Market talk

By Joe Cardone

FOR the most part, the share price of a company reflects information, well founded or otherwise, driven by the demand or lack of it (volume) for that company on that day – and charts allow you to assume something about the demand or otherwise for that company’s shares.
This week’s chart looks at the ASX200 over a monthly period since 1993.
Up to November this year, the selling wave that began with allowing Lehman Brothers in the US to slip into bankruptcy on September 15, has now reached a level normally called the “acceleration” phase.
The acceleration in November selling became so intense that an important level of technical analysis called the 200-day moving average (the red line) was breached. Why is this level important? Simply, a share price above a moving average is good and below is not.
The longer the period set for the moving average, the better sense you get of the trend in the company’s share price.
Now that the 200-day moving average (currently 3611) has been breached means any meaningful long-term recovery in the ASX200 is now set by observing whether the ASX200 can re take it and once again move beyond to the 50-day (green line) and 20-day (yellow line) moving average respectively.
Another important area of technical analysis is what is going on with the volume of shares traded. You will have noticed the volatility in the sharemarket, but more interesting for me has been what has been going on with volume, particularly the struggle between those who want to buy shares and those that want to sell shares (the up/down volume ratio). The selling pressure for most of this year is reminiscent of the period 2002-2003.
I am keeping a very close eye on the price and volume charts. For the time being, patient accumulation is the name of the game for those in the sharemarket.
Stockbroker Joseph Cardone is an experienced adviser and the Canberra branch manager for Patersons Securities Ltd, Stockbroking and Wealth Management. Any advice provided in this article is general in nature and should not be relied solely upon when making any individual investment decision.