More BHP
I have decided this month to resume my discussion on BHP given it continues to be a market that moves quickly and plays by the rules that we overlay on markets to turn movement into profits. The backdrop of BHP also links to major themes that are driving asset prices. We know that commodities have roared back into the frame but more likely the pricing of the US dollar is providing the framework of what’s next.
Chart 1 shows the DX-Spotv the US dollar index, and the recent sell off in October, the top came in on the 28th of September and spent time trying to make new highs until the recent declines. The move from January to September in terms of upside gains has taken under 3 months to give back over 33% of the move. Again, a great reason to see trading long and short as trading tools.
If you are a Ultimate Gann Course student, you can refer to my article in the October Platinum newsletter on some insights around the decline.
Chart 1 – Daily Bar Chart Dx-Spotv
BHP being focused on hard assets, combined with what has been a rebalancing out of tech stocks, put this stock into a frame that may be the right “cycle” to keep a close eye on. The next few charts focus on the importance of 1st dimension work of price. The geometry of markets allows us to expect history to reappear in the numbers, not always at a 100% repeat but clusters that are percentages of previous moves allow us to be ready to apply trading rules and risk management to a position in the market.
Chart 2 shows us the current major top and bottom and a ranges card broken down into percentages. The July 2022 low was a 75% of the range, since then the market has been more sideways but it would be wise to look for future turning points around important milestones.
Chart 2 – Daily Bar Chart BHP.ASX
Chart 3 focuses in on the smaller range within the year and the 7/8ths milestone clusters again on our 31st October low.
Chart 3 – Daily Bar Chart BHP.ASX
These two examples alone would not be linked to a textbook set up but as we combine other elements into our analysis, the concept of baking the cake with a wide range of ingredients starts to take shape.
Charts 4 & 5 uses repeating ranges or percentages of (bearish moves) to align more data and the fact they are 50% levels gets us more engaged.
Chart 4 – Daily Bar Chart BHP.ASX
Chart 5 – Daily Bar Chart BHP.ASX
Chart 6, using the Lows Resistance Card from the Covid low of 2020, shows us 175% of that low again provides a place to watch for resistance or in this case support.
Chart 6 – Daily Bar Chart BHP.ASX
The low of interest for us came in on 31st October at $36.93, and for those who are using more advanced analysis, that price is worth spending more time on. There is considerably more price and time work that can be added to the recipe, of note would be the time frames from the 26th of August and 11th October running into the current low. Is there any repetition we could have used as confirmation?
The reward comes when you can harness analysis into action, Chart 7 looks at the swing chart at the time the low was coming into play. The pattern I see here is a potential overbalance in price setup, as the current swing top is lower than the previous and become more of an advanced ABC trade.
The $2.62 range is approximately 1.8 times larger than $1.43 and may not fit your parameters for an overbalance in price setup, the best way to set parameters is by testing.
Chart 7 – Daily Bar Chart BHP.ASX
The final chart number 8 brings us up to current position of the market, with and entry being triggered on the 4th of November as the swing chart turned up. Based on the current close the Reward to Risk Ratio is approx. 12.5 to 1.
Chart 8 – Daily Bar Chart BHP.ASX
The question needs to be asked, if the current move is now overbought could expect a pullback?
The 17th of November could be telling for the prospects of BHP moving higher as the year progresses. This ultimately will bear little outcome on this current setup in terms of success but will be an area to watch moving forward.
It’s a great time to be a trader.
Good Trading
Aaron Lynch