Short updates

GOLD
Daily RSI is diverging and we have a confirmed doji today: I don't like that. Down day tomorrow? I do not know but based on the triangle or cup&handle conservative target implications, $1481 is the next target level. Target is admittedly far away but it is worth giving this trade more chance to prove itself with the remaining half. Stop at $1.429.

SILVER
The wedge did not hold and silver went right through it but it is sitting on top of the wedge and if it comes back into it, then a down move to $37.37 is possible where uptrendline currently is. Also, the first wave length was $13 (31-18). Extending it from Jan 24 bottom of 26.8, it would make it to $39.8. Current level of $39.6 meets minimal requirements already and at $40 extension requirements will be met fully. Zooming in on 4H chart, close below $39.17 on 4h will confirm short with a stop above recent highs

OIL WTI
After testing patience for three days it has finally rallied today. Provided it is an up day tomorrow, we can move the stop to $107.3 based on three up days rule. Target is $113.5 as per earlier post

JPY
Yen is taking a breather and i will look to enter shorts Yen if retraces a bit more. For USDJPY , 84.26 is a good entry level

EUR
It is at an important junction as it is testing weekly downtrendline. So, nimble is the name of the game till we find out who got the upper hand. 4h close below 1.4239 more likely will lead to a fall to 1.4170/75 area first. One large FX hedge fund is expecting Eur to peak this Friday, retrace for a couple of weeks and then rally all the way to 1.48. As a rule their opinion is not my opinion but it is good to know what big boys are up to.

GBP
It seems to have finally broken its weekly pattern of one week up and the next week down. Even it falls tomorrow, it is likely to remain as the 2nd up week and if it manages to close above 1.6271 this week, then i will look closely whether long entries lasting at least a week should be attempted. Zooming in onto 4h chart, we can see cable at a tight range of 1.6256 - 1.6363. Breakout above or below this range gets us into the trade with the stop on the opposite side of the range and the target being the width of the range. On 4H, MACD and Stochastics have rolled over but cable is at that stage of the trend move when middle of the Bollinger Bands acts as a support and pushes the security further up. I will wait for the range breakout

AUD
This one did not reach my downside target and instead confirmed its bullish uptrend by closing above its 6 month range. However, from Elliott Wave perspective, it is in wave 5 and is topping or has topped. It may indeed be topping but i still think it could rally further, possibly to 1.08 after it dips in the coming sessions. Only if it falls back to its its range, namely 1.01 level will i start to doubt my bullish case. In the mean time standing buy stop order at 1.0230, its previous weekly high sounds reasonable to me. Daily close below 1.0320 will indicate that we are heading to 1.0230 support.

P.S. On 4h charts, indicators are in bearish divergence for EUR, GBP, AUD, CAD and NZD which does not happen so often, or rather happens rarely. USD to rally today? We will find out in a few hours.

Yen: major trend reversal at hand

All the research I have read so far suggests JPY should be appreciating. Quick look at charts confirm that: from Jan to May/June 1995 Nikkei 225 fell but JPY appreciated as private sector repatriated money to rebuild the damaged infrastructure. However, repatriations turned short-lived and after only two months outflows resumed while Yen kept appreciating for a couple months more.

Currently, JPY is depreciating confounding all those opinions based on history. I can think of two reasons why yen is appreciating. We can assume that coordinated CB intervention is proving effective or we can assume that markets think that government will deal with the crisis by ordering CB to print Yen instead of repatriations (i.e. currency debasement) or both. I like the latter.

As per my previous posts I was bearish Yen and thought of latest triangle as a reversal rather than continuation pattern. In ¼ of cases triangles come at the end of mature trends. EURJPY also looked bullish to me. When earthquake hit, I did not long JPY at the time because of volatility and of potential CB intervention. I sold on a rally back to the triangle but my stop loss was hit a couple of days later after penetrating into triangle.

One thing I should have noticed but failed to was a bullish hammer which was confirmed the next day. My Netdania charts did not show that unfortunately. So, my loss is a payment for being lazy. Another mistake that I should have considered was that a final selloff in USD took place in thin markets. That should have sent my lights blinking as to the validity of the move. One technicality and one factor that I will keep in mind in future. Therefore, this time I will use charts from Bloomberg since these are the charts that big boys focus on.

My main argument is that JPY has almost bottomed out and multi month base building process seems almost complete. I am still convinced JPY will decline from here and long term targets are at least 95 and then 100. Best risk to reward comes from shorting Yen going forward on any meaningful rally.

Monthly JPY – almost

Last month was a bullish hammer but we need to wait till the end of April for final confirmation. But MACD is in positive divergence and bullish crossover took place

Weekly JPY – almost

Pro:

1. Classical TA – multi month bottom building process appears complete. Higher close this week will confirm double bottom. Also earthquake/radiation sell off closed on higher low.

2. Candlesticks – bullish hammer confirmed.

3. MACD: bullish continuation hook and divergence in place. MACD hooks are very reliable.

Contra:

1. Classical TA – major down trendline form Aug 2008 is nearby and USDJPY needs to close above it to confirm.

2. Weekly 50MA currently at 0.85 is nearby to act as a resistance.

Daily JPY - short

On the break from triangle, JPY reached implied target in three days and now what we have is a pattern failure of sorts. This is a typical triangle reversal pattern. If yen comes back to test around 83.60 (top of the triangle and 200MA), it is a great spot to short it.

EURJPY - as bullish as it can get

Monthly - bullish

We have a bullish hammer (still needs confirmation) and it engulfs 10 previous candles when we compare on a close to close basis. MACD did a bullish crossover as well. In this chart you can see fractal nature of price movements. Quite often you can see a security make a low after a steep fall (Wave 3 in Elliott Wave Theory), then rise up again on profit taking (Wave 4) and then plunge to a lower low (Wave 5) before reversing for good. One can see that in any timeframe. One good example is S&P500 low in Oct 2008 and lower low in Mar 2009. I do not need to tell what happened afterwards.

Weekly - bullish

Multi-month bases building process complete as EURJPY broke up from the flat channel. There are 3 bottoms supported by bullish diverging MACD which finally got above zero. The last time it was above zero was in late 2009. 120 remains a good resistance for the up-move. I do not see any reason why it should not reach its previous high just shy of 140.  

GBPJPY – bullish

Monthly - bullish

We have exactly the same story like in monthly EURJPY.  This pair is in the process of building a Rounding Bottom. MACD is supportive

Weekly - bullish

Last week was the highest weekly close since Aug 2010. Channel was broken on the upside and MACD is above zero. First solid resistance comes at 141.50 area. Top at 162 is reachable.

AUDJPY

Weekly

Target of 92.85 is feasible and unlike USD, EUR and JPY, AUD pays a good carry as well

 P.S.

Although USDJPY has not confirmed short Yen idea yet, what I have at hand is good than enough for me to short Yen. I would not be buying any of these pairs right now as they are deeply overbought and instead will be waiting for dips to buy. I will update on those opportunities as they arise.

Post update or P.S.2:
Market commentators cite rising rate expectations in G7 as the reason Yen is getting trashed and that sounds reasonable enough.  

Shiny Metals & Black Gold Update

Gold Spot

There are contradictory signals coming from weekly candlesticks versus daily classical TA based on. On a weekly chart we had a bearish shooting star followed by doji. So candles warn longs to be careful here. Weekly MACD and RSI are diverging as well.

However, there is a bullish ascending triangle developing on a daily chart. While MACD and RSI are diverging, I would rather trade based on the pattern at hand than divergences. My bias for Monday is that it is going to be an up day and a close above $1,437 on 4h should be bullish with 1^st target of $1,450, the top of the triangle. Should gold meaningfully break out of this triangle, our big target will be $1,500. Alternatively, a test of the rising trendline is a buy with a stop below $1,410. But close below trendline and in particular below $1,410 means pattern failure and as such 1st target will be $1,390and 2^nd target will be the weekly uptrend at approximately $1,380.

Silver Spot

Silver looks strong on weeklies and dailies but I keep watching bearish rising wedge. Given bullish pattern in gold and a new 52-week high on OIL WTI, this contradictory message from silver confuses me.  Anyhow, at this stage the best way to trade silver is to sell at the top and buy at the bottom of the wedge. Down the line, we should watch out for silver to break to the downside from the wedge.

Oil WTI

Well, so much for divergences just on Wed and by the end of week MACD had a bullish crossover instead as oil made a new high from cup & handle pattern or a rising triangle if one draws a horizontal line at two tops. Initial target is $113.5. Buy intra-day dips. Stop-loss below $102.6. Most important stop level is $96 which is slightly below daily 50MA.

Shiny metals and black gold

Commodities have been in a strong uptrend but every now and then short term counter-trend oportunities come along and they are worth taking. For now, it is wait and see.

Gold

It looks as though a short set up is developing coming days and I am waiting for things fall into place. We have weekly & daily RSI and MACD divergences. There is also weekly bearish shooting star but downside follow through this week is needed for shooting star to be valid.

A daily close up shows gold within what appears to be a rising triangle. Only a close below rising trendline approximately at 1410 will serve as an invitation to short targeting its major uptrendline from Nov 2008 currently around 1380. Till then, we will keep an eye on that daily uptrend.

Silver

An amazing trend so far but a potential short trade is brewing here as well. It is within a rising wedge. At this point it is mostly about playing the wedge boundaries but the real deal will be a potential fall from the wedge in April.

Oil (WTI)

It looks like a cup & handle and the target is 105.5+8=113.5 (105.5-97.5=8). But what I do not like is the RSI & MACD divergence and a possibility of pattern failure. Then oil should fall through the steep uptrendline and head to the top of the failed wedge channel as shown with red arrow. So, wait and see approach looks very reasonable to me.  

Usually there is not much to do but today the plate is full

AFTERNOON UPDATE

EURJPY

See the commentary in the previous post. Anyhow, I have two scenarios (details in the chart) and so far I think scenario A may work. However, as you are aware equity markets are tumbling as I write so 1) JPY may catch a risk bid and 2) EUR is likely to tank further below current levels (need to see daily close). Then scenario b would be at play to buy at the bottom of the channel. If both fail, I am wrong and I am out.


AUD - bye bye my friend

A trendline of medium importance (medium term trend) has been broken and right at the top Ozzie makes symmetrical triangle, then makes a fake close above it for a day just to fall back in the next day and out of it today. Such fakeouts are good trading opportunities in themselves because everyone is caught on the opposite side of the move. Most importantly, triangles come as reversals patterns at the end of the long trend in ¾ of cases. The only thing I do not like about this chart is that Ozzie broke out very close to the apex of the triangle and breakouts close to the apex usually fail.  Trading Plan is this:

Short: 1.0040 and above. Stop: 1.0140 Target: 0.9550/60 (Nov 29^th swing low)

Triangle implied target: 0.9500 (approximately)

NIGHT UPDATE

EUR - short confirmed today

As i wrote previously my scenario B was to play on the short side on rejection of the weekly downtrendline. It appears scenario B is in play as the Euro closed today below an uptrendline from Jan 10th that was part of the rising wedge.  So, a further move down to 1.3725/35 support area is what i would expect coming sessions. That level should then produce a short term bounce. In the mean time, any throwback to 1.3845/70 area is an invitation to build additional shorts. Stop is above 1.3924

GBP -another short

This pair also closed below an uptrend from Jan 25th. A move down to 1.5985/95 where it will face Feb 11 swing low and 50MA resistance is what i would expect coming session. If cable closes below 1.5995, then we will be targeting the top of the downtrendline from Nov 4th and Jan 18th which is currently at 1.5885. A bounce to 1.6120 or above is a short opportunity. Stop is at 1.6220.

EURGBP

Today swing high at 0.8550 and a downtrendline at 0.8535 were tested which gave an opprotunity to long. Stop loss is just below 0.8455. 

 Charts to follow tomorrow....

I wonder whether USD rally will take a breather tomorrow and continue next week instead. 

Good luck trading.

EURJPY - it seems to be getting ready for the upside

EURJPY made double bottom & finally closed above the entire consolidation pattern on a weekly basis. Does it signify a Major Reversal  pattern? IMHO, it can. Since last 4 days it is testing previous swing high of 134.45. I have seen many breakouts whereby currency pair makes 2 to 4 days of dojis at a previous swing high range like EURJPY is doing now and then woosh and there is no turning back. If it happens, I am ready for it. But stochastics are pointing down: daily stochastics has rolled over and weekly is rolling over. Then, a very short term short can be attempted on the breakdown of the current range at 113.40 will be in play to target 113.97 & reverse to long at 113.93.

Charts to follow...

Review of Trades

EURUSD
Sometimes trading this pair was a bit difficult but trading strategy so far seems sound. Buy opportunities were at the breakout from bullish flag on Feb 17. A test of the flag on 2nd was another opportunity to long the pairFirst sell at 1.3850 worked to bring. First resistance at 1.3745/70 put up negligible fight while 2nd resistance at 1.3850 put up a fight worth slightly over 100pips. Daily close above & successful test of 1.3850 gave a target of 1.3946/66. Initial short at 1.3966 level failed after EUR closed above weekly trendline. But the next day provided another short opportunity when MACD & Stochastics diverged on 4 hourly charts & Euro spike was quickly reversed. Short target at 1.3870 has now been reached. It is now sitting at 50MA on 4H chart and a trendline on daily chart. Below 1.3850 is a sell & above 1.3950 is a buy to 1.4150 and if it is reached then 1.4270/80

EURAUD
Not much to say here yet & I am still bullish on this pair for following reasons:
a) monthly stochastics is above zero for the first time since Mar 2009 & weekly stochastics is rolling up again
b) weekly downtrendline that was part of the downtrend channel or a wedge (depending on how you draw it) has been broken and left behind
c) weekly candle is bullish
d) daily 50MA is now below and has started to trend up. Admittedly it happened before (Jun 2010) but even then it was much less steep. It has also spent the most number of days above 50MA since Jan 2009.

It appears to be forming cup & handle pattern on dailies (stochastics also rolled down) and on 4H charts the price is within small downtrend channel or wedge again depending on how you draw it. A test of buy area at 1.3720/30 took place today and up to a swing high of 1.37 is a buy. Daily close below 1.3670 would be a cause for concern on a short term basis. A daily close below 1.3490 will indicate a test of 1.3320 is under way.

EURCAD
Was waiting for a buy confirmation but it is testing the bottom of the triangle instead. It looks like it is ready to surprise to the downside instead. Daily close beneath triangle and in particular 1.3380 does not bode well for Euro.

EURGBP

Nothing has happened so far. Long position in place, still waiting for the move.

NZDUSD
Sold the pair back in Feb 10th, posted trade ideas on this pair on 12th. NZDUSD provided ample opportunities to sell short on 18th & 21st when it tested the level of its triangle breakdown approximately at 0.7630-50 area. Then on 21st NZD made doji & the next day it collapsed on the back of an unfortunate event - eathquake - in New Zealand. But doji before eathquake?! Coincidence or not but it is simply incredible!!! Anyhow very strong support at 0.7355 is still holding and i expect a bounce to 0.7430 or above which should be shorted. Original target at 0.7170 based on triangle measuring implications is still achievable

GBPAUD
Plan did not work and i was out in a jiffy on this one with a small loss thanks to continuous stop loss adjustment.

GBPJPY
Another trade gone sour. The amusing thing is that it is back where i bought it and still looks bullish to me.

JPY
Out with a tiny loss but this beast still looks bullish to me. It is now within a multi-week triangle. My adventurous side tells me a long to 0.8370 looks feasible while classical TA tells me to wait for JPY to close above it.

CHF
Minor target at 0.9750 reached but from there it was downhill.

Overall, not too bad but need some improvement on timing the trades & profit taking.

EURO pairs & flip flops

EURUSD  - short now
My Resistance 2 (R2=1.3850) held for two days and it was starting to look like double top on 4H chart till it did not & was successfully broken with bullish engulfing candle & retested. Now Euro reached R3 (1.3946/66) target courtesy of Trichet & is now hitting on another weekly downtrendline. This is a very good point to play short according to scenario B. Euro should at least test the daily uptrendline or 1.3870 area as a target. One way i will know scenario b is not valid anymore is when it closes above this weekly trendline. Then, the  target will be R4 area of 1.4140/50. By the way, NFP is today so exercise care.

EURCAD - wait
This one was a tough cooky & i found myself flip flopping & plain wrong: it rallied out of the bullish flag turning me bullish, then came back right into it turning me bearish. But now it is sitting almost above the downtrendline of a falling wedge (very bullish on a close above), is in the process of approaching the neckline of inverted head & shoulders pattern (bullish on a breakout of the neckline) but it is still within a triangle (waiting mode) on dailies. Anyhow, i want to see a close above 1.3600 to get tentatively bullish again & above triangle to be totally bull. On weekly charts, we have bullish engulfing candle in formation as long as it keeps around its current level of 1.3575.

EURAUD - buy the downtrendline test
On weeklies this pair closed above weekly downtrendline & it makes me at least medium term bull as mentioned in the earlier post. Short term it was within a symmetrical triangle & i felt it was going down to test the weekly downtrendline first. Instead, it closed above triangle & says it is in the up only mood. The triangle gives me a target of 570 pips to 1.4330 from current 1.3760 level. Expect resistance (i.e. quick short term short plays) at previous 1.3870-1.3900 areas. Tradewise, stop loss is difficult to pinpoint but I am happy as long as it does not close below 1.36700. A test of 1.3720/30 is a buy.

EURGBP - buy
Bullish Case:
1. It closed above daily triangle which gives a target of 710 pips to 0.9288 from 0.8578.
2. On a 2nd look i noticed weekly inverted H&S and a weekly close above 0.8585 gives a target of almost 300 pips to 0.8885
3. Also this H&S pattern is so far 16 week consolidation formation which i call boxes. Previous such consolidation formation (but not H&S) broke out of the range in week 16 and exceeded the 300pips target by approximately 80pips
4. Finally, it broke above the first weekly downtrendline at 0.8533

Bearish Case:
However, the pair is still within a weekly downtrend channel which comes currently at 0.8750

How do i reconcile these opposite views? The obvious play is to long to target 0.8750 area first and if it behaves well afterwards, then aim for 0.8885 if not much higher.So, buy now or anywhere up to 0.8550 level  (downtrendline & previous swing high support) based on the current close above daily triangle. If it manages to close above 0.8585 on a weekly basis, it is even better. When it comes to stop loss i would be worried if it closes below 0.8527 on a daily basis.