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  • Jay

Macro to Micro


Here's another example of the top down approach. Remember, the idea, in equities, is to look at strong (outperforming) sectors, then drill down into their respective strong industries and end up with single stock names that have interesting (bullish) chart patterns.

During the last weekend of November, I've updated the following chart on Twitter:

XTJ

...with the following comment: "The S&P/ASX 200 Telecom Services Index (XTJ) bounced at the 78.6 retracement from its 2011 low to 2015 high... which coincides with XTJ's 2006 low. Some #HighDividendYield stocks within that sector currently in a basing/bottoming process... (see it on Twitter here).

A big component within the XTJ is obviously Telstra. Here's today's (December 5) daily chart.

Telstra Daily

As you can see, today's candle started at the low and ended at the high, i.e. an extremely strong (bullish) day.

Yesterday was already a bullish day as the stock closed above its 50MA for the first time in almost four months.

The 50MA itself, its slope to be precise, is also showing some bullishness (or at least less bearish as it flattens and maybe turning upwards, from its downtrend, which confirms the bottoming process of the stock).

The candle on November 28, known as a hammer, is a famous reversal candle showing exhaustion of a (down) trend, especially when it is accompanied with extreme volume (washout) as it is here.

That November 28 candle made a lower low than the (price) low early October, but the RSI did not confirm that and actually made a higher low on November 28 compared to the early October low. This is known as a bullish divergence.

That is a lot of bullish confluence and tells me that an intermediate low is in place!

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