmed support level is just below 4000. The first task is to wait for support to be tested. The second task is the early identification of rebound patterns and the sustainability of those patterns.
The up sloping triangle pattern failed. This happens in around 30% of cases, but usually not quite so spectacularly. Downside target is near 4000. Traders watch for consolidation near this level and then enter only if the market develops a rebound. These extreme market reactions call for caution. Trades are managed aggressively, but they are not entered aggressively. Traders wait for evidence of a rebound and avoid aggressive entries made in anticipation of a rebound.
Market volatility is the key to understanding this market behavior, as is the early recognition of the trend change.. The tactics for these market conditions are shown in our DVD CATCHING THE BOUNCE

I will be on CNBC SquawkBox for the full 3 hours on Thursday May 3(8am to 11am Sydney time). Send your chart analysis questions to Squawk@cnbcasia.com and I will try to answer them.

I will be on CNBC SquawkBox for the full 3 hours on Thursday March 29(8am to 11am Sydney time). Send your chart analysis questions to Squawk@cnbcasia.com and I will try to answer them.

The 4300 level is very very powerful. Traders should not under estimate the strength of resistance near 4300. The retreat away from resistance near 4300 has been strong and rapid. This was expected. Traders tightened stop loss points when the market tested resistance near 4300.
The fall below the lower edge of the long term GMMA is bearish. There is temporary support near 4060 and long term support near 4000. This is a rally trade environment and we have included trading tactics for this in the newsletter. Traders use leveraged instruments to maximize returns.
The oscillation breakout continues with a rally move towards 4300. Traders will be ready for a retreat from 4300 and use this as a signal to close long positions.
The market is oscillating around a central line near 4180. It’s a series of slow rallies and retreats that bump up against resistance, or bounce off support. Don’t underestimate the strength of the 4300 resistance level. The market can spike above this level but 4300 has been a powerful influence for an extended period. The reaction away from 4300 is often very fast.
Settle down for a prolonged period of range bound trading with fast rallies and fast retreats. The first half of 2012 looks tough for traders.
Traders change trading tactics in this environment. The focus remains on identifying short term, trend breakouts but there is a greater probability of these developing into sustainable up trends. These initial rallies can be traded with derivatives to maximize returns prior to the retreat and rebound behavior.
Market volatility is the key to understanding this market behavior. Its an issue discussed in GUPPY TRADING. The tactics for these market conditions are shown in our DVD CATCHING THE BOUNCE. We have to learn to live with volatility.

I will be on CNBC SquawkBox for the full 3 hours on Wednesday Feb 8 (8am to 11am Sydney time). Send your chart analysis questions to Squawk@cnbcasia.com and I will try to answer them.

The 4300 resistance level was not challenged in the Christmas period. Support near 4000 was solid, with rebounds developing from 4040. Don’t underestimate the strength of the 4300 resistance level. The market can spike above this level but 4300 has been a powerful influence for an extended period. The reaction away from 4300 is often very fast. The market is showing greater weakness and lack of directional bias.
Settle down for a prolonged period of range bound trading with fast rallies and fast retreats. The first half of 2012 looks tough for traders.
Traders change trading tactics in this environment. The focus remains on identifying short term, trend breakouts but there is a greater probability of these developing into sustainable up trends. These initial rallies can be traded with derivatives to maximize returns prior to the retreat and rebound behavior.
Market volatility is the key to understanding this market behavior. Its an issue discussed in GUPPY TRADING. The tactics for these market conditions are shown in our DVD CATCHING THE BOUNCE. We have to learn to live with volatility.

I will be on CNBC SquawkBox for the full 3 hours on Thursday Dec 29(8am to 11am Sydney time). Send your chart analysis questions to Squawk@cnbcasia.com and I will try to answer them.

I will be on CNBC SquawkBox for the full 3 hours on Wednesday Dec 14(8am to 11am Sydney time). Send your chart analysis questions to Squawk@cnbcasia.com and I will try to answer them.

For Christmas we have a special newsletter subscription and DVD offer with up to 50% off. This is an ideal opportunity to subscribe to one of Australias longest running trading education newsletters. The newsletter has been educating traders since 1996.

This is a very sharp rebound from the XJO support level created by the down sloping trend line. The rebound was given extra impetus with the coordinated action to prop-up the Euro. This doesn’t fix the European problem, as discussed in another article in our weekly newsletter. This external factor does not make this XJO rebound sustainable. The rally is treated with caution. Resistance is near 4300 and this may be a key critical reaction point that signals the end of the rally. Support is now located along the value of the downtrend line. This is also near to the previous support line near 4000. Traders from the long side enjoy the sunshine while it lasts.

I will be on CNBC SquawkBox for the full 3 hours on Thursday Nov 10(8am to 11am Sydney time). Send your chart analysis questions to Squawk@cnbcasia.com and I will try to answer them.

There is no question, we love pattern trades because they provide high probability situations with low risk.
Patterns are powerful by themselves, but they gain extra power when they are compatible with the market. Bullish patterns work most successfully in a bullish market. They work in a bearish market, but the success rate, and the degree of pattern continuation is lower.
The up sloping triangle is formed when a horizontal resistance line is intersected by a rising trend line. Price rise to the resistance level, where sustained selling forces the price back. Buyers can bid less and still pick up stock. However, on each pullback, the fall is reduced. Buyers have to bid slightly higher to get the stock. This creates the rising trend line as each new low is higher than the previous one. When there are no more sellers at the resistance level buyers have to bid higher to get stock. Often this means bidding substantially higher and the breakout takes place. This is a strong chart pattern and breakouts from the last third of the triangle can be very powerful.
When a triangle pattern develops inside this bullish environment then it has a higher probability of successfully developing and achieving its targets. We have strict rules for patterns. A valid up sloping triangle pattern has these characteristics:
 Well defined resistance level
 Well defined trend line with a minimum of 3 touch point
 Consistent activity between the trend line and the resistance level
 A base created by 1 to 5 days of price activity that moves consistently upwards.
The market is showing many bullish patterns and we discuss how they are traded.

I will be on CNBC SquawkBox for the full 3 hours on Wednesday Oct 19(8am to 11am Sydney time). Send your chart analysis questions to Squawk@cnbcasia.com and I will try to answer them.

Ignore the hysterics coming from people who cannot read a chart. They couldn’t read a chart in 2007 when the market collapsed. They couldn’t read a chart in 2009 when the market recovered. They still cannot read a chart now but they still have management of invested funds.
The fall in the DOW Thursday night is high volatility move within the context of the L shape consolidation pattern that has been developing for the past several weeks. The downside target for the head and shoulder reversal pattern is at 10,600. It is likely to be tested again several times as part of this consolidation behaviour.
The potential for a real market crash comes with a move below 10600. That gives a downside target of 9600. We have had this analysis in place for several months. The behaviour of the market is no surprise. The behaviour of fundamental analysts is no surprise.
Our task as traders is to recognise the key trigger points and develop and adapt strategies as appropriate as discussed in our weekly newsletter over the past months.

I will be on CNBC SquawkBox for the full 3 hours on Thursday Sept 22(8am to 11am Sydney time). Send your chart analysis questions to Squawk@cnbcasia.com and I will try to answer them.

There are two strong bearish features on the XJO chart and they point the way to 3700.
The first feature is the downtrend line with a current value near 4150 and this presents a significant resistance barrier. The market struggles to move above this line. It is positioned broadly at the lower edge of the long term GMMA.
The second bearish feature is the consolidation band behavior between 3980 and 4300. . The width of the band is measured and used to set a downside target. This is set at 3600, a little below the historical support at 3700.
The bulls look at the potential for a double bottom W shaped reversal. They are optimistic. The pattern of rally and retreat has already negated a W shape reversal and confirmed a trading band consolidation.
The dip on August 9 created a pile driver low. This tests the foundations of the market and often sets a future downside target. This pattern is discussed in our EWS TRADING DVD. This gives a target marginally above 3700.
In the longer term there is a high probability the downside targets will be tested again.
The chart has a downside target near 3700 and there is a increasing probability this will be tested.
The general trend is down, but the volatility is exceptionally high. The tactics for these market conditions are shown in our DVD CATCHING THE BOUNCE. We have to learn to live with volatility.

I will be on CNBC SquawkBox for the full 3 hours on Thursday Sept 8(8am to 11am Sydney time). Send your chart analysis questions to Squawk@cnbcasia.com and I will try to answer them.

I will be on CNBC SquawkBox for the full 3 hours on Monday August 22(8am to 11am Sydney time). Send your chart analysis questions to Squawk@cnbcasia.com and I will try to answer them.

You read it here first in June 12. The DOW head and shoulder pattern we identified in early June meant the collapse was not a surprise. The degree and speed of fall was not fully anticipated, but the fact of the fall was anticipated. This has the potential to develop into a GFC 2. Our newsletter readers recieved this analysis in mid-July. It is available free on request from support@guppytraders.com Head your email GFC2 request and we will send you a copy that details what to look out for.

Last week the price of natural gas plunged from 8% in a few seconds in the early hours of Asian trading. Then the price rebounded. In the past this would be called a “fat finger “trade. It would be assumed this was a trade price entered by mistake – a typing error. Now this type of rapid plunge is often the result of High Frequency Trading (HFT) trading algorithm. As the US debt situation develops we can expect to see more sudden index moves accelerated by HFT activity.
The impact of HFT on price behavior is a hot topic of debate amongst traders. One group of traders believe HFT increases the liquidity in the market because there are always buyers and sellers at every price level. The increase in market volatility gives a good trading opportunity because it is always easy to find and buyer or a seller.
Another group of traders believe HFT increases erratic volatility, such as sudden isolated price rises or dips that take just a few seconds to develop. This makes it very difficult for traders to use stop loss because the stop loss may be triggered by a short term false price move created by HFT traders. The danger comes when the false price drop triggers a cascade of many stop loss orders so the temporary price fall develops into a sustained price fall. This is caused by the HFT trading method, and not by any change in the condition of the stock.
A third group of traders believe HFT is not important because it has lost its advantage and will soon be common place. When there were only a few HFT traders there were many larger opportunities. Now there are many HFT traders and opportunities are quickly identified. The size of the opportunity is shrinking and the profit margin is falling.
Like any new tool or method in the market, it will quickly lose its edge and become common place. New patterns of opportunity will develop and this is the challenge for traders. It seems the more things change the more they stay the same.

The movement in the copper price is used as a leading indicator of economic Several other industrial metals also react quickly to changes in demand, and this includes tin and nickel. Tin is used in many manufacturing processes. Nickel is an additive to more advanced metal production and manufacture.
In 2011 April the London Metal Exchange copper price activity developed a small head and shoulder pattern. This is usually an up trend reversal pattern. This small pattern suggested a retreat in the copper price, but not a significant change in the trend. The downside target for this pattern was near US$ 8,300. The pattern failed to develop fully and the price fell to a low of US$ 8,550 before rebounding.
The copper price rebound and developed a small consolidation with resistance near US$9,200 The last two weeks have seen a powerful rally above the US$ 9200 resistance level. This is also a break above the short term downtrend line. This signals a continuation of the uptrend.

I will be on CNBC SquawkBox for the full 3 hours on Monday July 18(8am to 11am Sydney time). Send your chart analysis questions to Squawk@cnbcasia.com and I will try to answer them.

I will be on CNBC SquawkBox for the full 3 hours on Tuesday (8am to 11am Sydney time). Send your chart analysis questions to Squawk@cnbcasia.com and I will try to answer them.

The International Energy Agency (IEA) dumped 60 million barrels of Government oil hoarded in the strategic reserve. The last time this type of market intervention occurred was in 2008 when oil was trading at $147.
The current intervention is a drop in the ocean in terms of demand, but it’s a body blow to the price uptrend which has been in place since June 2010. It drives prices back towards long term support around $87.
Lower oil prices provide instant relief from inflation – despite recent Government denials that the increase in oil prices were inflationary. A drop in prices at the pump hands consumers more income. Its almost like a tax cut.
This is not a long term policy solution. Drawing down on stockpiles is a policy with a clearly defined end. This can only last as long a stockpile inventories last and the market knows this. Nobody is going to fade this trend right now, but it’s a sucker-punch trade in a few weeks time when the release comes to its inevitable end.
Chart analysis helps to identify the support levels, and the rebound target levels. This sets up both a short-side trade, and later, lays the foundations for a trade from the long side to capture the rebound rally, and potentially the beginning of a new longer term uptrend.

The Australian market has always been heavily influenced by the behavior of overseas markets. In recent times, up until 2008, the market was heavily influenced by the behavior of the US market. Watching and analyzing the DOW gave traders and investors a head start for trading the SPI and anticipating the behavior of the XJO index.
This is no longer true, although from long entrenched habits, many analysts continue to look to the DOW for guidance for the behavior of the XJO.
The XJO does not operate in a vacuum. Australia is a small world market, so leadership comes externally. Although we have acknowledged the increasing influence of China in terms of export income there is a greater reluctance to look at the influence of China on market behavior. It seems irrational to link the economic fortunes of Australia to the Chinese economy , and not to consider the market relationships.
The key focus is on the behavior of the two markets. The key similarity is the movement into a broad sideways trading band and the inability to breakout above the upper edge of the band. The behavior of the XJO more closely resembles the behavior of the XJO.
There is a further key point in this relationship. This is the lag period. The Shanghai Index started the rebound several months prior to the rebound in the XJO. The Shanghai Index moved into the sideways trading band about 12 weeks before the XJO moved into the same type of trading pattern. There is around a 3 months offset in the behavior of the Shanghai index and the XJO..
This suggests that any decline in the Shanghai Index will lead a decline in the XJO by around 3 months. Watching and understanding the behavior of the Shanghai index is essential for an early warning of the behavior of the XJO.
We have provided analysis of the Shanghai market to financial media in China, including Shanghai Securities News - the official publication of the Securities Commission- since 2005. Our analysis of this market is also carried in the English language China Daily and TheEdge in Singapore.

The DOW shows a head and shoulder pattern. The continued fall below 12300 confirms the development of a head and shoulder pattern. This chart pattern is an end of uptrend reversal pattern and it is used to calculate a downside target when the market falls.
The downside target is near 11600. This signals a substantial retreat in the market. The downside target gains further confirmation because it matches the previous historical support and resistance level also near 11600.
The downside targets for head and shoulder patterns are often minimum targets. The market often falls below this target level. The developing head and shoulder reversal pattern on the DOW is invalidated if the DOW can move above 12600. The pattern is discussed in a longer article in our newsletter.

I will be on CNBC SquawkBox for the full 3 hours on Thursday (8am to 11am Sydney time). Send your chart analysis questions to Squawk@cnbcasia.com and I will try to answer them.

Guppy GMMA is already included in Metastock.
Right click on any chart to bring up TEMPLATES. Scroll down and select GUPPY MMA. Select apply.
If you want to create your own display then follow these steps.
Creating a Guppy MMA display in Metastock requires several steps:
1) Open a new bar chart of a security with a long trading history.
2) Delete the inner window showing volume. Click on the bar chart display to highlight it.
Select CUT from the EDIT menu. You will be advised that this actions deletes the base
security. This is OK. You now have a blank screen, but the underlying data is still intact.
3) From the Indicator List select MOVING AVERAGE. Add each of the short term group of
exponential moving averages to the display by dragging down the indicator and changing the
moving average value. Keep all these averages displayed in the same colour. I use blue.
4) Stay on the same screen display for the long term group. From the Indicator List select
MOVING AVERAGE. Add each of the long term group of exponential moving averages to
the display by dragging down the indicator and changing the moving average value. Keep all
these averages displayed in a single different colour. I use red.
5) When the display is completed select SAVE AS from the FILE menu. In the dialogue box
next to SAVE AS TYPE select the TEMPLATE option. Give the template a name and click
SAVE. This template can now be applied to any chart display.
To bring up the template just right click on the bar chart display and select APPLY
TEMPLATE. Choose the MMA template from the dialogue box to see the new display.

Daryl's Response

The strategy will work, but the drawdowns may be substantial. There are better strategies suited to modern post 2008 markets and to the developing secular bull marketr. We use derivatives to boost returns.

Daryl's Response

There are no technical patterns in EMS.

Daryl's Response

This question requires investment advice rather than analysis. I am sorry, but I cannot provide an answer as this would be investment advice.

Daryl's Response

This question requires investment advice rather than analysis. I am sorry, but I cannot provide an answer as this would be investment advice.

Daryl's Response

I believe you can continue to trade on the ASX using a comsec account. Settlement details may need to change to reflecet any new bank details. Or just keep an Australian bank account open for trading purposes. I would suggest you get specialist advice on the tax matters. It is not an area where I have any expertise. I trade, and let my accountant handle these detials. .

Daryl's Response

I treat this as a Dragon fly doji. They form when the open, high and close are equal and the low creates a long lower shadow. The resulting candlestick looks like a "T" with a long lower shadow and no upper shadow. A dragon fly doji could signal a potential bullish reversal or bottom but this is usually at the end of extended downtrend.

Daryl's Response

The evidence suggests a minor top and pullback rather than a repeat of 2008. In 2008 the end of trend patterns gave very low targets which were achieved and exceeded.Curent patterns show retracement rather than reversal. However, we watch support carefully to evidence it can hold.

Daryl's Response

We do not teach FX trading, but we work with professional FX traders who are using some of our techniques, such as GMMA and TVL which are very useful for FX trading.

Daryl's Response

I cannot provide trading advice. Both stocks show a parabolic trend - one more developed than the other. This type of trend is discussed in The 36 Strategies of the Chinese for Financial Traders. We also discuss this type of trend behaviour in our weekly newsletter.

Daryl's Response

The DOW is hammering out an L shaped consolidation pattern bounded by support near 10600 and resistance near 11600. This pattern has developed after the DOW reached the 10600 downside target calculated from the head and shoulder pattern. Look for a weekly close above 11600 or below 10600 to set the next leg of any trending pattern. There is currently no directional bias in this consolidation pattern – just volatility. The XJO does not have a head and shoulder pattern, nor a L shaped pattern.

Daryl's Response

The strategy is called Beating the Grass to Startle the Snake – and its taken on a whole new dimension with High Frequency Trading which is repeated small hits designed to shake out the weak and nervous hands. Once its moving, the big players do sit on the hands and let the momentum run. But HFT trading and Algo trading is now looking for faster, smaller and more frequent returns so they bail out more quickly. Its part of what is creating the increase in volatility we have seen.
Pump and dump schemes are a deliberate manipulation of price over a longer period which is a little different from ‘running the stops’ or testing the strength of support areas with hundreds of HFT trades. ChiEx and ASX are now geared up to enable HFT trading.

Daryl's Response

Several parts to the answer. First, in these market conditions I do not trade small/micro cap stocks. The rewards are enticing but it is exceptionally difficult to effectively mage risk due to the volatility and gapping you mention.
If you are trading in this area then use position sizing to manage the risk so it is less than 2% of total trading capital. Because of the volatility gapping, we prefer less than 1% of trading capital at risk.
The mechanics of the risk calculation are explained in Guppy Trading and in our weekly newsletter. It means you can take a 30% fall in the stock price IF the dollar value of the fall is less than 1% of your total trading capital. The drawback is that the position size is small – so small that it may be uneconomic to trade.
Volatility has turned this into a gambler market. I am not a gambler so the best strategy is to remain flat on the sidelines in this sector. As an independent trader you do not have to trade, or trade every day. It’s a good time to

Daryl's Response

First, congratulations on your success.
Charting provides a method of independently verifying information that comes from other sources. It can be used in many ways. Aspects of charting are suitable for short term trading. Other combinations provide advantages for position trading. Further combinations are applied to strategic long term market analysis. (I use these combinations in the analysis we provide to several US Fund managers)
Personally I place a low % value on company assets and management decisions. These figures are simply too easily fudged. Bernie Madoff succeeded in fudging this for years.
The market provides many different types of opportunities, which can be successfully analysed and acted upon in many different ways. The challenge is to assemble the methods which are most comfortable for you and your style. I am always wary of the claims of superiority of one method over another because the market and its participants are so diverse.

Daryl's Response

Trend line in this market generate many false signals. Ie a close below the trend line followed by a rapid resumption of the trend above the trend line. It’s a post-GFC characteristic. Trend lines are less reliable. My new book GUPPY TRADING looks at new methods in this environment and how some older methods need to be modified. The Trend Volatility Line uses GMMA behaviour to define the trend and set stops that are more directly related to the trend volatility. In our weekly newsletter we are looking at some short term intraday trading methods, again designed to use volatility to generate returns. Markets have changed in their volatility structure so we must continue to develop better responses fro trade identification and management.

Daryl's Response

Exit strategies vary widely. Briefly.
For pattern trading, exit just below pattern target
Rally trading. Exit when triggered by a close below a price volatility indicator such as Count Back Line or Traders ATR.
Trend trading – close below a trend volatility line based on Guppy Multiple Moving Average analysis.
All of these methods are explained in more detail in GUPPY TRADING.
At times, in individual trades, these are modified based on price and volume behaviour in order lines. We show real time screen shots examples in our weekly newsletter in case study examples.

Daryl's Response

The increase in the speed and degree of market volatility post-GFC has rendered some traditional techniques less useful. Oscillator reliability has decreased. They react too slowly and deliver inconsistent signals. Over bought and oversold were always relative concepts and they were useful in a slower paced market. Now they tend to whipsaw and deliver noise rather than a signal.
My preference is to start with a robust trend definition method – a trend line where historically reliable, or GMMA analysis. This allows identification of the developing pullback. Then I use a measure of price volatility to confirm the rebound and deliver an entry signal. I use the count back line, or a Trend Volatility Line. These are discussed in Guppy Trading. I use an oscillator signal as a final validation, but it is not a critical validation. With Index and FX trading is useful to move across multiple time frames to manage entry risk and trade performance.

Daryl's Response

I would prefer to see one or more of these: MA crossover, CBL confirmation; trend line breakout; MACD signal; developemnt of a bottom pattern such as saucer.

Daryl's Response

It tells you distribution is easing, but this is not necessarily an indication of accumulation. Until confirmed by other factors, this is simply an easing in distribution pressure.

Daryl's Response

The DOW has developed this pattern. Targets are near 11,600. Longer notes on my CNBC blog and in last weeks Australian newsletter. I will be discussing this and China outlooks in Singapore at the OCBC Global Investors Forum on Saturday.

Daryl's Response

Pattern and momentum trading on the long side, leverage via CFDs. However plenty of short opportunities, just I choose not to trade them. Trade the volatility, not the trend.