Oil update

WTI has exceeded my entry levels...licking wounds is the phrase here.So, now the level to watch is $96.60/70 200MA on the 1h chart is at $96.68

On the 4h chart, 50MA is $96.65. This is another reverwsal area. Fib resistance is at $96.86 (not shown).

Conservative traders may also use $94.91 swing low on 1h chart to enter shorts. Hourly close below $94.91 will give first confirmation that it is coming back down.

P.S. If it is Santa Claus rally lifting oil, then a test of $97.5-$98 is likely. 

Trade of the week: Crude Oil WTI

In my earlier posts, I did a couple of entries on crude oil and so far oil is behaving as expected (probably it won't after this entry). So, I thought I update you all about possible trades in this commodity.

This is a monthly chart. I think Netdania uses continuous futures data. It is too early to say anything about the candle. The important bit is the MACD which is turning down.

On a weekly chart below, major uptrendline was broken in August indicating the change of the major trend from bullish to bearish. You can also see how crude came back to test the trendline, kissed it goodbye and now seems to be accelerating to the downside. One interesting observation is that it made a flag (2 weeks), made a new high from the flag only to reverse. I like such failed flag patterns. They work well. In general any failed pattern works well since a lot of people are caught on the opposite side.

MACD is turning back down from zero level which is bearish. On the other hand, weekly RSI is about to test its 50 level; make or break here. My bet is that will pause first (small bounce) but then break below 50 level. Test of the second swing at $76.30 or the trendline aproximately at $80 is my main scenario.

Daily charts gives us even more clues. We have confirmed double top (Adam & Eve) with a minimum target of $87; broken 50 and 200 day moving averages (not shown) and a broken uptrendline (green line). Crude tested the uptrendline and was successfully rejected.  MACD is accelerating down but Friday was a doji day which makes me think we might or even likely to test the bottom of the double top.

Trade 1: 
If we have a bounce, then watch $95 to $95.80 for a short entry. This is where it should reverse.  Also, pay attention at a daily RSI. It is turning up and it should get rejected at 50 level ($95 to $95.80 range) or just at the bottom of the circled zig-zag. First target is $90. Second target is $87 (double bottom minimum target). Third target is $80ish (weekly trendline on the 2nd chart) and the final target is $76.30 swing low. In general if crude closes below that weekly trendline at $80ish, then it is likely to fall way below $76.30.

This trade is off if it closes at or above $98 on a daily basis because we might be looking at a typical A-B-C consolidation formation before crude goes higher. Not my preferred scenario.

Trade 2:
If it is not going back up to test $95 area, then sell below the low of the last week.  Targets above apply.

Trade 3:
$90,is a major support. You can see how price tested this area 5 times before. Herein lies the rationale for a short term (1 or max 2 days) counter-trend long trade with a tight stop loss.To time it better, you may need to go to 15min charts. I believe it will be a very high reward to risk trade.

Below is the 4h chart. You can see MACD appears in the process of crossing up while RSI is showing small bullish divergence. The last candle is inside candle. Breakout to the either side (up?) from highs/lows of the previous red candle will give a clue as to the short term direction. All this supports the daily doji.

 Good luck.

P.S. One of earlier posts was on AUDCHF which closed above daily right angle triangle. The stop loss on this trade is at 0.9300 as per this post. But lately this trade is going nowhere and instead we have a a clear right angle falling triangle (bearish) on 4h chart. If it falls down out of it, a) then the daily breakout will turn out to be a fake,  b) also, minimum downside target is 225 pips from 0.9312 but most probably it will fall to 0.8900. Therefore, I would put a reverse sell order at 0.9299.

A chart that makes me go hmmmm?!

This is the longer term chart of VIX. The first spike is the October 2008 low in equity markets. The second spike is the August 2011 low. If someone showed me this chart and asked me to guess where S&P500 would be last August, my totally wrong answer would have been "gee,that looks like 666 bottom on S&P500."

Closer look reveals that VIX made a lower low and investors appear getting sanguine. Judging by it, S&P500 should have been or must close above 1,285, its October 26 swing high. But so far it has not! One of them is wrong. Soon we will find out if it is VIX again. But if so, is VIX losing its importance as a confirmation signal?

On the other hand, Merrill Lynch US High Yield index seems to be a good advance indicator on S&P500 these days. I posted this chart back in early November when I highlighted the divergence and argued for the downside breakout from the Pennant. 

Currently, both S&P500 and the credit index seem to confirm each other.

Equity indices update

I am not going to re-hash what other bloggers are saying but in terms of major equty indices, the pattern I am focusing yet again is, you guessed it right, triangles. FTSE100, DAX30, S&P500 and Nasdaq100 all appear to be within triangles. Triangles are continuation patterns in 3/4 of cases. Breakout (to the downside?) from this pattern is what I will be waiting for.

One of the congestion patterns one comes across a lot is when the price is squeezed between two moving averages. Breakout from the clutches of MAs gives a directional bias for the next few sessions at the very least. As you can see, both FTSE100 and S&P500 broke out of the 200MA and 50MA range. My bias is to the downside as long as both are below their respective 50MAs.

The further into the apex Nasdaq100 gets, the more should we discard the triangle pattern.If that will be the case, I will then focus on the rest of indices for the signal.

Good luck

Updates on trades

Gold is testing the major uptrendline ($1,600) as I write (check my post from previous Friday). It does look like more downside is to come but it pays to lighten up since gold short is already up $100 from where i recommended. Woahh, now $1.587!!!!!

Silver target is $25.5, the width of the symmetrical triangle. There is a major swing low from Oct 26th at $26. Even if silver does not reach 25.5, it should potentially reach the Oct 26 low.

Crude Oil (WTI) testing its Nov 22/23 valley & a close below $95 (which incidentally will also be below 200MA) will confirm a double top targeting $87.5 . There is a 50MA at $94.27, which is the last support on the way down.

USDJPY- if and when it closes above 78.5 on a daily basis, we will get a major long signal. Keep it on your radar.

GBPAUD is another long candidate from 1.5526 (this one i missed but happy to add on any retracement). First target 1.5740, second target 1.5890. Stop loss 1.5445

USDCHF nad GBPCHF (last Tuesday post) acting as planned but AUDCHF is weak and it is worrying.

Finally, GBPUSD and AUDUSD and accelerating downside (last Tuesday post) from sell entry points I mentioned. So, nothing to do here but to bring stops at least to breakeven. These two will be my medium term trades which I intend to hold for a couple of months. Therefore, I will build shorts into rallies with very wide stop losses. Same applies to USDCAD and in particular EURUSD.

2011 Outlook

You can read Michael's 2011 outlook here. If you already went through his 2012 outlook, you will notice that he updated some of the charts he posted in 2011. Anyways, the type of research I like is when you get a 3D overview of different macro assets where all the missing pieces of the puzzle are brought together.

In my post earlier today, I suggested a couple of trades, in particular GBPUSD and AUDUSD. As to EURUSD, I mentioned possible reversal points which turned out to be precise to 5pips which happens very rarely :). If you took those trades, congratulations. All i can add is this, while USDCAD and AUDUSD have not broken out from their respective symmetrical triangles, they eventually should succumb to the USD strength. It is all a matter of time. EURUSD is a toast and sell the rallies is the only game in town. Expect some resistance/profit taking at 1.2880/1.2895 area, Jan 2011 swing low and Aug 2010 swing high. As to GBPUSD, from current levels all the way to 1.5355 is a weekly major suport area (5th test since Sep 2010!!!) which I expect will duly be broken. With every test, this support level gets exhausted and the pair just broke out from the flag pattern one can see on a weekly chart. Weekly close below 1.5355 is very bearish. The ride down should then be very smooth (providing CBs do not destroy our plans) till 1.4885ish area.

Good luck

Charts I am watching

I know I promised to post UBS' team 2011 outlook but I am struggling to attach it on this site (if you know let me know how I can do it). So, I will save it on scribd and then post the link tonight. As i said, at the end of the year I like to go through some reports and see how authors' predictions fared, what i knew then and what i know now with hindsight, could i have expected it and so forth.


EURUSD  - Major downtrendline broken - we are now in the sell the rallies mode

BUT pay attention to the RSI divergence. It is likely we test the broken downtrendline before downside acceleration.

4H chart – The pair is likely to test the bottom of the downtrend channel at 1.3230 & if it manages to get back into the channel, then 1.3283 (red line) is the next resistance. And if, big if, the pair makes above 1.3283, then the upper part of this channel is likely to stop the bounce. In particular, 1.3321/25 area is where the upper part of this channel meets another resistance line (higher red line) at 1.3321.  Also, major broken downtrend is nearby at 1.3340.

GBPUSD - Green horizontal lines are Fib retracements. The pair was in the large range, broke down but now trying to get back into the range. More work needed. Clearly, fall below 1.5536 is likely to bring the pair back to the bottom at 1.5436.

USDCAD – the body of the range is between 1.0262 and 1.0074 and this range is one way to trade this pair. But when the price breaks out of this symmetrical triangle, expect some action and hopefully large profits.

AUDUSD – uptrendline break will ultimately accelerate downside move. Symmetrical triangle break should be the first sign of bad things to come for Australian Dollar.

4H chart - Watch out for the downside if that blue uptrendline is broken. On the upside, four hourly close above 1.0226 is likely to lead to 1.0300 at a minimum.

CHF - USDCHF and GBPCHF made new highs but if you extend charts bit more, you will realise oth are testing previous highs Hopefully, higher we go. Stop losses better be below uptrendlines. AUDCHF successfully tested the top of this Right Angle Triangle. I would keep my stops t 0.9300.

Good luck.

P.S. Tonight I will post the scribd link.

2012 outline from UBS

Michael Riesner is one of the best TA analysts out there. He is the global TA head for UBS. I have been following his weekly commentaries for over a year and I can gladly confirm that Michael's analysis has been spot on as many things as i can remember.

ZH posted their 2012 outlook, a treasure trove of charts and insights. Please enjoy it here. At the end of 2012, peruse their analysis once more to see how they fared. I will post their 2011 outlook next week and you can see it for yourself.

Current commodities watchlist

Silver ready to break down? Target is the width of the symmetrical triangle

Gold about to test smaller symmetrical triangle (4h chart). Break down leads us to the green line, the larger symmetrical triangle

Dow's Fan principle in development as can be seen on Crude Oil (WTI). We still need another downtrend though to complete it. In the mean time back to $95 is achievable. Any re-test is the broken trendline is a sell.

AUDCHF broke out of Ascending Triangle

I think I first mentioned it on Friday on Twitter. All i can say is that this is very bullish and has approximately 600pip profit target potential (the width of the triangle). More details to follow later.

Updates on gold and crosses

Markets are in wait and see mode and are meandering in the mean time testing support and resistance areas. I got whipsawed today

As highlighted in the gold blogpost, gold broke down thru the uptrendline and is now $16 away from the bottom of the symmetrical triangle. Obvious stop loss is $1,723. Conservative target is $1,700.6, Nov 30 swing low. Aggressive target is the bottom of the symmetrical triangle which is currently at $1,695.

While gold idea worked, cross currency idea is not working yet.

As you watch markets day in and day out, you develop intuition. It is difficult to explain but one has this nagging feeling that something is wrong or is not acting right. The phrase that comes to mind is from Market Wizards II when Druckenmiller said, "I smelled a rat," when D-mark did not react to news as expected. So, what happened?

I trade off of 4h charts for short to medium term trades and only drill down further to 1h charts when I want to get a clearer picture or improve entry/exit levels. Anyway, between 2pm-6pm AUDUSD tested 1.0300 but USDCAD was not anywhere near 1.0074 (no confirmation?!) and instead doji star was staring right at me (another no no). EURUSD also had a doji while GBPUSD registered a shooting star. Now, I expect EUR and GBP to underperform since they are weak currencies and that fact is reflected in cross-currency rates. However, such non-confirmation especially in USDCAD got my antenna flashing caution. Then, between 6pm-10pm, EURAUD finally made a new low but more importantly GBPAUD did not and USDCAD broke to the upside from its downtrendline while AUDUSD was rejected and came back down. When that happened, my bullish stance turned instantly to neutral and EURAUD/GBPAUD trades were not taken. From that moment I knew we are still in consolidation formation and markets are saying "not yet."

As i ponder more about this failed trade it makes sense to me markets are not moving because everyone is waiting for the results of the next EZ summit this week and those results most probably will act as a catalyst for any large moves. In the mean time we wait. As I keep telling, watch the horizontal range between 1.0150 and 1.0300 in AUDUSD for breakouts.

Above are updated charts for EURAUD and GBPAUD. As often is the case, patterns are clear in hindsight but trading them as they evolve in real-time is a different matter altogether. I am not yet sure whether I should see them as bullish pennants or bearish falling wedges. EURUSD looks like the latter. Time will tell. Your patiently waiting A.

Continuation Trades in EURAUD and GBPAUD

EURAUD and GBPAUD have been in quite a wide range for a while (since Jan and July respectively). This range essentially consists of risk on and risk off state of equity markets. Risk on - current state of equities - means AUD is the winner. For example, one way to confirm whether risk on is about to begin is to look at EURAUD and GBPAUD besides AUDUSD, USDCAD and DAX30.

Prior to this range both EUR and GBP have been depreciating vs AUD and these long ranges (Rectangles in Dow Theory language) are either Consolidation and Reversal patterns. The problem is we do not know for sure yet which but I will assume it is Consolidation till proven wrong. When EURAUD closes above 1.4212 and GBPAUD closes above 1.6275 on a weekly basis, then there is an evidence of a major trend reversal.  On the other hand, a weekly close below 1.2971 and 1.4899 respectively will confirm continuation of the previous downtrend.

The picture gets a bit clearer when we look at daily charts. I drew symmetrical triangle on EURAUD and the pair has opened below the triangle. Bearish trade for the pair?

I also drew an uptrendline (approx 1.51) on GBPAUD but the pair is not near it yet. If this uptrendline does not hold, then I will be looking at 1.50 and 1.48 as initial downside targets. Below 1.48, downside should accelerate.The width of the Rectangle is 1200pips. Possible target is 1.39.

4h charts below show what looks like bearish Descending Triangle but the correct interpretation would be a pennant, short term consolidation pattern of half-mast type. Minimum target is the width of the pennant but normally we should expect a move equivalent to pennant's mast starting from the break out of previous pattern.

EURAUD target is approximately 1.2470 (1.3680-1.3070=610pips). 1.3070 is just below the neckline of the H&S top that you cna clearly see.

Target for GBPAUD is approximately 1.45 (1.52 less 700 pips). This pair also broke down from ascending H&S.

Now, all what i wrote here regarding what looks like a Pennant may just turn out to be rubbish if the price action evolves into something else, possibly a small Rectangle or who knows what. It looks unlikely but I may even have to play on the long side if the pairs break to the upside instead of following the script.

But if the analysis is correct then the implication for equities is that we should see further upside. In terms of confirmation, AUDUSD is in a bullish flag (clear range on 4h chart) and a daily close above 1.0290 should give that confirmation. USDCAD is being nudged downwards by its downtrendline and as long as that is the case, bullish stance is warranted but on the way down it has to overcome 1.0074

 So, we will wait and see but the resolution for these 2 pairs and for AUDUSD for that matter seems very close.

Good luck.

Near term scenarios for gold

McClellan's Chart in Focus shows a large triangle on a daily chart. The gist of hsi articles is that he looking at a bearish surprise. The cahrt below is a smaller triangle on 4h chart with what i highlighted are near term scenarios.

I honestly have no clue about Elliott Wave counts here: should  Nov 8 top be labeled A (bearish count) or should Nov 20 bottom be labeled A (bullish count). For a good EW analysis check this blog. I like his analysis.

EW aside, I will simply be trading breakouts from or reversal within the triangle. Price break below the black uptrendline tells me gold is likely to test the bottom of the triangle.

P.S. Gold is starting to test that black line as I write. 6 dollars down within 10min. This metal moves fast.

Bullish play

Majority of the short trades did not achieve their downside targets and instead we have initial signs that suggest we may need to change to the bullish camp.

Two "risk on" currencies, AUD and CAD have broken their trendlines while GBP opened just above its downtrendline on 4h chart. The EURO is lagging ( no surprise there!) but appears poised to test the downtrendline as well. Strong wave lifts even the creaky boats. If currencies are indeed mirroring the bullish (short term?) outlook, then obvious initial targets are CAD-1.0261; AUD-1.0075; GBP-1.5610 & 1.5715; and EUR-1.3435 which is the bottom of the descending triangle where it is more likely to be rejected at least temporarily.

While we had huge runs in major equity indices yesterday, so far only DAX30 is looking comparatively bullish. It is back inside the pennant and the last place bears can make a stand is at the downtrendline currently at 5,822. It is also testing daily 50MA (blue line).  S&P500 is testing its 50MA and Fib resitance while FTSE100 is about to. Nasdaq100 is still below 50MA.

Of all the charts, the most important to me would be AUD, CAD (risk and growth sentiment) and DAX30 (risk sentiment). The first two have already given long signals while DAX30 is about to confirm the long side as well.

Tradingwise, conservative players should wait for currencies to come back to test their trendline while adventurous traders must already be long AUD and GBP on the breakout and short CAD.

P.S. By the time i posted this entry EUR,GBP and AUD reached the targets i described. That was REAL fast! Already time to lighten up a bit.

P.S.2 My guess equities are doing their typical month end rally and this time on low volumes. So, with regards to the suggested trades, lighten up when initial targets are met and trail your stops. Currently it is a day trader or short term trader's market. Trade with that in mind!

Update on trades and targets

The target on my short EURUSD has been reached (167 pips). Now only holding 1/3 targeting 1.3180.

Gold target also reached with $1,600 potential downside extension

Silver target at $30.4 has not yet been met.

Next most likely target for crude oil (WTI) is Fib 38.2% retracement level at $92.50.

I mentioned target of 4,900 to 5,000 for shorting UK's FTSE100. Currently it is at 5,107. Precise target from descending triangle would be 4,978 (5,376-398).  The last resistance on our way to the target is Fib retracement of 78.6% at 5,065.2. Shorts can consider taking some money off the table at 5,065.2 and if seen the rest at 4,978.

German DAX30 is still some distance away from 5,062 target. Halving the position at 5,260, swing low from early October is a good idea.
S&P500 triangle target is approximately at 1,146 and futures are just shy 8ppts from this target as i write. The good news for bears is That S&P is currently below Fib 61.8% resistance at 1,157.94. If today we have a close below this level, bears may be getting a chance to have a shot at 1,120, the last Fib resistance area.

In my previous post I posted a chart highlighting bearish divergence in HY spreads versus S&P500 which foretold the downside breakout from the triangle for S&P.  I am updating this chart again: both confirm each other.

Good luck

Euro broke down from its recent range

The pair broke thru descending triangle and the minimum implied target is 1.3260, just above the low of Oct 6 (blue horizontal line = 1.3250). IMHO, it is more likely to go to 1.3180, October 3^rd low on a daily chart below.

While RSI on this 4H chart is diverging, it is confirming on a daily chart and that is more important.  At most, this short term RSI divergence may result in a pullback to the resistance area of 1.3425/30. If it happens, then all those who missed the boat will have another shot at shorting the pair.

The last Fib resistance area of 78.6% at 1.3376 should act as a temporary support and at best can bring the pair back to 1.3425/30 level mentioned above. The blue descending line is likely to act as support in EURUSD’s descent.

My stop is at 1.35 maybe bit too close but it gives me good risk to reward and if my analysis is correct it should not retrace that far in the first place

Good luck

Targets for Trades

Most of the assets have broken on the downside from their respective patterns so far.

Gold broke down from the triangle and the target is $1,687 which is $7 shy of Oct 31st bottom. The sell entry is at $1,767 and the stop can be moved down to $1,767.5

Silver also broke down from the triangle and the target is $30.4, just above Oct 20th low. The sell entry is at $33.72 and the stop now is at $33.97

Crude oil (WTI) exceeded $100 but was rejected at the upper wedge line that also coincided with May 30th high of $103.35. But the game is not over for crude until it breaks below the bottom line of the wedge.

FTSE100 broke below its rising uptrendline but we still need to see a fall below 5,334 to confirm the downside. This level is actually the neckline of a complex head & shoulders pattern.

S&P500 so far had a fake breakdown but is now within the triangle. Daily close below 1,220 will confirm the downside

The only non-player is the DAX30. It still has not broken down from a Descending triangle and is not confirming the bearishness we are seeing in other assets. Something is wrong here!!!

We are at an important juncture for risk assets

S&P500 is in the triangle. As a “picture of doubt” triangles can go either way. Currently many analysts think it is a consolidation pattern and if it proves to be such, then a min upside target would be 88ppts (width of the triangle) following the triangle breakout and the max target would be the pole of the triangle which is approximately 198 points. Also, cycles are in favour of the upside move: Q4s are mostly bullish.

However, other markets do not appear as bullish as S&P500. Therefore, we have to be prepared to the downside risk in case bullish S&P plans do not pan out.

German DAX30 is in a bearish descending triangle. The width of this triangle is approximately 675pts and a downside breakout gives a min target of 5062. Oil WTI is in a bearish rising wedge and is approaching a major resistance at $100 (Jul 25^th high). UK’s FTSE100 is being supported by an uptrend line and it looks rather precarious.  A daily close 5350 will confirm that we are heading back to 4900/5000 area.  If these divergences are a harbinger of things to come, then S&P500 is likely to break the triangle on the downside and 88pts down is a reasonable target level. Daily close below 1220 will confirm the downside.  So beware.

Finally, HY credit is not looking as bullish as S&P500 does. Two charts below compare HY Spread (HY credit yield minus US 10Yr yield) to S&P500. HY credit spread made a higher high (bearish) at the end of last May, two months before S&P confirmed H&S pattern. This is as good advance warning as one can wish for.

Now, HY spreads are going up again while S&P is holding steady. Credit may be panicking too much but i think it is panicking for a reason. So, beware of the downside risk.

Gold and particularly silver are also at important junctures. So, we will just wait for the breakouts

Possible trade

Above the horizontal line is a Buy with a Stop below the current candle. RSI is supportive,
Targets: 1) 1.3385, 2) 1.3455

Update

Overnight USDCAD did a head fake pop above my buy level at 1.0214 only to fall back to 1.0172. While current retrace from 1.0214 looks corrective I do prefer breakout trades to show profit straight away instead of lingering. I would therefore reduce the original position to 1/4 and move my stop loss to 1.0095. I would also reenter long if USDCAD reaches 1.0226.

Watching to long USD

We are possibly going to test the broken uptrendlines on majors. I am not sure EURUSD or AUDUSD can go that high to test trendlines. Instead they may reverse from congestion areas while GBPUSD could reach the uptrendline since it is very close.

I would be watching 1.3815/20 level on EURUSD. GBPUSD may come to 1.6035 (currently where the broken uptrendline is) where it will be a great short candidate. AUDUSD may stall around 1.0460 area where 50MA currently is. USDCAD may  form the handle of a possible cup & handle pattern.

Should USD continue to rally instead without cosolidation, it is worth keeping sell stop orders at 1.3600 for EURUSD, 1.5883 for GBPUSD, 1.0264 for AUDUSD and a Buy Stop at 1.0214 for USDCAD.

Majors look set to give back some of their gains vs USD

Today is an important day news-wise: newspapers call it make or break or the Euro. Even if European leaders decide to leverage up, the underlying problem will still remain. The exercise in kicking the can down the road may give them another breathing period but they will not be able to put off the inevitable, imho.

Back to charts, and this is what 4 hourly charts are telling me. GBPUSD seems to have broken down (on metatrader where 4 hour candle ends at noon London time, it has not broken yet while on dailyfx.com net dania charts new 4 hour candle ended at 9.59am, it already has) from ending diagonal pattern which gives me minimum downside target of 1.5840.  To be on the safe side, price below 1.5975 is green light for shorts.

CAD is a buy at 1.0179 to target 1.0245 at a minimum

Overnight, Australian quarterly inflation came in lower and now expectations are for a first rate cut next week by the RBA. AS a result AUD took a hit across the board. AUDUSD has broken down from rising uptrend line though it may still run up to test that trendline which would be a nice short set up. Nevertheless, AUD is likely to fall to 1.0200 at the very least.

AUDCAD also gave back most of the gains of yesterday. I am trailing the stop loss below MAs and the uptrend line on 4h charts. So, the new stop is 1.0429.

Another Trade Idea

There is one set-up I like to call crocodile claws: it is when a price is stuck between 21MA and 50MA or 50MA and 200MA. One is above and another is below or vice versa. Then a price breaks out of crocodile claws and flies away to freedom, to express metaphorically. In terms of direction of the flight, it is either continuation or reversal or flat L. You can see and trade this set up at any time-frame. But it is always good to use this set up in conjunction with some other signal to get the odds on your side.

Four chart of EURJPY shows that the price is 150 pip consolidation range while daily chart of EURJPY shows that it is capped by 50MA from above and 21MA from below. Finally, daily downtrend line has been broken, which by itself is not necessarily a trading signal but at least markets are giving us a cue. Thus, we are getting enough confidence that this pair looks like set up for the upside.

Trading wise, the safest way is to wait for the pair to close above the range (4h chart). Aggressive stop loss is 105.50 and conservative stop loss is 105.00. If it breaks to the upside, the pair may stall at 1.0750/60 level and even fall back down. Should that happen, one has to view it as an opportunity to buy more. The first target is 109.00.

However, if this pair falls back down from the range, it is more likely to fall to 103.50 if not 102.60. But beware, 10460/70 level, where daily 21MA or 4 hourly 200MA (red) are, will act as a support. Then, the price first falls to those moving averages, bounces back to the range where a short can be initiated, and then it falls back down. Daily close below 21MA will confirm the move down.   

Update on AUDCAD

Entry order hit at 1.0468. Original stop below the range has now been moved to 1.0405, just below 50MA and an uptrendline on 4 chart.

As expected, this pair has stalled above 1.0500 area peaking at 1.0539. To be clear, the pair is still within a daily/weekly congestion area and a stall on that area is logical. However, daily RSI is diverging (left section of the first chart) and if you zoom in at a 4h chart, you will notice that a min target of channel extension appears to have been met and the pair came back down with a perfect bearish Shooting Star.

In terms of fundamentals, expectations are for the RBA to cut interest rates as the local economy slows down. The only impediment to rate cuts has been higher inflation. If it slows, the RBA cuts and AUD therefore weakens. Tomorrow (Wed) 1:30am London time, latest inflation data is on dock. Mean forecasts are for a slight slowdown in inflation. If inflation slows faster, the stop loss will most likely be hit as AUD tanks. But if inflation prints as expected or even higher, ahead we go is the motto for AUDCAD, I guess.

I mentioned to many negatives for this trade but that is OK with me. When everything looks bad is the time to do the opposite and in my experience I have seen a lot of breakouts from the range when price consolidates for a few days just beneath the top of the range only to power ahead and never look back for the next few weeks.

Therefore, the recent daily channel/consolidation may serve as a harbinger of the large measured move to come. Unless proven wrong (stop loss being hit), I am willing to give this trade a leeway to prove itself.

Trading multiple time frames

 On my last Wednesday post i shared a trade idea on USDCAD. In short my trade idea of imminent USD strength was right-ish  but I still lost money on this trade because I was early. So, I thanked the market for stopping me out and started watching 1h and 4h charts for signs of reversal. Finally on Monday 17 Oct,  AUDUSD reversed after testing important resistance at 1.0345-70 (see the red line on a Daily chart - right section).   The signal came with a shooting star on 4h chart - left section

 I do not normally take trades based on candlesticks because early on I learned that trading based solely on candlesticks will deplete my capital real fast. So, I use candlesticks in conjuction with classical technical analysis (support, resistance, trendlines,etc..). In this case, AUD reversed from major resistance with a bang and that was good enough for me. The target was 1.0118, confluence of 23.6% Fib resistance and daily 50MA (200MA on 4H) which AUD duly reached breaking the short term uptrendline in the process.

The next day i warned about a bounce in majors vs USD which came later in the day (usually I am wrong :) ). First short when AUD came back to test the resistance was a good trade but my tight stop loss was hit. Then AUD tested the trendline once more and only after it was rejected (the first white candle) did I put on the short again. The scenario that I had in mind was ABC correction with a minimum target of 0.9980 and 0.9910 at best. Instead, we had a bullish engulfing candle and consequently I moved the stop loss just above it. When the engulfing candle was followed by an ever tightening range I knew I was now looking at 50-50 trade. Further drill down to 1h showed AUD was in a symmetrical triangle:

 So I moved my stop loss lower and entered reverse buy stop order in case AUD goes up. It then went up and i was now long. I did not wait for it hit the target as implied by the triangle since god knows what will European leaders decided on over the weekend. When AUD reached the green line that was good enough for me.

I do not know what to expect next week re AUD but on a weekly chart we have a bearish Hanging Man while on a daily chart we just made a new high breaking out from the 5 day range. Still, AUD is poking its head at a significant daily resistance. Mixed signals here and so we wait.

LESSON: do use multiple time frames starting from weekly all the way down to 1h to generate a trade idea, to time that idea and to place a stop. If the trade stalls or market not behaving as planned, check shorter time frame ( i usually stop at 1h chart) to decide whether you need to reassess your trade. 

P.S.  Trade idea for the next week. AUDCAD broke to the upside from the 5 day range and it looks it is ready to roll. I would be willing to buy at 1.0468 (above highest high of the range) and put a stop at 1.0360. The only bad news is this pair can stall anywhere betweeen the 1.0515/50 range where previous 3 tops were made.

Moving stops on EUR and AUD shorts

Things are not panning out as expected and EUR and AUD are stuck in ranges

EUR is in 1.3900 - 1.3650 range while AUD is in 1.0360 - 1.0118 range.

EUR short entered at 1.3820 and stop moving to 1.3815.
AUD short at 1.0303. Moving stop to just below breakeven 1.0300

Short update

Shorting EURUSD nad AUDUSD.  Recent swing highs are stops

Uptrendlines broken

Majors (EUR, GBP, CAD and AUD vs USD) have all broken their short term uptrendlines yesterday. However they are now sitting on their support levels, so I would not be surprised if a bounce ensues

Should Majors bounce versus USD, then these are the levels where shorting them present good reward to risk:

EURUSD could go to 1.3724 which is the neckline of H&S pattern on this 4h chart. Stop 1.3805. Target 1.3570

For AUDUSD, Minimum upside bounce target is 1.0218 . Above that look for it to kiss the broken trendline goodbye which is currently at 1.0275. Stop 1.0318. Target 1: 1.0010 & Target 2 0.9910

USDCAD can go down to 1.0150 or to the broken downtrendline where we can long the pair to the first target of 1.0335.

GBPUSD can go back up to 1.5740 before reversing to the first target of 1.5660. Stop is at 1.5820

At the end of the day, I am only looking for these moves as retraces and not a full blown USD rally. So, at some point I will be looking at shorting USD again, technicals confirming :)


On loonie

Just noticed USDCAD testing its Sept 27 swing low and is 1.0170 now. It is a good risk reward long USDCAD entry and it also ties up with my view of tactical (minimum a day) USD strength. I am wondering whether a close above 1.0175 on 10min chart will confirm it. Stop loss is 1.0135 and min profit target is 1.0250

Continue to be USD bear

I will post charts later but in the mean time this is what charts are telling me.

Currently I am a USD bear but tactically and in spite of the breakouts on 4 charts I see increasing chances of short term USD strength. In terms of trading it means, reduce USD shorts. Later I will review potential USD short levels where re-establishing USD shorts gives us good risk-rewards.

AUD - intraday price broke thru the daily neckline but with need confirmation on daily basis: AUD should close above the neckline. Then it would be very bullish. However, you may think about taking 50% of profits NOW and the rest at at 1.0170 because strong resistance is on the way and AUD likely to test the neckline before going further up. Stop loss should be moved to 0.9900

EUR - I am not sure it will overcome downtrending 200MA on 4H chart. So, I am halving it. Should it go down, it should be supported at 1.3664, potential buy EURUSD level.

GBP - I re-established long at 1.5650, just above the swing high on 1H chart but GBP is about to meet its 200MA at 1.5785 on 4H chart. My bet like in the case of EUR, it will lose the first fight. Then, it may go back to 1.5675-80, our buy area. Therefore, I am happy to trim as well.

EUR breakout

Although we got the overall trend right by turning bearish USD, trading based on an hourly chart has been a bit difficult lately because of whipsaws that followed breakouts from the levels highlighted (see previous post). Only AUD behaved much less erratically.

Anyhow, it is worth keeping in mind trading retracements is more difficult and I guess it is worth following the pairs on a higher timeframe and 4h charts in particular. Second, it is worth selling USD after it rallies rather than breakouts. This is what I will follow for the time being. Now, analysis.

EUR finally broke out falling wedge to the upside. Any return back to 1.3500 to 1.3485 area is a buy. Stop is 1.3360. Resistance: 1.3665, 1.3750, 1.38 (200Ma which is 50MA on dailies) & 1.3880

GBP is on the cusp on double bottom confirmation with a close above 1.5677. Close above it will give us 1.6011 as a target. Resistance: 1.5750, 1.5820, 1.5910/20 & 1.5990. However if 1.5677 holds, we head back to 1.5341 minimum.

AUD - coming out of the V bottom in an uptrend channel. I am not sure it will close above 0.9950 on the first try or above the channel for that matter. One scenario I will be watching out for is that it is rejected at 0.9950 level, goes down to 0.9750 where support holds and then AUD attacks and successfully overcomes 0.9950 level. That will form cup & handle pattern and the target it gives is 1.0450. However, that may be too rich because we have the broken neckline at 1.0035 (currently). We will see

Good luck