Bull run will certainly leave you high, dry

Based on columnist Jeremy Thomas, “Trading the JSE – or any stock market, for that matter – must be a thundering great pain in the neck at present.”

The Top 40 index on Friday, for instance, blazed upward for 200 points in the first hour and then spent the day dawdling downwards – ending at almost the precise level it left on Thursday. For a trend-trader, it must be a nightmare.

That’s not the worst of it: the live index ticker frequently shows either a calamitous on-the-bell fall of over 100 points, or an equally bizarre 100-point leap on the closing day’s price.

Anyone tracking what they thought was a medium-term bull or bear run would be left high and dry – even the most generous stop-loss trigger level can’t cope with such squeezes.

What gets the conspiracy theorists really buzzing is the fact that indexes – never mind individual stock prices – invariably tend to fall or rise towards blindingly obvious support or resistance levels. These can be as basic as the closing day’s price.

Trouble is, when the price reaches such a level, the common trader has no idea if it will bounce or simply blast straight through.

In the old days, you could be pretty sure an army of fellow traders would be eyeing significant technical “pivot points”, and the price could be expected to move in the direction of the herd. (Or not – but the probability was on your side.)

Now, this “tow-truck driver” method of technical trading hasn’t a hope. It’s almost as if there are super-computers out there, programmed to manipulate prices to levels they like. Hang on a minute …

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