hctv presents bluey-doo mystery monday, page-9

Hi PB,

I'm not surprised you say it's hard to work out. Nothing personal about you - just the way the market is at the moment.

Checking some blg blue chips over the weekend I couldn't help but notice the divergence in chart patterns between WBC and BHP. These two big blue chips can be taken to represent the two largest sectors in the Ozzie market, Materials and Financials. If these two were in sync, it would make matters a lot simpler.

Here are the charts:

Westpac at resistance in a sideways channel.

BHP at support in a sideways channel.

Traders would expect WBC to retreat and BHP to rise (reversion to the mean).

Accumulation/Distribution Chart for Westpac supports the bearish view on WBC. Momentum indicators on WBC suggest the stock is overbought and the probabilities lie to the downside. On BHP, Accumulation/Distribution is ambiguous. Positive divergences on momentum indicators for the BHP chart support the bullish case.

Three possibilities:

1. Both rise (WBC breaks above resistance and BHP bounces off support). Market Bullish.
2. Both fall (WBC falls from resistance and BHP breaks through support).
Market Bearish.
3. One rises, one falls (Take your pick as to which one rises, which one falls.)
Market stagnates.

My preference: Possibility 3. But I'll be watching out for all three possibilities.

Redbacka.