Want to buy the dips? Try CSR

One of the most used phrases that you hear in financial markets is ‘buy the dips’. Like all of these bits of apparent genius it tells you less than the full story. The thing that you are really looking to do here is buy reversions to the mean or reversions to the trend. Otherwise you could be buying any old thing at any old time. So for instance if you believe that the QEIII package is likely to be supportive of risk assets like equities then looking for things that have been moving in the right direction may be a good plan. Something to look at that I think may fit the bill is CSR as you can see in the chart below:

As you can see here there has been a solid downtrend in play for some time which is turning itself into something of an uptrend now which I have marked with the parallel channel that you can see here. If you want to weigh up the bear case you can see the 200 period moving average moving lower which shows the bullish sentiment is not universal but it certainly looks as though it’s improving.

The trader has some options here. Typically people may say that you should wait for a breakout from the top of the pattern before making any move but it will be interesting to see if there is a test of the base of the channel in the near future. This upside of that is that you are able to take a long position with a stop-loss order quite close to the action which is an ideal risk:reward outcome for the trader.

In any case this is the type of embryonic trend setup that’s worth keeping in your pocket to watch and see how it unfolds in the coming weeks.

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2 Responses to Want to buy the dips? Try CSR

  1. Mike Eggleton says:

    On a long term chart CSR has 2 support/resistance lines. One circa 2.40 going back to 1988 and a lower one, less soundly based, at circa 1.50 (both adjusted figures). Following the high circa 9.00 it free fell to crash thru the 2.40, recovered to a double top circa 4.40 late ’09 then free fell again thru the lower support area. It is now consolidating in the 1.50 area. It is indeed an interesting one to watch.

  2. Pingback: CSR – Don’t Change the Channel | CMC Markets Blog

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