It seems that since I am from Canada some of my readers wanted to see a little more posted on the Canadian markets. So without further ado, I take a look at Canadian market but the lessons really apply to US markets right now too. Volume is low and price remains stuck in broad ranges, so even if you don’t trade on the TSX, you may still want to read through this.
This week saw continued low volume as the TSX 60 stagnates within in a large range. For day traders this can make trading difficult, and requires a look back to some old trading wisdom which reminds us traders and investors don’t need to be in the markets at all times. There are intervals when risks and rewards are harder to calculate and fills (on trades) are hard to receive at the price desired. Therefore, there is no urgency to be in the market during each moment of the day.
When the iShares S&P/TSX 60 Index is looked at we see the Canadian markets trapped in a broad range. When the overall market is trapped in a range such as this, the stocks that are traded become very important. The time of day in which trades are made also becomes very crucial. Looking at total volume numbers for a stock may make it appear as if there are opportunities, yet closer analysis will reveal that during times such as these the trades need to be very selectively.
The chart reveals that this is not a trending market. Price will need to move through 17.50 on the upside, which only indicates a move to the top of the channel at 18.30. On the other hand a sustained move below 16.20 indicates that further downward pressure is likely to be seen.
Figure 1. XIU.TO Daily Chart

XIU.TO Daily
Source: Free Stock Charts
On the 15 minute time frame (Figure 2) it is easier to see that the market is extremely choppy. Mirroring the longer-term price action the shorter-term is also stuck within channels. The downward sloping trendlines provide a barrier for prices through the beginning of August. A breakout of such a barrier or failure to breakout can provide higher probability trading opportunities during this environment. A breakout above 17.35 would put upward short-term pressure on prices; resistance comes in at 17.48 and 18.52.
A failure to move through the 17.35 level will mean the eventual re-test of the channel lows towards 17.12. Beyond this 17.04 should provide support.
Figure 2. XIU.TO 15 Minute

XIU.TO 15 Minute
Source: Free Stock Charts
The volume data from both charts show volume is relatively low, low volume adds risk to trades in that it becomes difficult to enter and exit at the price desired. Slippage on orders becomes more frequent, but can be minimized by trading intra-day during higher volume times.
Cory Mitchell, CMT
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