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This Is From Jodi Ellis Chart Chatter via Sanford




The retracemement in the global market has been echoed by our own All Ordinaries Index. Looking at the Dow and the Nasdaq, we can see they have had a similar pull back. It is still likely that our market will still find support at around 3250 and bounce up slightly as mentioned in last weeks article.

Despite the Nasdaqs' full retracement from the recent market surge, the Nasdaq Telecommunications Index has not pulled back to the same level. It has held above its previous resistance point and is showing signs of moving upwards. Reviewing our own Telecommunications Index (XTJ) gives us little real information as it heavily dominated by Telstra (TLS). We can reasonably expect that TLS will have some benefit from a stronger overseas telecommunications market.

The chart shown is a weekly Continuation chart of TLS with an overlay of XTJ.

TLS was covered recently in Chart Chatter article 270 where the TLSST Put option paid off handsomely to those who pursued it. Now TLS has pulled back to $4.72 (options strike price) support and resistance as expected.

We can see that the original uptrend that commenced in March has been broken. However, similar charts are seen in most stocks that have enjoyed the rally back in the market. The significant support remains at $4.72.

The measured move has accurately indicated levels of support and resistance on TLS through its entire history. The points marked "A, B & C" give a retracement to $5.16. A successful breakout of this shows a retest of $5.69. The time frame for a move back to $5.16 can be calculated using the continuation projection tool (not shown) for a completion of this retracement by 20-1-04.

Interestingly, the Continuation Chart indicates a 91% probability of a retracement up from this point. As the weekly chart is showing this weeks' incomplete data, it can only be taken as a high probability of a rise from this point. Whilst this has less meaning than a completed weekly bar, it also indicates the high probability of a move up from this point.

As indicated, a break below $4.68 will end this pattern, so for stock traders, the downside is very low compared to the upside. For options traders the January options have virtually no action and so leave us to look for the higher risk short-term options. For the keen options trader the $4.72 December TLSWN December Call seems to be the best value below $0.15. Any sudden move upwards towards $4.96 in November should turn this into a $0.30 option - offering a reasonable risk-reward ratio whilst giving some potential to exit the trade below $4.68.

A solid move up prior to Christmas could herald the last time we reasonably see TLS below $5.00 for some time. 2004 is shaping into a year with a reasonably bullish potential at present.

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