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The Top ASX 100 Falls

The Vital Importance of Using Stops 15 Nov 2011 10:53 PM

 The past year has been a very difficult year for most traders - as the market spent much of the year in a sideways crabbing pattern, with short periods of increased volatility, before turning down strongly in recent months.

On Tuesday 9 August 2011, markets tumbled around the world, following a drop of about 5.6% on the DOW in its previous trading session in the USA. (refer to our coverage in Edition 317). 

In Australia that day, many shares fell substantially, then rebounded spectacularly off their Lows. 

This followed what appeared to be capitulation selling e.g. by margin lenders dumping stocks on behalf of those clients who had received margin calls (and hence were obliged to produce extra cash) and those investors who had bought Blue Chips on a “Buy and Hold for the long term” basis, but who found they could not actually ‘take the pain’ any longer, so sold out in a panic. 

We commenced this new section of our 'Investing & Online Trading' Newsletter in Edition 318. We are progressively examining all of the ASX100 Charts - to compare the outcomes of our two hypothetical traders; JB Trader #1 and Trader #2 ‘Buy and Hold’. 

We will analyse only those ASX100 shares which have given a JB Volatility Entry signal within the last 12 months. 

In particular, for each of the ASX100 shares, we will look at the last potential trade which occurred in a Rising Trend over the last year. For each ASX100 share, Jim will: 

1. Provide a weekly chart as at August 2011 and show whether the share was in a Rising Trend or a Falling Trend, by Jim’s definitions. `

2.  If necessary, go back in time to find the last time each share was in a Rising Trend , then detail the notional management of JB Entries and Exits for the last potential Rising Trend Trade - using Jim’s short term Trading Rules on a daily chart - and will provide the notional results 

3.  Show a chart of the price action which occurred after the last JB Exit 

4.  Include the results in 3 summary Tables at the end, so you can compare the outcomes for our hypothetical Traders #1 and 2.

We encourage you to follow very closely the details shown in Jim’s charts and his accompanying analysis descriptions, as this will further advance your understanding of his common sense approach......  

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Jim Berg and John Atkinson are Authorised Representatives (AR Nos. 322724 and 1251439) and ShareTradingEducation™.com Pty Ltd (“STE”) is a Corporate Authorised Representative (CAR No. 322726) of Maven Capital Pty Ltd, Australian Financial Services Licence AFSL 418504. Examples from the Australian and USA markets are provided to demonstrate that Jim Berg’s principles may be used globally. This educational material is from an Australian source and complies with Australian law and not necessarily any other (local) law. Direct investing in the stock market can result in financial loss. STE products have been prepared for the general information of investors and do not take into account the investment objectives, financial situation and particular needs of any particular person. Persons intending to act on information in STE's products should seek professional advice to confirm that the investments or strategies mentioned are appropriate in the light of their particular investment needs, objectives and financial circumstances prior to taking any action. Refer also to the full Customer Caution Notice in our Terms and Conditions.