At the end of this incredible week which saw both the Dow and the All Ords (as well as many others) plunged, the Triple Top of the All Ords has been confirmed. However, caution is in order as this is still a newly confirmed Triple Top and may turn around suddenly. Nevertheless, W.D. Gann and David Bowden recognised that Triple Top is one of the safest signals for beginners to trade, even more so than a Double Top, because when these signals are met, they are most likely to continue on as expected.
To avoid being caught out, decide on a suitable Stop Loss if your are going short. The level of stop loss depends on your own risk-reward apetite. Some people place stop loss at a certain percentage of their expected loss, for example you can put the stop loss at a price where you would lose 3%, 5%, 10%, etc. Others place their stop loss based on special points on the charts. For example with the Triple Top, we may choose the previous Low point as the stop loss which is in the week of 1st Feb 2010 at 4532 points.
In addition to the All Ords Triple Top, we also see the chart breaking the all important Gann 1:1 (brown line) or 45 degree angle. This is the angle of great strength where support or resistance will be tested. Again, it has only just broken this angle, so cautious trading with Stop Loss is prudent.
The Dow Jones on the other hand, does show a correction after coming down strongly from the yearly high. However, it has not formed any significant Double Top or broken any Gann angles. It is however approaching another the Gann +10 angle where it may find support or it can breakthrough.
The Dow tells a cautious story. As the All Ords seem to show signs of an emerging bear market, perhaps we have to look towards the Dow as a final confirmation as to whether both markets will go down or pull up from here on.
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