daytrade diaries... august 17

Morning traders.

Market wrap: The Australian stock market's recent independent streak will be tested by falls on key resource and equity markets on Friday.

Buoyed by better-than-expected company profit reports, the ASX charged higher last week while most overseas indexes slipped to their first losing week in five. In the US, a late buying spree in financials pared the worst of the losses but the major indexes still finished well in the red. The Dow lost 0.82%, the S&P 500 was off 0.85% and the Nasdaq 1.19% after a surprise decline in consumer sentiment suggested the foundations for this year's share surge are shaky.

There was selling in the mining and materials sectors after falls in the prices of oil, gold and base metals. Crude oil futures tumbled 4% as traders weighed the consumer sentiment message against this year's 50% price rise. Oil finished $3 lower at $67.47.

An index of American precious metals miners lost 2% after a fall in gold futures. Gold slipped around 1% to $947.60 on Friday after a sharp annual decline in US consumer prices reduced its appeal as a hedge against inflation. Base metals retreated from recent highs. Copper lost 2.7% in US trade and aluminium was down 3.4%. Zinc, nickel and lead also declined.

None of the above bodes well for our market today. The SPI futures index was down 28 points at 4397 and arguably would be lower if our market hadn't bucked the global trend so often last week.

TRADING THEMES TODAY

BUY SUCCESS: Companies that beat expectations when they reported last week generally advanced for at least two days (eg, COH, FLT, JBH, CBA). In other words, waiting until the end of the day and buying companies that have risen after reporting and holding overnight has been a high-probability strategy. It's another big week for company reports. Among those reporting today: ANN, BSL, CGF, IMD and NCM.

BOUNCE TRADES: When the SPI points to a big green open, I look for likely breakout trades; when it's heavily in the red, like today, I concentrate on finding support levels where tumbling shares are likely to bounce. Setting price alerts at these levels lets me know when a share is in the "buy zone". If the support holds, it's time to buy.

BUILDERS: Not necessarily a day trade for today, but last week's breakout in building stocks is worth watching. (Any sector where there's strength is worth tracking.) JHX, CSR, BLD and DOW all hit new highs. Should be some buy-on-retrace opportunities coming up this week.

Good luck to all.