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Posts Tagged ‘europe’

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It has been a year since the last post, and before that time, I’ve worked at a trading firm, learned, and left to start the new stage of my career. I have also passed all 3 levels of my CMT exams, and even though I certainly like the novelty of Point and Figure’s boxes, catapults and more, its obscurity (especially in FX) goes against an important tenet of the markets: it may be a self-fulfilling prophecy (if enough people are looking at the same thing).

So what have I learned? Follow the trend, Digested in these few simple points, which has simplified my charting.

1. Trade breakouts. Follow quiet markets, and get in when it breaks

2. There is no too high of a price to buy, or too low of a price to sell (that’s from Livermore). Especially true with all these extremes in FX and indices.

3. Use simple indicators, especially the ones that everyone is following. Hence my use of only 10-200 MAs, and now on hourly charts because that creates more opportunities.

20150726gbpusd

Follow this trade on TradingView!

To the best of good buys.

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Wow, that holiday rally was quite robust on Friday. It hit all of my PTs (gold, pound, but I’ve also closed my Bund trade), but more importantly, almost all risk assets have come up to major resistances. That confluence of resistances, especially amplified through so many assets, is what our PFTQ tech trader running the high Sharpe RSI 2 package.

The indicator package still shows holding short, as it hasn’t rallied back to major MAs.

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The best way to structure this would be through: Ichimoku hits, trendline hits, fib hits and finally candlestick patterns. Confidence decreases in this order too, so it’s more or less simple arithmetic to find the best asset to trade this decline.

Ichimoku hits:

Gold, the big one. Actually had my long position from 1710 limited out with that last spike up to 1753. Wiped candle at the end of the day doesn’t do good with momentum either. Additionally, all tests of a blue cloud from underneath has ended (hit, not close above) with the Span A (top line) providing a reversal point, regardless of other indicators. Price target of this one would be first the span B again at 1690, with an even lower one at 1660 (but run a probability analyzer on that).

A large cloud in this case, courtesy of QE3 speculation also gives enough room for scalping. Unless gold closes above 1753, the immediate bias will be negative.

Also look how similar to the DAX30 the technical positioning looks. More importantly if we have a reversal here, both gold and indices will have put in a local top.

 

The other big daddy: EURUSD. Looking for a capitulation on EURUSD, permabears? This might be your opportunity (well, the first relatively confident one so far). That Span A hit has been a powerful line of resistance, as no upward test has broken it within a week’s trading (as in, the reversal isn’t that fast), in 4/5 times this has happened (the only time it didn’t was in mid-September 2010). However, do please use stops at breakeven, or set very near price targets.

 

EURSEK: Don’t have much to say on this support hit, though a break of the Span A has been rejected before (remember not to confuse low liquidity gaps with actual breaks today!). Also, USDSEK has broken below that thin cloud and will likely target 6.5000 (technically). Small position? Why not.

 

Trendline hits:

The Nikkei 225, which has been following that channel since forever. Can’t say I’ve gotten into too many of these even though the lines have been drawn since the 2nd peak. Yes, the top line has been broken, but the fib provides quite robust resistance, especially since it was a very substantial support during April and May of this year. Plus, the bottoms haven’t picked up enough to show a true reversal, so trading this channel is still quite safe by my standards.

Also, this last run was completely caused by USDJPY. The US economy is improving, but treasury yields have exploded these past months, which naturally brings in more FOMC trading, and – not to forget – possible risk aversion due to a lame duck congress (what great timing!). Even though apparently this last drop in bond prices have been caused by foreign dumping, all sources of possible risk (remember that Greece still hasn’t received its bailout tranche even though its “rolled-over” bonds from November 16th will have to be paid on Dec 7th and 14th.)

This, along with a short USDJPY (yes, redundant and a bit dangerous) are my current trades.

 

AUDUSD: a bit dangerous but including it in this section as well. This pair is being wedged in, but close enough to the top line that would make a trade have slightly over 1. I still wouldn’t trade it as the range has been oddly thin over the last months, and for a similar long-dollar trade, there’s a few that give much better positioning (as in, why not EURUSD at around 1.3150?)

Fib hits:

Bunds, which I closed out after this post as momentum just died. This has stopped at a fib range rather than an actual line in the sand, as previous trading shows the actual resistance has actually been around 142.10 and 141.85. Will actually wait for a conclusive break of that range to re-target 140.40 or so (the Span A cloud bottom).

EURJPY: which has led a coordinated recovery (the Euro and the yen) back to hit the 76.4% reversal line. RSI has reached overbought area, and the HA candles are flattening. Confident? I think so.

Candlestick patterns:

Well, just the one really on USDJPY. RSI, HA and CMF (accumulation or deaccumulation) are showing weakness in the upwards run, and the last few candles (and if today’s is included), should restart the reversal pattern back to the low 79s. Hence, this is the reason for my Nikkei 225 trade, as the timing does match with the Nikkei’s channels. We do have the election coming up, but based on history (as Prime Ministers come and go), there isn’t expected to be a large change. Looks like there’s going to be something troubling in Greece again.

To the best of good buys.

 

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Finally this sucker has broken after a strong of day trades. Stop at breakeven, and let’s see how quickly this holiday rally can take us down to 139.46 or change.
To the best of good buys.
**At the time of writing, which is 1915 PST, (0315GMT) there has been no word yet about the next tranche for Greece… Seeing the EUR peel away at 1.28000 since Bunds trading is closed right now. Nevertheless if you haven’t got a position yet, wait for the European markets to open. If you do, again stops at breakeven.

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Closed out my pound trade from this post after hitting the span B. Momentum wasn’t too strong on part of FX, even with the equities sell-off, and thus the BFTD bias still remains on currencies (and gold… maybe…)

The next week’s hold is largely based on data coming post-Olympics. The current estimates are still quite conservative (1-2% higher YoY only – and mind you the comparison was to a Britain entering recession), and from what GDP showed, promises to surprise to the upside again.

That’s it really, and based on Friday’s SPX close, that massive doji signals a reversal, of at least up to 1430 again (bounce between the kijun towards the span B).

The GBPUSD pair seems to be a good pair,  though there is still additional room for the dollar to come back. Though RSI is at its local low (on such a quiet pair), an entry should be placed at the 200DMA which is at 1.5850 and so. We also have Fed minutes coming this week. Though it didn’t cause immediate volatility, the dollar has strengthened – with the exception of Gold, which is again bouncing on the speculation of the Fed either printing until unemployment hits 6% or some kind of stopgap to prevent the fiscal cliff from taking out the economy again.

And mind you, the government’s not going to do anything during the lame duck period. So expect dangerous complacency until the start of December.

I’m going to use the GBPJPY pair – which gives a much more robust resistance – the combination of a 50 fib and the span B. Though the pair is sitting at a rising trendline from early August to mid-October, current yen volatility (especially after the GDP report – because Japanese data are having an effect right now) could very well push it to 125.00 – my entry point – before a robust complacency-driven bounce back to 131+. Also, the price has broken the 50DMA, 200DMA (a long time ago) and the upper span A line. Next major resistance is lower.

Europe? It’s OK. The Germans will pay for the 16th. The next risk point has been delayed to the end of the month. And if Spain requests, it’s risk-positive… for some reason. Zenious.

To the best of good buys.

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ハイ、以上

取引で善かれと思う。

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My prayers for those who were severely affected by Hurricane Sandy. Hope the recovery will be swift so everyone can get back to their places as soon as possible. But on the bright side for all the groveling New Yorkers, at least the subway will be cleaner after 7 days of soak.

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Right so, that does mean US markets will be back online to the joy of traders everywhere. Although these past few days may have brought a welcomed break, where it has left us as far as positioning is precarious, and very advantageous.

What we have here are three risk-correlated assets (in different degrees), GBPUSD, the Dax30 futures, and Spanish IBEX35 futures. All three have entered the cloud, and these few days of inactivity have led them to re-test, but fail the Span A (upper) resistance. With the current low volume-higher risk complacency trading atmosphere, a large return of volume tomorrow could start pushing risk lower.

Secondly, RSI14 have dropped below 50 on all three assets. There may be a retest above, but overall sentiment has turned negative (which hasn’t been seen in quite some time), and trend is expected to return to the oversold region again. 50 has proved a strong support resistance (depending on direction of test) for all three, and shouldn’t be discounted this time.

Risk-reward is excellent, with a stop around 0.250% above the span A and first limit (of whichever is first) at the cloud bottom. This gives around 10:1 in about a month. Second limit would be the equal to the Span B line minus the SpanA-SpanB gap.

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The Sterling: see that breakout candle on the second day? That was because of the GDP-induced productivity. Same thing happened for the Kiwi during the Rugby World Cup, so I’ll definitely be closing out before the next CPI report on Nov 11th (also mind you there’s a BoE decision, the second to last by Governor King) and looking for another short entry on this or GBPAUD, depending on position at the time.

HA doesn’t give as good as a signal due to the extreme chop. This should be used as a confirmation or rejection in the days to come. Stop is a daily close above 1.6140.

 

The DAX30 and IBEX35 are following the same drivers: topping at current range, HA turning moderately negative (which gives a bit more confidence than the pound). Additionally, the markets are still waiting for Spain’s final request. Even though that is a catch-22 with yields being brought down greatly due to the promise to purchase, Spain would be admitting they can’t really pay back all that debt at these rates. Nevertheless, anything short of a request will not restore confidence in the European markets, and will pressure the indices lower. Again, stops should be placed at daily closes above 20% of the span A top.

 

Remember to maintain enough margins! To the best of good buys.

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Closed out the trade I had a few days ago – looking for a re-entry unless to sell at 1.56349 and continue with the bearish bias… unless something awful happens.

To the best of good buys.

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