Today when you look at the stock chart for the ($TSX) I wanted to keep it clean and now have any lines on it. You can see that we have already come down quite a ways from the highs back in 2011 but as each week of the chart moves it makes where we are now in the market a lot lower as the lower values in the chart disappear. This effects traders as they like to see where we’ve come from and if we start to appear as if we are at very low levels then value investors and traders start to step into the market and we catch bids higher.

Our next stop in the TSX will probably be the recent breakout point of 11,750 which is only a a few hundred points away, seasonally for the markets September tends to be a volatile time. That’s not to say you can one make money or two that there aren’t any strong sectors during this time.

If you have traded for any period of time you know that September to December tend to be favorable to tech stocks. I actually used Friday’s strength to open up a new position.  It might not be a TSX listed stock but it is in an area of support and I will watch it to see if the seasonal trend for tech stocks holds true for this year. With the US election though anything could have an effect on stocks.

If you do have any short positions keep a close eye on them as we approach the bounce area I mentioned of 11750 and perhaps look to lock in some profits.

If your wondering which position I opened up with was long Intel ($INTC) as it bounced off support at the $24.50 level. I think a lot of traders saw the same move and have the same thesis as I do but the doesn’t mean I will be hitting this out of the park.

Now before we start the fear mongering, looking for attention type comments take a look back at my most recent TSX Today Post where I actually say that August tends to be a good season month for the TSX and related equities. The point of this post is to frame our risk and properly set stops and price targets. By no means do I want to see a 9750 on the TSX but being a trader/investor or market participant you need to make yourself aware of the bad as much as the good.

So why the call for a possible 9750 TSX? simply based on a technical pattern many traders can recognize and see for themselves. A head and shoulders pattern.

As you can see the left shoulder was put in way back in the first quarter of 2010 the top of the market or the head was formed in the first quarter of 2011 and now we can see the formation of the right shoulder in the first quarter of 2012….see a trend already….

Now this pattern took three years to form. now from what I have experienced bear markets or market drops tend to happen a lot quicker then bill market runs. Now the measured distance from the head to the neckline is roughly 2000 points which typically would be the measure move down if the neckline is broken and done so on strong volume.

I typically like to see two weekly closes below or above a support or resistance line for it to count on a yearly/long term chart for a confirmation.

So again, do I expect this to happen, not yet. Can it happen…of course it can. Should we be aware of it…definitely

Now if the TSX starts to rally in August and ends up breaking through the 12750 right shoulder this pattern would be negated.

If anything I want my readers to be aware of this and not be taken back if this scenario does play out. Either way money can be made on the long or short side so it’s how you trade that determines your success.

TSX Today| A 9750 Possibility

When we look at today ‘s TSX chart showing all the Toronto stock exchange listings we’re always try to identify patterns so that we can formulate a proper risk profile and make gains by protecting our principle first and allowing trades to flow.

That is what we are showing you today

Looking at the chart below you can see that in 2009 & 2010 there were some substantial rallies that started in August. These are highlighted in blue. Now the most recent august rally in 2011 only went to previous support which then became resistance. This is more important to look at as it’s the most recent and most relevant.

If you look at the chart you can see that the 12k area was support back in May-April and November of last year. Keeping this in mind combined with the most recent August rally  we can anticipate that there will be a bounce to the 12k mark to test this resistance.

It seems coincidental that the fifty day moving average will be right there to hold us back.when we get up to that point. This would be a good profit taking area even if you only get seven to ten percent return.

You can also see an upswing in momentum in the MACD and an implied support line in green showing rising support.

So the august seasonal trend, rising MACD and support all point to a small bounce in the TSX in the coming month.

I hope this helps you to identify where to put your stops and where to take your profits. Use this chart to scan through all the Toronto stock exchange listings and find opportunities that will lead to some possible profits.

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