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Technical Analysis, The Inflationist Challenge 2009, Your StockPicks

MAGIK Numbers

MAGIK Numbers

Daily and Weekly Dow Jones | FTSE Analysis

By Mr. Magik

25 Jan 2009 | Edition 1

Welcome to my inaugural edition of Magik Numbers, I will be writing a daily trading plan and commentary exclusive to theinflationist on price action for both the Dow Jones Industrial and FTSE 100. The format of my trading plan will focus upon multiple time frame analysis on key support and resistance areas with specific price recommendation levels.

Inherent in any trade plan, I will also provide both price target and exit levels. The idea and principal of my technical analysis is based upon the pivot point in multiple time frame analysis firstly developed by Charles Drummond. As with most technical analysis methods, it is not necessarily the technique but rather the values within the trader that usually determine success in the long term. Essentially markets are a collection of both fundamental and technical factors that determine the movement of the prices.

I have been trading and fine tuning my technique through observation and tuition fees in developing a bespoke pivot technique based on Drummond geometry. After years of trading, I have to admit there is no silver bullet for any on trade. Rather I find both quantitative (technical) and qualitative (fundamental) factors works best for successful trades, not to mention a big dose of luck always helps!

As this is my inaugural edition, I will briefly explain the idea behind the pivot point and price energy. The pivot point can be explained as the point of equilibrium in a particular time frame. It is the neutral zone for both buyers and sellers; this means both parties are relatively comfortable in this zone. In any given trade day or week, the price will try to get back to the pivot point. By this I do not mean it will definitely hit the pivot point but rather the further away from the pivot point, the stronger the price energy will be to return to neutral zone. This can be best explained as a stretched rubber band pulled on either side.

My trading plan essentially will include 7 key energy points on a particular time frame. If a particular energy point overlaps on multiple timeframe (i.e. daily and weekly) then the particular point is even stronger. You can make money with any technique as long as you manage your losses and trade with discipline and integrity. Have the courage to take the trade and also take the loss or profit. Greed and complacency are part and parcel of the game, so emotional management is equally or more important that purely technical analysis.

Enough talk, lets get into the first trade plan for the 26 January 2009.

DOW			FTSE
Daily	Week		Daily	Week
8046	8092	Pivot	4027	4087	Pivot
8184	8274	R1	4096	4217	R1
7941	7895	S1	3982	3922	S1
8424	8654	R3	4213	4519	R3
7690	7519	S3	3866	3618	S3
8300	8464	R2	4153	4368	R2
7823	7709	S2	3926	3775	S2
40	22	%	54	28	%

 

Dow

The Dow closed at 8078 on Friday which is very near the weekly pivot. We are expecting the Dow to trade within a range of 8184 (R1) and 7941 (S1). Swing is neutral at 40% hence on a daily basis the market is expected to consolidate between the support and resistance level 1. There are no key overlap points between daily and weekly analysis however the zone between daily S1 7941 and weekly S1 7895 is expected to provide strong support.

Trade plan

– Buy at S1 7941 with stop at 7875 (20 pts below weekly S1). Target 8184.

FTSE

The FTSE closed at 4052 in a similar neutral position on Friday. The expected trade range is between 4096 (R1) and 3982 (S1). Depending on how price movement begins with on Monday, the FTSE can test lower daily support 3982 S1 first before going back to pivot.

Trade plan

- Buy 3982 (S1) with stop at 3950 (10pts below Friday low). Target 4087.

Best to your trade,

Mr.Magik