Saturday, November 22, 2014

Gold and oil analysis

Gold and oil have been trending lower for quite a while. From fundamental point of view I see a lot of politics going on with both commodities. Due to annexation of Crimean and turmoil in Ukraine Russia faced a lot of pressure from the West and one of the reasons for fall in oil prices could be just this. I can never be sure about it, but big boys definitely have means to push the price of oil or any other security. Of course, there are other reasons too. However, no trend continues forever. On the one hand we could see oil going to 60 bucks per barrel and stay at that level for quite a while. On the other hand, we could see gold bottoming in the area of 1000-900 per ounce. You should remember that gold is a currency as well as cash and in such troublesome times as these you should invest in gold. I mean you should possess it in physical forms. Silver is an alternative, of course, if you cannot afford buying gold. At some point, we might see nations collapsing economically due to debts in government sector.
For the time being, more pressure will be coming to both commodities. If you are a swing trader you should consider selling gold at resistance of 1220-1180 (previous support, now resistance) level down to 1000 level. Selling pressure may come as early as the beginning of next week.
Now, oil is currently at resistance. The commodity ended the week at resistance and you might expect oil to start falling to new lows from these levels. We are in a downtrend and you should only sell rallies when downtrend is in progress. Price may do some topping process at these levels, but I am pretty sure that it will go through the floor sooner rather than later.

Saturday, January 11, 2014

Trend trade in usd/cad



New Year has begun and new trends are emerging in financial markets. Last year was very good for shorting Japanese Yen as well as Australian Dollar across the board. I am not sure whether this tendency will continue this year, but we can be almost sure that another trend is starting and that is Canadian Dollar downtrend. Let me look at usd/cad currency pair today. 

Should you look at a weekly chart of the security you would see that usd/cad dollar after a sharp fall (in 2009) and the downtrend that lasted till 2010 has been in a large range for over three years. What you should know is that the longer a security stays in a range, the stronger the trend will be after it breaks out of its’ range. 
You may also watch a video how you can trade volatile trends, which was the case with this particular currency instrument.


In a way the pattern that you can see on a weekly chart resembles inverted head and shoulders. This should have given us a clue that a downtrend is over and at some point we are going to see price break upwards. This also tells us that a new bullish trend will start. We simply need to define that critical point which broken will let us know that a bullish trend is in progress. 


In usd/cad case it was 1.0700 level. You can see from a daily chart that at the end of 2013 the price hung around the area and formed a bullish triangle. Look at 4 hour chart to see the pattern better. 


Trading the pattern is not really difficult. You simply have to place a buy order above the upper trendline of the bullish triangle with a stop below the lower trendline of the triangle and move with the trend when the pattern is broken upwards. This is precisely what happened on the 7th of January this year (2014). 

Therefore, I can state that we are in a bullish trend and the minimum target is 1.1700 level (around 1000 pips above the break point). Of course, the will be some resistance levels along the way and we should not get scared of that. However, I do expect a strong move, because as I said when patterns that are 3 years in length broken the moves are very strong and do not end after a few hundred pip advance. 

I will be adding to my position along the way and I will keep you updated on that. I likewise see some bearish powers in progress in New Zealand dollar, but I will expand on that in my future posts. See you soon. 


If you want to see and experience what real investing in financial markets such as Forex, stocks and commodities is all about I recommend trying innovative social investment platform of Etoro. Initial deposits are as low as a few hundred bucks. The best dealer I have heard of so far!

Disclaimer
Trading financial markets carries a high level of risk, and may not be suitable for all investors. All information on the blog http://trend0.blogspot.com/ is of educational nature and cannot be considered as advice, recommendation or signals to trade in any financial markets.
 

Thursday, July 4, 2013

Importance of day trading plan



Whether you want it or not you do need at least a few rules in your life. There are things that you tell yourself you ‘should’ do, but there must be a few things which you ‘must do’. If you label everything under should you will hardly achieve anything in life. “I should lose weight, stop smoking, sleep less, work more and etc.) It does not work. Have a few ‘musts’. The same can be said about day trading. You need a few rules and you must have a trading plan to be a successful day trader. I want to talk a little about it in the post. 

Read my other posts on the subject:

eur/usd quick trade

If you do not have a plan you will be ruled by emotional impulses and illogical behavior. You cannot trade on the hunch all the time. Occasional trade is ok, but not regular. Do you get what I mean? I hope you do. Trading rules help you to shape and filter your trading system and keep you from making spontaneous trades. I would say that a bad plan is much better than no plan at all. No army general would go to battle without a strategy and a plan. The same can be said about successful traders. Trading is battle for money. Somebody is after your money and you are after somebody’s. Cruel truth, but truth! 

Before you ever consider of opening a trade you need to look through your plan and see if a possible trade meets your criteria for a ‘good trade’.

Some of the points you might ask yourself:

Is there some technical pattern that indicates a reversal or continuation? I wrote a number of posts on the topic and the series is not finished yet, but as I wanted to make a short break I decided to write on day trading. Be sure to check my series on chart patterns. 

Is price near support or resistance level? It is very important as it indicates a reversal level if you a security is in a range. 

Is the price close to a trend line (upward or downward)? When price comes to a rising trend line (especially on daily charts) it is very usual for price to find support and jump off the trend line as strong demand comes to market. See how gbp/jpy pair bounced off its’ daily trend line when price hit it on the 13th of June 2013.
Do you see long bullish or bearish candles indicating that support/resistance is strong and you may trade in the direction of the tendency? These candle patterns indicate strong supply and demand areas (or accumulation/distribution zones). I haven’t written on candle patterns yet, but intend to do it after I finish chart pattern series. 


Is the move I see is in the direction of the trend or is it a counter trend rally? Day traders can capitalize on both, but most successful traders trade only in the direction of prevailing tendency. Buying on dips in an uptrend and selling rallies in a downtrend should be a common practice for any day trader.
These are just some of the things that should be on your trading plan. I hope to add more stuff on the subject in my future posts. 

I hope you benefited from the post. If you liked the post I would also be happy if you gave a plus on Google+, tweeted, liked it on Facebook and other social platforms. Have a nice day. 

Vytas.



If you want to see and experience what real investing in financial markets such as Forex, stocks and commodities is all about I recommend trying innovative social investment platform of Etoro. Initial deposits are as low as a few hundred bucks. The best dealer I have heard of so far!

Disclaimer
Trading financial markets carries a high level of risk, and may not be suitable for all investors. All information on the blog http://trend0.blogspot.com/ is of educational nature and cannot be considered as advice, recommendation or signals to trade in any financial markets.

Monday, June 10, 2013

Double top reversal chart pattern



This is continuation of my article series on chart patterns. Last time I discussed bullish reversal pattern: double bottom. What could I do today if not discuss bearish reversal pattern: double top? Like any other technical structure it can be found of various time frames and all of them can be both valid and fake. Everything depends on whether the pattern is broken in the direction it should break. A reversal pattern should change a current trend and continuation pattern should be broken in the direction of a current trend after consolidation period is over. As double top is a bearish pattern it means that an upward trend is about to end and bears will show their strength soon. Let us look at some necessary conditions that have to be that we might state that the picture we see is a valid double top pattern.


Key components in double bottom pattern

As it is a reversal pattern the first thing that there has to be is a previous uptrend. The security had to go up for some time in order for the pattern we are discussing to be formed. Depending on the structure the uptrend could have been from a few days (weeks, months) to a year and even more. 

There has to be the first sharp rise that marks the first spot in the top or peak. It is known as the highest point in the current uptrend. At this point we cannot say whether the tendency has changed or not as there still isn’t any indication of a reversal and increase in supply.

The first sharp fall! Reaching the first top the price of the security crashes. It indicates that smart money is distributing the security and it is good time to sell it short and so selling starts. After some time (hours, days or even weeks) the first bottom (or important support) is formed. 

Back to the top! At some point inertia of the bulls kicks in and they continue buying assuming that the uptrend is not over yet. So, the price of the security soars to the first spot of resistance (top) and this time the spot becomes the second spot of a double top pattern. 

The second sharp fall! After hitting the first resistance (top) the security starts collapsing, which indicates that there really is serious distribution of the security taking place at current prices. In most cases the prices will reach the first spot in support. Likewise, in most cases the price after hitting the support will go up (rally) a little. 

Break of the support. The two points of support that were made as the security fell sharply after reaching the top is finally broken. That is the point where the double top pattern becomes a valid one. 

Resistance becomes support. That is a classical rule of technical analysis. It is not a necessity, but a security sometimes comes back to test previous support (that is now resistance) and if the break was not fake the resistance will hold. 

Traditional target for the exit of your short trade is the distance from the break point to the highest point of the pattern added to the breakout point. That is the smallest distance that the price is expected to travel. It may go further, or it may fail to reach the expected target. However, if you need some guidelines where to exit this could be one of those. Additionally, you can move your stop above clusters of hourly or daily candles (depending on the strength of reversal). 

US dollar index example

US dollar index has been in a clear uptrend for a prolonged period of time. On the 22nd of May it may a strong rally upwards and on the 23rd of May it fell sharply. So we can say that the rally on the 22nd of May formed the first peak (resistance) in the pattern at 10 876 level. The fall formed the first point of support at 10 766. 

It then made an attempt to come back to the peak and break it, but the attempts were futile and after failing to make new highs US dollar collapsed to previous support (just a little lower). It then consolidated for a few days. Then the security broke down again jumped back to test previous support, which is now resistance and failing to break that it collapsed. 

Watch the video to see for yourselves.
video

Ok, I will finish now. Be sure to read related articles to learn more on technical analysis. I promise to expand on this in my future posts. 

I hope you benefited from the post. If you liked the post I would also be happy if you gave a plus on Google+, tweeted, liked it on Facebook and other social platforms. Have a nice day. 

Vytas.

Related posts:


If you want to see and experience what real investing in financial markets such as Forex, stocks and commodities is all about I recommend trying innovative social investment platform of Etoro. Initial deposits are as low as a few hundred bucks. The best dealer I have heard of so far!

Disclaimer
Trading financial markets carries a high level of risk, and may not be suitable for all investors. All information on the blog http://trend0.blogspot.com/ is of educational nature and cannot be considered as advice, recommendation or signals to trade in any financial markets.