• Daryl Guppy
  • 10 August 2017

Chart patterns are an essential part of market analysis because they provide a guide to how market participants are thinking. At heart, the financial market is a measure of the psychology of its participants. It captures the shift from hope to fear and identifies which emotion is dominant. This is seen in sustained trading activity as currently shown with the US indexes. But at times these chart patterns capture sustained points 09 of indecision.

The Australian market index has two potential chart patterns. Both show prolonged indecision. The challenge is to determine which chart pattern is the valid pattern because this effects the way upper and lower index breakout targets are established.

The first pattern interpretation identifies the prolonged sideways trading band that has dominated the Australian market since 2016 December.  The lower edge of the trade band is near 5660. The upper edge of the trading and is near 5820.

Trading band patterns are used to set breakout targets. The width of the and is measured and the value projected above and below the band. A break below this trading band has a target near 5500. This target can be reached very rapidly as markets trend to fall more quickly than they rise. An upside break has a target near 5950 but getting is much more difficult to achieve simply because of the prolonged period of market weakness in the sideways trading band.

With a bit of imagination its possible to plot an equilateral triangle pattern on the Australian market index. We say imagination because the lower trend line in particular has to exclude some dips. The upper trend line includes an extended series of peaks that are well below the trend line. It’s a far from perfect equilateral triangle. An equilateral triangle has equal degrees of slope on both the upper and lower trend lines.   

However, the key message of the potential equilateral triangle pattern is one of indecision. The market may break to the upside or to the downside. It’s 50% probability either way.  Using the equilateral triangle an upside break has target near 5960 and a downside break a target near 5560. This simply supports the conclusion derived from the trading band analysis. This is a sideways market where the key trigger for a trend change is a move above or below the trading band.

We favour trading band analysis because the upside breakout in 2017 May almost reached the trading and upside target of 5820 before retreating. This validates the use of trade band analysis.  This is rally and retreat trading environment with no clear market direction. In many ways, it’s an ideal market for the application of the ANTSSYStrading method. There is no much comfort derived from either pattern analysis method. This is a weak market waiting for an external lead and this makes it exceptionally vulnerable to any external shock.

About the Author
Daryl Guppy (Australia)
Known as the “CNBC Chartman”, Technical Analysis Expert, International Investment Master, Daryl is an active private position trader trading equities and associated derivatives markets.

Daryl Guppy is Founder and Director of Pty Ltd. He is an active private position trader trading equities and associated derivatives markets. His most recent book is ‘The 36 Strategies of the Chinese for Financial Traders’. He is the author of several books including ‘Share Trading’, ‘Trading Tactics’, ‘Bear Trading’, ‘Chart Trading’, ‘Trading Asian Shares’, ‘Market Trading Tactics’, ‘Better Trading’, ‘Better Stock Trading’, ‘Snapshot Trading’. Several of these books are also available in Chinese & Italian, in particular, ‘Trend Trading’ has become a best seller and is available in Chinese.

Daryl developed the Guppy Multiple Moving Average indicator which is included in DZHI Advisor, Metastock, OmniTrader and other charting programs. He delivers accredited courses for the Singapore Exchange and Society of Remisiers, Singapore. He is an appointed foundation member of the Australian Government Shareholders and Investors Advisory Council. He is a regular technical analyst commentator and guest host on CNBC Asia Squawk Box.

As a technical trader, he relies mainly on chart and live market information to make trading decisions. He is the publisher of a weekly Internet newsletter Tutorials in Applied Technical Analysis, which explains technical analysis techniques and shows how they are applied to current markets. There are Australian, Asia, China and India editions of the newsletter, with each concentrating on local market solutions and trading education.

He is a regular contributor to the Sydney Futures Exchange magazine - Your Trading Edge, the US trading magazines - Technical Analysis of Stocks and Commodities, Active Trader, Working Money, Bridge Trader, Australia's Shares and Personal Investment magazines, Singapore's Smart Investor magazine and The Edge business weekly and Personal Money in Malaysia. He has a regular column in China's Weekly on Stocks magazine and in Shanghai Securities News. He also contributes to Poland's Professional Investor and provided sector analysis on the Singapore, Hong Kong, Malaysia and Philippines markets for i-invest handbooks.

He edited and contributed new material to the Australian editions of the US classics in the International Investors Bookshelf series, The Basics of Speculating and Day Trader's Advantage and Options: Trading Strategies That Work and Trading Rules and Mastering Technical Analysis. He prepared the introduction to the Australian editions of Breaking the Black Box (M Pring), A Technician's Guide to Day Trading (M Pring) and New Thinking in Technical Analysis (R Bensignor).

He provides web content to Sanford online brokerage, Reuters, On Line Trading systems, the Society of Remisiers, Singapore, Asiastockwatch, Telstra Big Pond Money and Quicken, Singapore. He provides charting chat room support and is co-host for the stockmeetingplace traders forum.

He trades from Darwin in the Northern Territory, of Australia, some 3,000kms from the nearest Exchange. As a result he makes full use of electronic advantages to actively trade the market and to keep in contact with other Australian and overseas traders.

He gives conference briefings for brokerage private clients. He is a featured speaker at the Australian Traders Expo, for the Sydney Futures Exchange Conference days around Australia and New Zealand, and at the Australian Technical Analysts Association annual national conferences. He was one of the speakers in the first Australian Equis Metastock seminar series. He also spoke at the On Line Trading Summit in San Diego which was webcast to traders throughout the world, and at the Technical Analysis Trading Forum in Orlando. He has spoken at trading conferences in Italy and France. He has also spoken frequently at all the major Australian Stock Exchanges, and for brokerage firms.

He was one of two foreigners (Jim Rogers and Daryl Guppy) to participate in the 2005 Chinese market outlook conference in Beijing which was broadcast throughout China. He is a keynote speaker at the 2007 China Capital Markets Investment Forum. His analysis has been presented at the 2005 Palm Oil Outlook conference sponsored by Bursa Malaysia and the BYSD Annual conference in Turkey. He is a regular speaker at the annual ASEAN Rubber Conference and at financial trading seminars in Shanghai, Beijing and Shenzhen.

He presents Certified Professional Training modules for charting and advanced technical analysis for the Singapore Stock Exchange and the Society of Remisiers, Singapore and the Hong Kong Securities Institute. He has worked with the Singapore and Australian Stock Exchanges to promote their cross trading link. He worked with Reuters Hong Kong to deliver trading and training workshops. He was the lecturer for the Casuarina Senior College charting course.

He also runs public trading workshops, and equity and futures brokerage sponsored seminars for clients such as National On Line trading, CMC Markets, Beijing SEEC in Australia, Kuala Lumpur, Singapore, Shanghai, Dalian and Paris. He provides in-house training support for fund managers, brokerage dealers and remisiers.

He presented several on-line workshop conferences for and Compuserve Investors Forum. He has appears regularly on CNBC Asia, Squawk Box as guest host technical analyst, Asian Wall Street Journal, Trading Day, Channel News Asia and ABC radio and television.

He was retained as a consultant by several Australian and Singaporean brokerages and financial portals to advise on the development of Internet based brokerage, trading and information services. He is a member of the Australian Technical Analysts Association, the Technical Analysts Society of Singapore and the International Federation of Technical Analysts.