Trading Edge: Australian Market Open with FX Evolution

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Join Kieran Neeson for a new session – Market Open with Tyrone Abela and Thomas Atkinson – professional traders and technical analysis experts from our partners FX Evolution as they talk through what’s happening in the markets and dive into specific sector analysis and individual stocks.

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Read the full transcript of the webinar below:

Good morning, everyone and welcome to what is a special edition of Trading Edge here at Opentrader. My name is Kieran Neeson resident market expert at Opentrader, and thanks very much for making the time to join us for the first market open session that we've run. Just before we kick-off, I'll start with a quick disclaimer, anything that we discussed during the course of this presentation is general in nature. And it's not to be taken as personal advice. As we don't factor in your personal circumstances, your goals or objectives. These sessions are put on purely from an educational perspective, which actually is a great segue into introducing our guests for today, who are both professional traders, and are both technical analysts and all-around market enthusiasts. And no one lives and breathes markets more than these two. So, one thing I've learned in my 15 years of being an advisor, a broker and a trader as well, is that education is the key to success in this game.

Especially if you want to improve your trading results and actually make it through to the next the next stage, I guess of turning towards trading as a as a major source of income. So, it's a great pleasure to introduce our two guests, Tyrone Abella and Thomas Atkinson, who are who write ethics evolution. And don't let the name fool you, these guys specialize in anything that has a chart, so not just foreign exchange. That's one of them. But also, equities, derivatives, you name it. These guys, these guys are experts in that area. So, I'll, Thomas, and Taryn, thanks very much for making the time to be here. It's a great pleasure to have you both on the show.

The US was looking very well last night it went up and filled the gap. And then it went all the way back down and, and close near the original open. So, there's lots to talk about for sure. Yeah, most definitely. Look, we run a lot of market opens, during the week. And we're really looking forward to bringing you the Australian Open because it is something that a lot of people are interested in that we have a very big technical analysis channel on YouTube, one of the biggest technical analysis channels in the world, actually. So, we do this a lot. And we're really looking forward to bringing you the Australian market and actually going through some of the things that we look as probably professional traders, as much as just from an education standpoint, also what we do, you know, everyday trading to really pinpoint what we're looking for after day, and I guess, are leading into the week as well. So, I really look forward to the series that we're going to be bringing you over the next four to six weeks.

Yeah, great. Thanks, guys. And just for everybody that's tuned into the session, we encourage everybody to ask questions, there's a chat box on the right-hand side of the screen, we'll get to them at the end. So anything that comes up that piques your interest that Thomas and Tyrone Speak, speak about, please add them in the in the chat box, and we'll save some time towards the end to go through them. There's also a poll that's up live at the moment, choose to see how many of you actually trade the market open, which is obviously it's a really active time in markets, a lot of people have all eyes on the screens there to see how their positions are tracking. So curious to see what the audience thinks and keep your eyes out for other polls that will be posted during the during the course of today. So, guys, look, I'll turn to you. What are you seeing in the market? What sort of sectors are you looking at? Let's get stuck into it.

Okay, so yeah, I think look, there's a few sectors that are really on the up and coming at the moment, one of them will have no surprises to a lot of people, which is materials and something that I think's very been very interesting to Tyrion and myself, we really, I guess, looked into bhp very hard and iron ore back in November, December of last year, and found it to be a pretty good thing. Generally, you have a kind of movement of data and seasonality into that kind of that kind of area to entire and through that December, January, February period into the dividend. And then we see a bit of weakness followed by usually some strength. So that particular stock has started to show the strength that we like to see. And we'll certainly be going into a deeper dive of that and a few other things.

Yeah, most definitely. Look, dividends play a significant role in a lot of the Australian stocks, of course, and we do watch them very carefully, because they do go regardless of technical setups, since that already does play a part in some of these bigger players, like especially BHP and Rio, because people who are looking to invest obviously are looking for that dividend income as well. So as much as technical analysis does play out, the dividend certainly helped that cause. So we do watch those periods very, very closely. And this year at the end of last year has been no exception. I think we've been given some really, really good opportunities to get into both and probably just as importantly, get out of the murky times as well, Tom.

Yeah, exactly. So I believe everyone can see our screen Correct. Yep, I can see the share, we've gotten fantastic. So we'll get into the stock into the market open, we've got a little bit of just some theory stuff that I want to bring in. I think Tyrone and I just like to discuss this, then we'll get into the charts. And we'll see how we can apply some of these concepts as well, to help you kind of get a better idea of what we look for the structure because of course, trading is not just necessarily just diving in and saying, Oh, I'm going to be in this particular stock, or, you know, really purchasing this today, I need to see a lot of confirmation. And I want to see what we call, of course, the composite man. So we'll be covering today, how markets evolve over time, how to spot the best markets, potentially to be in the best stocks or sectors or anything like that. And what types of price action setups do we actually use for this type of thing, then we'll be doing a top down approach to the markets will drive through a market kind of thing, basically, where we break down the material sector into a few others and some other sectors that we're looking at. And we'll also talking about Sharpe ratio, because I think not enough people consider their risk and rewards when they're when they're considering trading. And it's very important for longer term success. So as Kieran mentioned, before, we do have a quick disclaimer, obviously, we'll just leave that on the chart there. But, yeah, I want to I want to begin with a quote here from somebody that came up with this concept a very long time ago. And this is Richard Wycoff. And he said, successful technical reading is the study of force. It requires the ability to judge which side has the greatest pulling power, and one must have the courage to go with that side. So what he's really saying is that if we can somehow figure out what is happening in the underlying market and find out who has the greatest pulling power, who has, is it the demand side, or is it the supply side, we will be able to effectively figure out price before it technically moves. And of course, that's every technical analyst, or anybody's real aim is to pick a stock or pick a position that then moves up into the direction that you're looking for. Now, we're all familiar with price action, from this standpoint, peaks and troughs, and higher peaks and higher troughs, we all aspire to be in these types of markets, where we pick up a market maybe around this area here or even better than buying the dip to tie on these kinds of areas. And we look for the trend to continue. And if the trend breaks, then we might, you know, be forced out of that position.

We'll show you today, two things that we use that are handy. Tip two, when we want to actually potentially look to close positions, or of course get into positions. And these, what we call schematics, I guess, are very powerful concepts that you can use. And they allow you to kind of have this this business plan in market. So Ty, how important is having some kind of business plan when we're approaching? From a technical analysis standpoint, it's really important to do most definitely, look, a lot of people look at trading like it's an it's almost a hobby, but even hobbyist need a plan and at the same time, like you're not going to go and buy a milk bar on the corner and not have a business plan? Well, if you do, you probably need one. And trading is no different. Because realistically, when we talk about a trading plan, like a business plan, we're talking about where we're going to enter, where we're going to exit how we're going to manage that position, what you don't want to be doing in trading is basically flying by the seat of your pants and making decisions on the fly. And not really having an exit strategy or potential Plan A, B or C when things potentially can go wrong.

 Now, obviously, risk management's at the fore of any business plan, there's no question about that if you've got the right risk management, regardless what happens to that trade, you're going to be within your risk parameters anyway. But it's very, very important to have a very clearly defined exit and entry strategy well before you actually enter the market, because the one thing you don't want to be doing is being caught by surprise where you have to particularly make decisions on the fly, that could be very detrimental to your account, which is obviously not what we want. A business plan helps completely alleviate that because at the same time, trading as much as it can be a hobby, a lot of people aspire to be professional traders or use it as a second income to generate wealth. So the only way you're going to do that is to have a plan. And the only way that sustainable, and actually, you give you the ability to actually grow it is to have a plan that you can actually follow and not deviate from. It's very, very important.

So as Tyrone mentioned before, we were going to be doing this over a multitude of weeks with Opentrader. So we're really excited to really go through this today we're going to go into some live charts, but also to give us a little bit of a foundation and backing to having some kind of business plan. Now in our trading style and our technical analysis, we like to understand how markets create price effectively, how does the market even get to a point where we could potentially place an entry and therefore see that beginning of the trend, effectively having a business plan. So Wycoff came up with the concept and that concept was really interesting one I think a lot of you will enjoy this today if you haven't been familiar with it. And the concept is what they call the composite man. 

So basically, the composite man was a really ingenious or genius way of thinking about the market, which was that the market is effectively we know made up of, of course, hedge funds, super funds, US retail traders, investors, low, high and low net wealth and everything. But he said, Well, wait a second stop right there. What if we consider that the composite man that is the market is just one entity, and that we are basically verse that one entity, and that one entity is building price and building a story in the charts? Effectively, they are showing us what they're doing. They're leaving footprints in that chart. If we understood it that way, would that make sense? And I think it's a, it still holds up today to make a lot of sense, when you think about price. And you think about the market as a whole, when markets fall. And I'll encourage you and we'll look at this together very, very soon. When markets fall, let's say they're falling down. They're obviously in some kind of downward trend. That is people are fearful. And what do markets tend to do? They tend to overextend, they go to a point, that's incredibly fearful. A good example of this is bhp, which we'll bring on the charts a little bit later, then after that, what they tend to do is they find a base, they find a low or a point here, effectively a trough or a capitulation in the market, extreme fear, and they start to go up and go down and go sideways. Now, these levels, if we can spot them on charts, effectively are the footprints left by the composite man, that's the easiest way to explain them. Now, if we can see them in the charts, and we understand the volume that's behind them, we understand that the market is effectively basically having a little bit of a war with each other between the buyers and the sellers, then we can possibly find a level, that's fair value, and therefore the market or even extremely under fair value, and the market might then go up and we can bring that together with your fundamental analysis, you can bring that together with whatever else you'd like to. So he had three ideas, and I'll leave that there just for a second. The first one was, if demand that is, you know, the buyers greater than the supply, the price will rise. Common sense really, of course, that's the laws of supply demand, then if demand was less than supply price will drop. And if demand was equal to supply, there'll be no significant price change, and the volatility would lower. So what this effectively is down here is demand equal to supply. However, if the volume was still very high, that is we saw incredible amounts of volume throughout this point. What could that be telling us about the composite man the market as a whole? Well, it could say something very important couldn't a tie could say that they would be accumulating a position. And if we managed to spot this in the markets, we could have an extreme edge on being able to effectively follow it because so many people want to fight the system, instead of following what the composite man is telling us the footprints are being left in the market, aren't they in front of it? Yeah, and, and really, a lot of people will feel that they need an edge in the market. And a lot of people feel that the edge is actually doing what everybody else isn't, when it's actually the opposite is true. And it's actually funny, because we hear a lot from people who say, Well, we think we've got an edge on the market.

 But I'm a little bit reluctant to actually show you because you might tell everybody else and everybody's going to trade against us, and we're not going to be able to win our positions anymore. It's actually it's funny to hear that because it couldn't be further from the truth. In fact, the more people that are actually trading, what you're seeing the better chance of success your trades going to have. And it takes a little while to work that out. And looking at what, Thomas when I started this nearly 14 years ago, when we probably had a similar view of the market at that time. Every time we came up with an idea. We wanted to keep it as a secret like, Oh, my God, we need, yeah, let's have five different brokers. So they don't know what we're doing. And all it really very, very funny things to look back on now. But in actual fact, what we really want to see is actually the if we see accumulation, and we see big people getting involved in the market, we really want to be fighting them. Absolutely not. The market, we can't force the market to do what you want to do. You have to work with the market. And, and really identifying these very, very key zones is a big, big plus and a very, very big advantage, regardless of what you think about your secrets.

Yeah, we've got some good questions coming in the entire lead to just a few of them as we go. And Peter says here, what is the percentage of the what percentage of the composite is made up of retail, so I guess the composite usually like to think of it as a huge amount of what's difference the entire market other than you. So that's fair enough to say retail look, retail, I believe is somewhere around 20% of all transactions done. So, it is significant. It's higher, though than it ever has been for a very long time. I think the last time it ever got this high was during the tech boom in the US back in the early to the 2000s into the bust. That was when the biggest activity was there other than now, but in general, it's somewhere around that 15 to 20%. But again, some retail traders understand this, some don't. And what you're really looking for is you're looking to gain an edge in markets and understand it better. So even these two you know, you're looking at this screen and you're probably saying, Come on Tom and Hi, what, what do you show me here, I can see this in any elementary school book. But the point is that when you actually understand what these two are telling you, it's actually the essence of being able to be a good day trader. And again, bear with us, before we get into the charts. I know you guys are excited to get in there. But this, this helps us get a bit of a foundation. So here we have on the Got to Go slow. Yeah, type before we can't wait, what is it you don't want to be? It's not a marathon, not a sprint? What are you seeing on the chart, if you understand what you're seeing on the chart right there, you understand everything about trading.

That pretty much will break it down into simple slides. So, we've got here, what we would call a downward trend, obviously, a market is coming down. Now, every time it makes a low, then it makes a lower high, then it makes a lower low, lower, high, lower low, lower high. So, as it's making lower lows, what in essence is occurring here? Well, in essence, the market is effectively being sold off the supply here is coming in from that level, or the markets are trying to sell that level. Now think about it. Logically, they sold this level, what does that probably mean? There are orders behind these areas? Yes. So, these areas hold what we would call orders. And because they hold orders, and they're also technical resistance, if they are broken, would that be a very positive sign that maybe the trend is ending? A lot of people don't consider it this way. But this this is when you'll see why. So these hold orders on the commerce side and upset upside. Where are the orders held? They're held at that last point. So if that point is broken, what occurs in both of these circumstances, what occurs is we've got a change of trend on the first timeframe. And whether you're a day trader or scalper or even a swing trader, this is actually incredibly important stuff. And it looks super simple. And you'll think, Okay, well, that's fine. Good. And well, let's now look at the next one. So why it becomes important is this. Remember, we have the orders sitting behind here on these timeframes. Now let's say that was a daily, and you saw price action that was moving in between this area. Has that actually changed trend? On the higher timeframes? has that done anything yet? No, is the answer, it hasn't broken through the previous resistance or supply level where the orders sit. So because it hasn't broken through that zone, this could all be accumulation by the composite man. And this is where you start to bring together the ideas of someone like Wycoff. And of course, just standard technical analysis theory with supply, demand, support, resistance, all those things, to really get a better understanding of how markets move. So here's a great example of a market where a lot of people would think the trend is changing all over the place in under here, and it probably is on the small timeframes. But on the higher timeframe, if you understand this as the key point, this is where the last swing occurred to sell down until it reaches that and closed above it technically hasn't really begun the new uptrend has a tie in a lot of people get caught in here, getting whiplash all over the place thinking it's going up. And then all of a sudden, what happens, boom, right back down, it goes. And they're left stuck holding the bag. And it's not what we want for anyone out there, you obviously want to rate it better,for holding the bag, that's for certain, and I think probably highlights a point that we haven't probably brought up just yet. But it will be something that you'll hear us talk about over the next eight weeks. And that's certainly that patience is key in the markets, what you don't want to be doing is pre-empting, what's going to happen, but actually having the patience for those key levels of breakout, those key levels are very, very important. And we've got it we have got a question here from Fred who says how do we see the orders ahead of time well generally Fred but I do is I just SMS Tom and he tells me where they are. But SMS, I look towards the most recent peaks on the on the way down, and the most recent troughs on the way up. So basically, the levels that we're drawing there, they're the orders that you're seeing ahead of time. So sometimes you have to go a little bit back in time if it doesn't fit quite on your chart, depending on what timeframe you're looking at. But that's where the orders are. So although you're not going to see them, it's not going to have a big flag. They're telling you they're there. They are there. And it's important to know that because when you do know that they are there, you know that a key level has been broken the other key levels that we're absolutely talking about, because they are really the only things that actually change that trend.

So one thing now we'll get into the charts. I think it's almost time but I just wanted to bring up something that I think investors and traders don't think enough about. And this is a thing called Sharpe ratio. Now anyone that's been carrying obviously knows anybody that's been in the industry for a long time is very well aware of this and that is that it's all about not so much how much money you make, but how you make it. Can you make it in safety is what you say? I always laughed hard because you know, I always think about where we began and where we are now. And if you went to somebody if someone came to me and they said they came in through my right in front door and they said, Oh, you know, I'm going to, I'm gonna invest your money. And I say, yeah, and then then they say, I'm going to make 150% per year on your money, I'd say, get back. No, it's not because it's not technically possible, it's obviously possible. It's because what kind of risk would they be taking to get that reward. And it's super important, you know, Sharpe ratio matters. And if you want to find out more about it, I recommend you just Google it, and just figure out about it, because it's, it's pretty much the philosophy, every great fund out there lives by us.

And it is all about how you make that return lucky. Sometimes you hear people say that they've turned $1,000 account to a $10,000 account in a month, and they've got a system that you really need to follow that system I would be running for the hills from because that would have to have required an extraordinary amount of risk to get that I mean, consistency, and building portfolios. And building wealth isn't about getting a huge returns in a very short period of time. It's about making sustainable and, and normal trades that you can actually apply and consistently make over and over and over again, consistency is everything with trading. And that really plays into the hands of the Sharpe ratio. How, you know, really, it's how you get those gains? Is it realistic to make those sorts of returns on a consistent monthly basis? No. And more than likely, at some point in the very near future, you're going to give all of those returns back and probably then some. And that's why you're important ratios, like the Sharpe ratio is very, very important.

Absolutely. So let's look at Php now. And we'll begin by looking at the left hand side, then we'll go back and just do a top down, I just want to show why Tyrone and I were, you know, liking what we saw. And hopefully this can come together with the theory. And again, we're trying to do this with over a few weeks. So this is more of a theory into live, then the next ones will be a little bit of theory more live, just so that you guys can see how we approach these markets. Let's move over to BHP. So bhp, obviously it was doing quite well, then all of a sudden, it didn't, and it started falling. And people say I'm going to buy the dip, I'm going to buy the dip, I'm day trading, I'm buying the dip. And there are logical areas that you might consider. I mean, this would have been probably a logical conclusion. And that's why it held to a degree around there. But as we mentioned, this market was going into a downward trend, that is it's falling effectively off a cliff. Now, when that occurs, we really want to see the market stabilize. And what it does is it stabilizes at this point, it breaches that zone. And you might think, well, then it comes back down. What was that Tom untie? Well, what that is, is at this point, you can start to say, Okay, wait, something's changed. Remember, we say that there's orders in the system effectively behind here is a very critical area, that's a resistance or a supply level that is breached partially. And at that point, what you expect is you actually expect the market to come back, and you expect the market to come back down and to effectively the composite man to then start accumulating a position. That is they will say, Oh, I like to buy this. But the problem is that you can't it's not just as easy as that when you're moving billions of dollars. How do they have to move billions of dollars tied? They have to get someone to sell it to them? Correct? I want to add, let's say $2 billion a bhp Can I do that in a day. It's just not possible on their scale. So when they're getting into positions, obviously, someone's got to sell it. So you've got to create fear, you've got to create greed, they're really the two emotions in the market. And what you end up getting is you end up getting one of these styles of technical analysis, which is of course and accumulation, some people would see it as a double bottom pattern. Because if it's a low here, it's going to low here, but it really all starts at this point. And then as it accumulates and as it does all of the right things and it starts jumping out, it becomes a very, very nice trade. And then once it breaches through it accumulates at this point coiling getting ready. And this is what Wycoff called the SOS and effectively we have all of the right kind of concepts around what we expect to be a bottoming of the market. And of course, the breakout and the rehab, the rain movement past that point back to hopefully the peak, which is of course where it got to. Now, when this the reason why all of this becomes important. And you might have been traumatized one a day trade man, I just want to go in the morning and just buy or something like that, or, you know, do whatever I need to do. The reason this becomes important is because once this accumulation happens, so once we see that change of the trend that happens here, what occurs multi month runs, that is the market has made its decision. It's accumulated its position and it goes back to a fair value. Now that fair value could have been easily through here it could most definitely, but you can see it starts the day trading capability for you to have a bias in the direction of trend and once you understand this section of the market, it becomes a lot easier.

So that's something that's super important to really break down the markets, it most definitely isn't. And a lot of people would say, Well, you know what, I haven't got time to day trade. And yeah, really all I want to do is going to be a long term investor, how do I deal with something like that? Well, look, there are many, many different mechanisms that you can actually employ to, to really take advantage of that understanding when this is happening is actually key. Once you know what is happening, there are all sorts of things that you can do, you can either take an accumulation, position yourself and just sit and wait. Or if you're an options trader, you can, there's a million different options, strategies that you can use in that environment, and most of them will be very, very high chance of success, because you understand that not only is the range being built, but you also understand the levels of where price is likely to stay above or below, which is very, very important. So that's one technique that you can employ. But if you are a day trader, and you are or a scalper or even a swing trader that basically trades over two or three days at a time, it is a trade is heaven, because you've been given a range that you can work with. But you're also aware that there is going to be a breakout at some point. And we know this right most of the eventually. So you're giving, you're getting a multifaceted approach on how you can approach that trade. You can you can day trade it, you can swing trade it you can long term, invest it and you can options, trade it for income, you can do whatever the hell you want, actually. But you couldn't do that if you didn't understand what was actually happening and what was really, you know, what the market was actually trying to tell you. And this is why we said when you understand the market, psyche, if you like, and you identify that zone, it's not an after the fact thing that I think is probably the highlight of what we're trying to tell you today. That it's not after the fact that actually you can see it happening as it's happening. And it allows you to really take advantage of that situation in real time, which I think is the most important thing. Everybody can go back in hindsight and say, Well, that was a great level, but actually identify the level of what's happening is the important thing, so you can take advantage of it.

So how do we identify that level? Ties? Great question. So one of the ways that we do it is we obviously look at the broader market first, and then we break down that market into sectors, effectively during the year, markets can actually move very little, let's say they move four or 5% the extra out. So if we load up the extra to here, it theoretically could actually it is doing, of course a lot at the moment, but it could be doing very little. Now, what that becomes important with is if the market is only sitting in a side, how do we get superior profits? How do we actually start to extract maximum value out of the market like this? Well, firstly, let's just begin by going top down analysis on the current market. So we'll get tired to run us through this one right now. So what are your thoughts on the expo at the moment? I mean, we've got a bit of range bound market between two key levels, don't we? And now we're stuck?

And look, realistically, we know, from a historical standpoint, 7350. And, and the 7000 really has been a very, very strong level for the Axio. from a bigger perspective, we know that 6950 and 6850, you can catch it, but we probably really expected the market, you know, as a fair value proposition is probably at a place where we're quite comfortable at Thomas and I certainly comfortable where the markets at now. And, and it can, it can fluctuate several 100 points either side, and we're still going to be quite comfortable. Because in our mind, it's an area where it's not at ridiculous highs given the economic situation that we're in, but it's actually not at a place where you would say, it's probably going to tank so we're very, very comfortable with where it's at the moment. And really, if you said to us Yeah, where do you think her value is for the market right now, I my opinion would be probably 7200 7250 would be just spot on. And, and if it was sitting here at this time next year, I think we'd be very, very comfortable with that. So given that we know that we're at a comfortable place. And you can see we're in the middle of quite a big channel. But that channel presents all manner of opportunities to Actually Trade in in both directions, whether you're using options or whether you're actually looking for positions to get in now, the key here is, of course, to understand that if you do get in, there is a chance that there might be an accumulation a little bit lower. And I think a lot of people are very fearful of that. But you know, we and we ask people to sort of look at it from a different perspective, that's actually an opportunity potentially add to your position. And that comes down to position sizing as well. I mean, it's a story for another day. But realistically, when you're in a in an area where basically we're sitting right in the middle of a channel here, that's not where you go all in. This is not the place where you say, Okay, this is this is the time and this market is not coming back. That's foolhardy to say the least what you what you need to be doing is positioning yourself in a place where if you do start to accumulate here, and it does fall back to another key level, that is seen as an opportunity, and in no way shape or form and we saying that you just double down and say let's go ahead. It's not going to be the situation there. But this is what we said about the business plan, and it plays into the business plan that we were talking about. ups, is this the absolutely ideal place to be going a full position into the ASX index? No, but it is, is it a good place to start your accumulation process? Yes. And but you need that plan to say, alright, if it does fall down to X, Y, Z, we've got those positions drawn there on the chart position to Yes, that is not going to be a place where we're going to be fearful, it's going to be a place where we kind of have expected that it's going to get there, we start to add to our positions to probably accumulate the position that we wanted to be in in the first place. And I think that's probably the key, that's where the business plan comes in very, very important.

Talking about is this the absolutely ideal place to be going a full position into the ASX index? No. But it is, is it a good place to start your accumulation process? Yes. And but you need that plan to say, alright, if it does fall down to X, Y, Zed, we've got those positions drawn there on the chart position to Yes, that is not going to be a place where we're going to be fearful, it's going to be a place where we kind of have expected that it's going to get there, we start to add to our positions to probably accumulate the position that we wanted to be in in the first place. And I think that's probably the case, that's where the business plan comes in. Very, very important.

So if we think back to the idea of what Wycoff was saying, effectively, this could be one great what he called distribution, that is a market moves up, and it has, you know, an extreme movement, and then you don't just need to have a bit of a slow down as it as it really figures out its next movement. And during that point, it needs to reset all of the indicators needs to reset effectively price and it just can't, you know, build those up and up and up and up forever without having some of these dips, or some of these, what we call distribution or accumulation zones. So right now, if you if you look at the x Jr. And the reason we bring this up is because Tyrone says exactly what it is, which is it's stuck in the middle of a bigger range between that kind of 7000, which has been bought off before. And of course, between this 7006. Now that's a big range, but we're right in the middle of that area. So it's your job as a TA expert, or anybody really to look at the markets and say, Well, are we in an uptrend inside of this? And then also to have realistic targets? What are your targets, some people come in, they don't even look at this tie. And then they say, Well, I'm going to buy this and my price target is 7900. And they don't realize that you've got to contend and do battle with a few others. That's even going to occur. So we start here. And I think if Tyrone and I look at a market like this, we say, Okay, that's cool extra in the middle, there could be opportunities, we set alerts, and we get ready for those opportunities. But we want to find better opportunities. Ideally, we want to start looking under the hood, and finding out whether there's something else in there. So one of the things that I like to do is always to focus on different sectors. So I guess before we go back to the material sector, let's have a look here at something like the healthcare sector. So here's the code x, h. J, and this is the healthcare sector. 

So it looks kind of different. I mean, are we still in a massive distribution? Absolutely. Do we have different supports and different resistances? Yeah, it's a totally different section of the market. This is the healthcare stocks. So we've got a very clear level of demand that is buyers are coming back in at this level. And that's our effectively our support zone. Now, do we have a level that we'd be very interested in seeing a breakout occur? Absolutely. If that occurred, what's effectively happened or the markets gone through a decline, the market has then accumulated at this area, you can see here the volume has been very high around this zone as well. And then it potentially goes long. And when that occurs, what are we doing? Well, we're basically looking at the overall picture the overall story. So imagine if the market was really sneaky, the composite man, let's say, was really sneaky. And it often is, what is a sneaky method that they could use Tyrion to potentially, you know, really set up everybody and trap them all into the wrong position. One of the things that can be done is we clearly have a lot of support or level round here. What if the market comes down, it does this and then it bulldozers and then breaks that level. It's what we call a spring. And a spring, or this type of trap is common in markets. Because what it does, it sweeps the liquidity, allowing the composite man to get all of the orders in because a little stop losses of the day traders and swing traders are getting hit out. And then it swings back. And it's happened to you I'm sure out there everyone, it's happened to me plenty of times I didn't know what it was initially. And then it breaches through this level. At that point in the future. Would we be interested in this zone? And certainly looking towards healthcare stocks? What do you think yes, is when it breaches that drone, I mean, don't worry about the fact that it's a descending triangle at that point as well, our ascending triangle at that point as well. So I mean, you know, the peaks and the troughs are actually playing the game from a price standpoint, but we almost do expect that that spring is going to actually play into the hands of what we want to actually happen. And it does catch a lot of potential buyers unaware because they accumulate in their position and we do see that that drop in the market and they're like, Oh my God, this was not going to hold up. 

Then all of a sudden they come back the next day, and the shooting for the stars that level that we've got drawn up the top there. Once that's taken out, it's playing the exact sequence that we're wanting actually the market to do because the momentum has shifted. You can see the volume was actually starting to build up sometimes that last grab is potentially it can be some time to stop loss grabbing to the liquidity grab. It's also you can call it all sorts of things. And people generally call it, especially people who are just new to the market. That's the broker trading against you, if you like. And it is a common misconception. Broker trading against me, oh my god, they're trading against me, I can't win here. They've taken up my stop loss. Now the markets going where I thought it was going to do. No, that's just market behavior. And it's certainly not an unexpected, and actually understanding that that can happen and being prepared for it, I think is probably the key there really put you in a good position because not only do you join a nutrient, I think that's probably one of the things that we probably want to highlight, when you do understand these levels. And you do get the breakout that you're looking for in the sequence of events in the right order, it allows you to join the trend very, very early. And that plays in the hands of long term investors, you know, longer term swing traders as well. It gives you all manner of opportunity to join, what can be very, very long, I mean, BHP was a perfect example of that in the previous charts that we looked at, but it happens all the time. And I think it's really, really important to know that although, you know, we're seeing a lot of sideways movement at the moment when it does eventually start to break. And I think this is probably why Tom, sectors are so important. And people do underestimate sector analysis. Because once you know what the sector is going to do, from a longer term standpoint, if you've got a very good understanding of it, it's then that you can actually delve deeper into what's inside that sector, and identify potential underperforming stocks inside their sector that are really going to benefit from a move like this. So if they've been a little bit on the weaker side, as an example, I mean, I'm going to go off topic slightly, but a perfect example will be the finance sector, the finance sector is looking long, are we you know, are we going to jump on the bank that is already at previous highs and looking really strong? Or are we potentially looking at maybe a bank, that's actually been a little bit undervalued, compared to some of the other bigger banks, and that's the one that's going to give you a bigger opportunity, because, of course, the range of movement is going to give you a far bigger opportunity, because the sector is going to help propel that with the other banks. And I think it's a really important thing to, to understand, going down into the into the sector companies is a very, very good method. And it sounds like it's a lot of work. But it's actually not, it's not much more work than you normally would in normal technical analysis. It's actually just one more chart, the sector job. Yeah, so it's really, it's really not that much work.

 So say like, you go into any of the sectors, it just helps you to see the money flow. For an  example, I'll just, I'll put on a quick black screen here. And I'll just draw up some boxes. And I'll just quickly show you how these markets truly rotate and function. I made a video about this on our channel the other day Ty, and it's super important for people just to think about and understand. So here we have, obviously four boxes, and hopefully everyone can see it. Basically we have a leading, we have a declining, we have a lagging box, and we have an improving box. And if anyone has ever actually had access to Bloomberg terminal or some piece of software like that, this is actually one of the things that sometimes it's in there. Now, why is it in there because it shows you what is going on with the sectors under the hood of the market, the market might look like it's doing nothing. But in realistic terms, the markets doing a lot underneath, there are things that are improving things that are doing well. So right now, what's everyone hot on metals and energy. So where are metals and energy going to be? They're both in leading category. That is that's where the hotness is at the moment. And everyone knows about, okay, now, not everyone knew at the start, but everyone knows about it now. So what will eventually happen is they go into the not so hot category, e.g. what happened with metals last year, in November, and they go into the declining category. And then they come back through into the lagging category where no one wants to hear about them. Remember, no one, no one cares about that sector anymore. And then all of a sudden, it comes from the late lagging category into the improving category. what possibly could be happening during this period? The accumulation Yeah, the lagging is the accumulation, the composite man is selecting the orders and getting them in, then the breakout occurs. And we move from improving into leading. So this trans this movement here can be, you know, felt for a longer period than you might think. And it creates the ability for you to then focus on those areas before maybe the mainstream media and other places are actually really, you know, bringing that stuff up. So it's it can be fantastic. From that standpoint.

It's identifying the little gems inside of sectors and using that sector analysis chart. And the way that that actually rotates the rotational graphs are amazing resource. And yeah, understanding so I mean, you're basically going on what I was actually saying, are we going to be if this was about the breakout, you know, are we going to be looking at the companies that are in that top? You know, right hand side, or we're going to be looking at the ones starting to creep into the top left hand side. Well, I'm pretty sure I know where I want to be. So it's really, really good way of looking at it. Because it gives you not only does it give you a direction for the companies in that sector, but it allows you to identify the ones that are going to give you the best value for money in that move. And that's the idea really, to try and get the best bang for your buck.

That's right, I so it's little wonder that x EJ here, which is energy is doing the best at the moment. And of course, for anyone looking at the technical analysis, you would know that this is currently in an upward trend and is currently in a breakout. And that's why people are flowing into this. But this is a time to probably start to look at this cautiously because yes, it is doing the right thing. But then you've got to also ask yourself, the question will have we got back to a level that makes some kind of sense. And we're very, very close there. In terms of an overall sector analysis, it broke out here in March, it's obviously been very, very strong for quite some time natural gases running that's causing all of these stocks to do quite well. So that's, that's one of those ones, that's really pushing through. But as you break through these areas, you're going to notice different ones going at different times. So we saw healthcare before, it's certainly one that Tyron and I have got on the chart, you could look at something like consumer discretionary, which is just frankly, terrible right now. And you're not going to probably look at this and say, Oh, I love this right now.

 But what happens if it starts to turn around? So if we start to see the turnaround story, that means that you could then go into it. Now if I'm looking at this chart right now, tie, I'm not interested, not interested at the motors, I think that it looks, it looks kind of terrible. But you know, that being said, if we see the composite man come in, we do have a little bit of an increase in volume here, we do have obviously some accumulation that we can start to see if we get it through, that could begin a rally that then could force through into even zones up to here and give day traders alike. You know, this, this potential to get into something like this right now know, in the future worthwhile having on charts and worthwhile exploring, definitely chosen, although we wouldn't be trading this, it would be on a radar with similar set. So, you know, we would be looking at this and saying, Okay, we understand that. We're, for instance, will be one of those ones. If you put a Woolworths chart on, it's probably going to look almost identical to what else? Yeah, it basically looks right. Just like it. So, but what you're gonna do, you're gonna look for those breakouts, you're gonna set alerts, but are you going to trade it? No, the one thing we don't want to be doing is jumping in early, we want to be absolutely waiting for price. And like I said, I said it earlier, patience is a very, very important thing.

 When you're actually looking at these charts, you must wait for the patterns that we're talking about to actually play out before you get involved. What you don't want to be doing is pre empting. And thinking, you know, Tom and Ty said that this is what's going to happen when this happens. No, that's not what you do. You wait for it, action, price action is the leading indicator, it always has been, always will be. And when that actually does give you the breakout, it's then and only then you start to look for the opportunities. So you set your time you set your alerts up. And when you actually see price action break through those zones. That's when you start to get really, really interested in that trade. So Scott has a question here for us. So what other technical analysis tools do we use alongside the charts for a technical picture? Look, it really depends on what we're trying to achieve Scott, from a day trading and scalping standpoint, or even a swing trading standpoint. technicals on our charts are relied on quite heavily. We talk about moving averages, MACD RSI Bollinger Bands, we keep it very, very simple. We've done, you know, we've taught a lot of people and we've had students that have had so many indicators on their charts, that we can't even see price, which is actually one of the most important things that we look at from a technical standpoint. It really comes down to the babies, we teach the basics in our course. Our ultimate masterclass basically goes into all of the technical indicators that we use and how we use it. But we don't actually don't deviate away from technical indicators. We don't deviate away from what we actually see on the screen here. And just to give you an idea, the moving averages that we always use are the 2050 and 200 moving averages, and we keep them the same for every chart that we apply to.

So today's markets, obviously pretty defensive tie, we had an overnight drop, well kind of went up in the US and then dropped and it filled up two gaps. So there were two gaps that were actually cleared. And that as we know, if you're an Australian trader, you have to pay some attention to what happened overnight in the US, and that that then dictates a little bit of the feeling for the day. So as we mentioned, you know, pretty much every sector is currently down except for really materials which is flatlining and the utility sector which has been strong recently or at least certain companies have been okay, the AGL knows like, so if we were looking here at XM, J does it have more in it? So I saw somebody Lisa before, say, looks like bhp is topping. So if we think about it a few weeks ago, you were given an opportunity, which was pretty significant the market came down. And it really wasn't many weeks ago that it hit this 16,000 support. So we basically have a demand loan line through this area, this also turns out to be demand and support, because it was the last swing before all of this movement up here happened on the higher timeframe. So it's super important zone. This is where you know, a trader will come in, and they'll look at this. And if you see that type of pattern where the smaller timeframes are accumulating around this zone, it can be very, very strong to pick up these areas. That's not just like trying to catch the falling knife, you're really putting in good work to understand that there's some accumulation occurring. And as that breaks out, you're getting a very strong position. So this allows us to then go into a whole bunch of stocks. So we'll go back over to BHP now and bring it full circle. And we'll have a look at bhp. So I think any technical analysts will look at this. And they'll say, Well, you know, are we at the resistance on the stock like this? I think you'd have to say, yes, you're very, you're pretty close. And unfortunately, we didn't do this few weeks before. So we couldn't really have this one on the charts at that time. But it is at the resistance, I think some people are going to try to short here. I'm not too sure whether that's the best idea, considering we've got that rotation, we've got the sector pumping, and the sector is not back to the peak yet. So bhp might be just comparatively very strong. So what would we want to do tonight, we go through and have a look at some of the other stocks in these areas in this sector, we've got Rio not back to the peak just yet. So you can see, again, BHP is technically doing better. There are some other reasons why it might be doing that way. Rio still got some potential up until this 122, doesn't it, that's a fairly heavy area for the future.

Still plenty of room really fruit to move. And, and that's why, you know, when you are actually looking at the light, not that they're completely like for life, but they're very, very similar. I mean, but you're not going to be, you know, horrified if bhp went all the way to $50 in this little spurt up because the sector still got more in it. And I think, yeah, identifying that, at the very, very least, would hopefully get you to think twice about maybe just automatically trying to short bhp because it looks like it's at resistance, because it's these little keys, you know, looking at its comparative peers, and also looking at the sector that is such a big part of can give you clues that maybe there's a little bit more in it. And, and then, you know, realistically, you shouldn't just ideally, in a perfect world, when you're when you are actually trading even if you are looking at shorting a particular level, you really should be waiting for market confirmation actually tell you that the shorts are happening now. You know, if we do go is FMG. Another example, you can see here that there is still a little bit more upside before it absolutely hits the resistance that could really stop it from moving forward. So you really have to do that as part of the sector analysis process to make sure that you're just not shorting because the key number has been hit. When there is a little bit left, potentially for. It's like for like peers, I think it's very, very important. And people get a little bit close, close blinkered if you like where they get so focused on one particular stock because they don't really look at what's happening around that particular stock that can influence very, very heavily, what can happen in the very near future. It's a very important concept.

So we had, of course, before healthcare on as well prior, and I thought we'd go through two healthcare stocks, we'll go through Sonic healthcare here. So Sonics not really doing too well, at the moment, obviously back on a level of support and possibly even going to breach it today. So today is a fairly important area. But what you'll notice is that had a very horrible time. So that was between December of last year, all the way till March this year, all down. And then something changed. And it started to pick up a little bit here. So what could this again be it could be that accumulation? Where do we have a clear breakout, that we'd be very interested in the stock like this around that 3750. So a lot of a lot of trading is actually being disciplined. And I like to say patients react, don't predict. So if you're trying to predict everything all the time, then you're going to have to be a bit of a soothsayer to make always, always successful moves. Tarn and I started this today talking about business plans. And one of the business plans is to create replication in your technical analysis. How can I replicate a similar concept? Well, you'll notice that we're very patient with figuring out whether something is rotating. Why is this going down? While the healthcare sector itself is not doing so? Well, right now we saw it's getting pushed. But if the healthcare sector starts to turn around, and we see that money flow come back into it, at the moment, it's lagging the market. It's not doing well at all, consumer discretionary and also healthcare just haven't done well. But if that will change and they'll suddenly be this click, and then all of a sudden the upside on stocks like this could be significant. Should we start to see those rotational things occur? So let's say we come in here in a few days time, and it does this. And it holds and defends this zone, creating what we call a bullish hammer.

 Would we like that the zone a little bit more time, especially as if it follows through the next day, and we see that movement up, we certainly wouldn't have my attention. And that's, I look at what we're looking for. Because, yeah, again, yeah, we go to the price action really telling us what has happened. I mean, a bullish hammer is really a war between the buyers and the sellers. And, you know, a bully hammer really tells us that that level is being defended with the might of the buyers really, really winning that war. And I think that's probably understanding that price action. And that price movement is a very, very big key to understanding how the market works. And understanding we already know this is a key level, right? We already know that we only have to open up a chart to see that. But it's how this level interact. And this is very similar to what we just talked about with bhp, just because it's here, do we automatically go along, because that's support? Absolutely not. Because we haven't had the price action to actually tell us that that's going to happen, very similar to what we talked about if BHB, if bhp had a big or mighty move up, and then all of a sudden, we had a big bearish shooting star at that level, that's telling us a lot more than what we know now. And giving us far more inclination that maybe the top has been reached. Very, very similar here, we don't just automatically buy because it's at a level of support. But a big bullish hammer gives us a lot more information than what we know now. So it's really being patient and actually waiting for that information to act on. Because when you have when you're armed with the information you're trading is just gonna go to the next level, absolutely the next level.

So the other thing that we've got here is CSL another huge Of course, healthcare, we are aware of this one, and we will probably well, we did probably love it up until the pandemic and now we don't love it because it hasn't done anything in a while. It's been sideways for quite some time, this is a stock that's been stuck. Now, of course, where's been that the heavy support has been sitting around that 245 area, big buying coming in each time it goes down there. But each rally so far has been a little bit weak at the initial rally was quite strong, then it weakened, then it rallied back up clearly a resistance that you want to pay a lot of attention between this box area here. So where are we well, similar to the extra area, we're kind of in the middle of that land. But something like this stock here, it's you can see why it's kind of accumulating, it's doing its thing, and what you're looking for as you're looking for the sign of turnaround. So again, as Tara mentioned with the bullish hammer, we're looking for some signal to say that we're ready to go back up, whether that's a sweep of this and a grab of liquidity, whether that's a bullish hammer that comes out of nowhere after going down, what that tells you is that the buyers or the demand is coming back into this market. And there are buyers around and if that coincides with the sector, it coincides with other health care stocks, it's the flow that we talked about, here's the box, suddenly this lagging area starts to improve. And if we can find that you can get onto a multi day, multi month kind of move that that's very exciting for not only day traders, but also people that are working really hard because you don't want to put in a huge amount of effort into your charts. Ideally, you're there for half an hour, you've got to work. I mean, you can't be there for all day. That's only for some people.

Well, Thomas and I do this as a career. And even we don't spend all day in front of the charts like here, if I've spent more than an hour in front of the charts, and we're not doing a webinar or something like that, I start to get cranky. So realistically, the whole idea of trading and becoming a professional trader is so you don't have to sit in front of the charts. Remember that what you don't want to be doing is being chained to change the charts for 10 or 12 hours a day. Because in my mind, that adds a lot of stress. So really, you need to keep your analysis very, very simple. And you don't have to spend hours and hours and hours on end doing that when you know more importantly, what you're looking for. But also having a basis in the area that you're looking because you can identify opportunities very, very quickly. And I look Make no mistake, yeah, there are opportunities everywhere on a daily basis, it's just a matter of actually waiting for them. This is where patients kicks in, you don't want to be trading for the hell of it. What a lot of people do we find is that they if they invest a certain amount of time, in doing analysis on their charts, they feel obligated to almost trade because they have to get some sort of reward or what they perceive as a reward for the effort they've put in and that reward comes in the form of finding a trade but quite often when that's being forced upon which is what quite often what happens when people invest too much time analyzing they feel they have an obligation to trade to justify the time that's when you're going to get a bad trade in and then that leads to all manner of problems that you could have end up with revenge trading and doing all sorts of crazy stuff. So your you want to avoid that mindset. spending an hour doing analysis and come and get with not a trade in sight and actually walking away not placing a trade you is a trading strategy in itself, because it means that you haven't placed a bad one and or a potential bad one that was placed on the wrong information. So don't ever feel bad that you've done our analysis and you haven't placed a trade. That's just not that's not what we do.

abundance mindset tie, that's what we have. We have the abundance. Oh, I guess we'll probably end today by Well, firstly, if you have questions, please just post them right now, we'd love to take some q&a here into today's session, as we mentioned, we'll go into more of an open style, getting all the live charts up seeing which sectors are running for the day, and really analyzing the smaller timeframes in the next session. But I just wanted to bring up Telstra here and just to show that this is another one that while people probably aren't loving it right now, because of its slow movement, it's technically coming back down to a demand or a support zone. And if we see rotation, we see it but go back through, especially breakout in the future, you know, Telstra could suddenly become everyone's writing articles about it and say it's great. But usually with Telstra, it's one of those ones that doesn't run for too long at this time of year does a tie like that July, kind of like so August, and then it just goes it's you got to be, look, and we have had some comments in here that people are getting some good learning. Look, that is fantastic.

 Because really, the four sessions that we're going to bring you over the next eight weeks are going to be all about learning and, and if there is something that you would like us to cover in the coming webinars that you'd like us to touch on, certainly reach out to Cuba and in the team at open trade because they would be happy to pass them on to us, we really want to bring to you what you guys want to learn, we want to pass on, obviously our experience and what we look for. But also part of that is actually teaching you and also potentially guiding you on things that you may not be clear with. So please, always feel free to give any information and feedback you can to the open trader team. Kieran loves to be contacted and passing on information. Because we really want to make these webinars about you, the people who are watching them to make it the best learning experience it can be.

Yeah, that's right. Any questions that you do have, please feel free to send them through to myself or head to the open trader website and, and contact the relevant department. There are a couple of questions. I'll just turn back to the poll quickly, gents that we posted at the start of the day. So couple of questions that we put to the audience, which is interesting to say. Do you watch your trade the market open? 72%? Said Yes. Which is, which is interesting. So and then also, have you done sector analysis before, which is obviously quite a strong theme in today's session, a bit more mixed? 52 in favor of No. And 47% said yes. So it looks like the audience are probably more so stock focus, as opposed to looking at the sector for some guidance on how they can find some opportunities a little more granularly from there. But anyway, I thought I'd share that. A couple of thoughts. Before we wrap up. There's a question that's come through from David. David, thanks very much for joining us, he'd love to hear your thoughts on some of the Aussie tech stocks, for example, zero or 360. I mean, that's a sector that's been pretty battered and bruised, not just in the Aussie market. But globally. Over the course of the past six months as interest rate starts to go up and tech stocks start to get valued a little bit differently than they did probably 12 to 18 months ago. So you're keen to hear your thoughts.

Yeah, so I think look, I like it to zero. I firstly, I like the business, I use the software myself. So I do like it. But the problem I always had with it was valuation. And I think that, you know, obviously, we trade charts. So we trade what we see. And if you're looking I just bought it up on the screen here, if we can still see that. If I'm looking at this, I haven't seen a base formation yet. On the higher timeframes. Now I'm not going to try to catch the falling knife too many people did that with hyper stocks in the US and obviously in Australia, they they've dropped it to kind of catch these levels. If you think about what it's done, it's wiped off everything that it put on, since the pandemic. So basically the pandemic happened here and back down to that same level not rocket science to say that but I think that means that these stocks are starting to get into an area and I use certain ratios to figure this out and to figure out whether the markets back in. And at this point in terms of risk at this point, the US market, which you know, I look at as the lead for Australia is starting to turn to show that they're prepared to take a little bit of risk on so the fear is slowly getting out of those sectors, but that's only because they're down so heavily. So I would like to have more accumulation and I'm not I know Tyrone and I aren't prepared to say the base is in yet because we just frankly haven't seen that in the charts. But I'm looking Yeah, we are very price action based traders until price tells us that the level have been basically supported well enough and the price action starts to give the momentum shift that we want to see the lightning bolt, which we'll talk about in the next few weeks. We are not going to participate in that trade, no matter how strong the sport looks.



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