TLX:ASX
If we seek absolute perfection and precision when it comes to our price forecasting we’d be disappointed for the vast majority. And thankfully this is not something we need before taking every trade.
That being said, in this month’s case study Aussie top 200 member Telix Pharmaceuticals (TLX:ASX) demonstrated a very tight cluster. In October of 2023, an old top (that of August 2020 at $8.20), the 50% resistance level on a Ranges Resistance Card ($8.17) and the potential low of 23 October 2023 at $8.20 all came together. The average daily range in the market at the time was around 38 cents, and the 3 cents of error in the said cluster was less than 10% of that average range. That’s about as tight as it gets!
This is shown in the ProfitSource chart below in Walk Thru mode with data up until the potential low itself, followed by the properties window (both Settings and Retracement Levels tabs) of the Gann Retracement tool that gave application of the Ranges Resistance Card.
That’s two reasons to expect a reversal, but was there anything else? For owners of the Number One Trading Plan manual, you’d know about Prime Numbers, in particular the lesson on the First Range Out. Zooming in a little we apply the ABC Pressure Points tool with AB range on the First Range Out (and down in this case) from the June 2023 high, and project from intermediate highs on the way down, in this case to the 29 September 2023 high which gave 150% at $8.23 – only 3 points away from the centre of the price cluster. This is shown in the chart below followed by the ABC Details window.
There was another good reason to trade here, and it relates to Gann’s 3rd Dimension which owners of the Ultimate Gann Course may wish to apply.
With enough reason to trade out of this price cluster, a little over a week later with the up day that was 31 October 2023, a first higher swing bottom entry signal was confirmed getting you long TLX at $8.84 with initial exit stop loss order at $8.49; this is shown on that chart below zooming in even further and with aid of the daily swing chart overlay.
As for a reference range and a trading plan, the AB range chosen was that from the February 2023 low to the June 2023 high with stops moved Currency Style while in the trade as though it were simply a large ABC trade.
It was not until 30 January 2024 when the market reached the 50% milestone and exit stops were moved to break even.
On 21 March 2024 the market reached the 75% milestone and exit stops were raised to one third of the average weekly range (approximately 33 cents at the time) behind the 50% milestone to lock in some profit.
Then on 29 April 2024, the market reached the 100% milestone and the trade closed at $15.16.
Definitely not a fast trade, but let’s see whether the result was worth it. In terms of the reward to risk ratio:
Initial Risk: 8.84 – 8.49 = $0.35 = 35 points (point size is 0.01)
Reward: 15.16 – 8.84 = 6.32 = 632 points
Reward to Risk Ratio = 632/35 = approximately 18 to 1
If 5% of the account size was risked at entry the percentage gain in account size would be as follows:
18 x 5% = 90% (almost doubling the account in about 6 months!)
If 5% of a $10,000 account was risked, i.e. $500, the reward would be:
18 x $500 = $9,000
To help with the process of turning hindsight into foresight (and capture trades like these as they unfold) it helps to practice reproducing and saving the charts from an article like this, in your own software.
Work hard, work smart.
Andrew Baraniak