What an excellent close to the month and the week. It is my view that the last Friday of the month is profit taking day. The reason? The traders need to pay bills. They need to close their positions generally speaking in order to cover their monthly expenses and start again in the new month. It also gives them the chance to spend some of the hard earned profits... It's tough being a trader you know!
Both the Resources 20 index and the Findi 30 index were way overbought from Wednesday but the market was still riding on the back of a major rally. The question really for next week is whether this rally was a bullish comeback or bearish rally? Some homework needs to be done over the weekend! Look out for my post about this on Monday!
But both the Resi 20 and the Findi 30 were overbought using the stochastic indicator as well as old highs. It was a matter of waiting for the trigger and the turn in the market. Did it turn!! Today the majority of the market has dropped down by around 5% in those sectors or indices.
Personally I was short Implats from 17252 yesterday and held it through to this afternoon for a fantastic profit. I was also going to short Standard bank, ABSA, First rand and Anglo American yesterday however I had a car licence renewal queue to deal with. This took me 3 and a half hours to secure. I find out I also need a roadworthy test as I am transfering the car into a trust.
Then the All Share Top 40 index signalled a short from 13h00 at 19500 which resulted in 500 pts of profit per contract!! The last two days on the stock market have made me a small fortune. I certainly cover my monthly expenses in just 2 days of short term trading.
Learn to use the moving averages and the stochasic with the RSI as your main indicators on the technical side... but it is vital for you to also understand the psychology of the market by using resistance and support lines and comparing global indices with your local ones and then sectors to shares etc.
I will be lecturing at a Derivatives workshop tomorrow. I need to go and prepare for that now. It is all about the theory of how the different instruments work and how you can take advantage of them to gear yourself and your portfolio.
Have a great weekend! For more info on short term trading visit www.newsweek.co.za
Financial & Investment Workshops, ebooks & financial freedom @ www.newsweek.co.za
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