the top down method of trading
the logic is to trade in a direction where everthing is in your favour ie.
if world economies are strong, the economy of the country in which you are trading is strong, the sector in which you propose to trade is performing strongly, and then the stock within that sector also has a strong outlook.... so in that case its a no brainer you go long...... like wise if you can select a stock or an indice where all the above conditions are in the reverse and then you go short...... so the more of the conditions that are in your favour the greater the probability of success...
you can use consensus opinion within the financial community, various government information which is provided on a regular basis, and financial analysis of companies to establish your views as a basis for your trading decisions - or you can use the charts....
with charting its all about following the trends ..... the table below is my interpretation of where the all ords and the asx sectors are at - at the moment....... I have used trading bands over a two month period as I have found on average this gives a reasonable indication of trend.... other time frames might give more accurate indications for particular situations.....
as all would be aware we have reached and even punched through the top of the all ords 2 month slightly down trending trading band..... this is also the case also with most sectors (not all) ......as I can see nothing of any huge signifigance to change things the greatest probability is that the trend of the trading band will continue on..... ie the all ords and most of its stocks will shortly reverse down again, and over all move along in the general direction of the current trend...
below is a table indicating where the all ords and the sectors within the ASX are at - at the moment....... all comments welcome
|
Column 1 |
Column 2 |
Column 3 |
Column 4 |
Column 5 |
| 1 |
TREND BANDS FOR SECTORS |
|
|
|
|
| 2 |
|
|
TW0 MONTH TRAD'G BAND - DIRECTION |
LOCATION IN TRADING BAND |
DIRECT'N WITHIN TRADING BAND |
| 3 |
XAO |
ALL ORDS |
SLIGHTLY DN |
TOP |
UP |
| 4 |
|
|
|
|
|
| 5 |
XDJ |
CONS DIS |
DOWN |
TOP |
UP |
| 6 |
XSJ |
CONS STAP |
DOWN |
CLOSE TO TOP |
UP |
| 7 |
XEJ |
ENERGY |
UP |
MIDDLE |
UP |
| 8 |
XFJ |
FINANCIALS |
SIDEWAYS |
CLOSE TO TOP |
UP |
| 9 |
XGD |
GOLD |
SIDEWAYS |
TOP |
UP |
| 10 |
XHJ |
HEALTH |
DOWN |
UPPER MIDDLE |
UP |
| 11 |
XIJ |
IT |
SLIGHTLY UP |
TOP |
UP |
| 12 |
XJR |
RESOURCES |
DOWN |
TOP |
UP |
| 13 |
XMJ |
MATERIALS |
DOWN |
TOP |
UP |
| 14 |
XNJ |
INDUSTRIALS |
DOWN |
TOP |
UP |
| 15 |
XMM |
METALS / MINING |
DOWN |
TOP |
UP |
| 16 |
APJ |
PROPERTY |
UP |
BOTTOM |
DOWN |
| 17 |
ATJ |
TELECOM'S |
SLIGHTLY DOWN |
CLOSE TO TOP |
UP |
| 18 |
XUJ |
UTILITIES |
SIDEWAYS |
TOP |
UP |
from above - the all ords is trending slightly down and the majority of the sectors are trending down also, indicating that the best bet would be a short in a sector that would have the greatest probability of performing poorly.....
energy stock and property sectors still have an upward trend, but look to have flattened off more recently....
gk...
