It’s been a while since I have posted any charts on the OGX Chart Thread. I think my last post was on 20/05. I copped a bit of flack on the other OGX threads along the lines of “TA chart posters only post their pretty charts when the SP is going up, and then disappear when the SP is going down”. Yes, as many would agree this is a valid criticism. However, there may be a reason why this is happening.
When a stock’s SP is going up the primary focus of any TA Trader/Investor is to identify the strength of any move (trend) and exactly where the best place is to open a trade. So the view is generally very positive. HC post readers who are enthusiastic about the stock read such posts as good news and get a dopamine hit which makes them feel even better, and then madly click the “Like” button. Everyone is happy!
When a stock’s SP starts to correct and fall the TA Trader/Investor goes into “position protection mode”. The questions are; how strong is the correction/new down trend, and where are the support levels that should stop the fall (often called inflection points by TAs). This is all seen as being bad news. The natural reaction of most HC readers/posters is to criticise and demean the TA Poster. Many misguided and uneducated HC Posters even resort to name-calling by referring to these TA Posters as “Down Rampers”, an HC specific term that suggests a conspiracy and/or strategy associated with a Posters negative view of a stock. I would suggest that if anyone reads a post that uses this term they discount anything that that Poster has published as having no foundation.
I have prepared a simple chart that serves to identify the current and past market sentiment towards OGX and identifies those possible inflection points/levels mentioned above. But first I’ll describe the various indicators that appear on the chart along with their purpose.
The first question you should ask is; what is the periodicity of the chart? The chart below is a Daily Chart which is commonly used for EOD trading. Investors may well prefer to view the chart using a Weekly periodicity. Also note that I have annotated the chart in an attempt to clearly identify what the indicators are telling us as well as where significant indicator have signals occurred.
The first and most important indicator is the Trend Indicator. On the bar/price chart (the top pane), along with the price bars there are two sets of six exponential moving averages (MMAs). The red shorter period MMAs represent Traders and the blue longer period MMAs represent Investors. When the red MMAs are above, and on any retrace bouncing off the blue MMAs, the trend is up, see the period 28/12/2017 to 03/04/2018. When the MMA’s start to intersect we have warning of a trend change. When the red MMAs move below the blue MMAs and bounce down off the blue MMAs we are in a downtrend, see period 02/05/2018 to present. The strength of the up or down trend can be inferred from the separation and slope of the MMAs. I’ll leave it to the reader to make their own inference regarding the strength of the current down trend as compared to the previous up trend from the chart below. A Ref for this Trend Model is “Trend Trading” by Daryl Guppy.
The bottom pane in the chart is Volume. Just compare the volume present in the Up Trend period to the current volume. The other and most important aspect of Volume is that it helps to identify where professional groups (smart money) may be buying or selling. The High, Low and Close of the price bars on which High and Ultra-High Volume trades occur are identified on the price chart by an indicator called “Anchor Zones”, see the horizontal dotted green and dashed red and green lines connected to the price bars on the price chart. These Anchor Zone levels represent high probability areas of support and resistance. Refs for this Volume Support/Resistance Model include “Volume Spread Analysis” Tradeguider Systems, and “Trend Trading Setups” L. A. Little.
The second pane from the bottom, just above the Volume pane, is Momentum. This momentum indicator is a price oscillator which uses the difference between two exponential moving averages to plot a line that moves above and below the zero level (this is the red line on the diagram “MOM”). The EMA lookback periods used are 5 and 20. The other green line on the diagram is a 30 period EMA of the MOM red line. This is the green line “DAD” and is used to get a reading of the longer term momentum of the SP. The position of the DAD line (above + and below – the zero level) along with its slope generally gives an early indication of the possible future direction of the SP. The general advice is to never trade against the direction of DAD!
The third pane from the bottom is a Cycle indicator. It tries to identify the short term up and down cycles of the SP price action. I use the Stochastic indicator with a setting of 5 (lookback period), 2 (first MA period to generate the red line), and 3 (second MA period to generate the blue “signal” line). When the red line crosses the blue line trade signals are generated. I have identified a few of the most recent signals that seemed to work quite well on OGX. On this pane I have also included a slightly longer 14 period stochastic, shown in dotted green. I use this line to help confirm the medium term SP cycle. A Ref for these Momentum and Cycle indicators is “Top Dog Trading” Dr Barry Burns.
Well so much for disclosure re the chart indicators. What are these pretty simple indicators currently telling us?
TREND – The trend is down (red MMAs below and bouncing down from the blue MMAs), but the down trend is weak (all the MMAs are quite compressed).
VOLUME – Volume is very low, almost negligible, indicating little Trader interest in the stock.
MOMENTUM – Momentum is negative (below zero). Short term momentum has recently turned down but longer term momentum is still flat.
CYCLE – The short term cycle of the SP has been down since the last Sell Signal on 04/06/2018. Both short term and medium term cycle indicators are now oversold.
SUPPORT and RESISTANCE – The significant support levels are identified on the price chart. Weak resistance is at 8c which is the Close of the high volume bar of 31/05/2018. The interpretation is that smart money moved in and sold at this level. The Close of the Ultra High Volume bar of 18/04/2018 at 7.3c was support until the recent confirmed break of that level on 20/06/2018. The Low of that Anchor Zone at 6.3c is now the level of support. The Buyers who came in to drive the SP up from its low on 18/04/2018 wouldn’t want this level to be breached.
In order to try and confirm these current levels of support and resistance I had a look at the state of the ASX Order Book for OGX. A pic of the OB as at market close 22/06 is shown below. It can be seen that the support and resistance levels identified above are in fact closely reflected in the intentions of the current Buyers and Sellers. This further reinforces that importance of the support levels noted on the chart!
AS with FA, the current TA view of a stock will change as more information pertinent to the analysis becomes available. Fortunately, some may say unfortunately, with TA and EOD analysis new information is provided at the end of each trading day. Hence, a TA view can change from day to day. There is no right or wrong with TA, it’s just reality and facts. The manner in which TREND, VOLUME, MOMENTUM, CYCLE, and SUPPORT/RESISTANCE indicators are interpreted with regard to the possible impact on the future of the SP level is up to the reader and their personal trading/investing strategy/plan.
As a courtesy to the few posters on the OGX FA Threads who do provide considerable value to the ongoing discussion regarding the future of OGX (and we all know exactly who they are), I will continue to post the above chart on a regular basis each week, or as significant price/volume action occurs. If there is a consensus that believe this is a waste of time and effort, let me know and I’ll stop.
OGX Price at posting:
6.7¢ Sentiment: Hold Disclosure: Held
