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Thursday, June 2, 2011

Trend for the 2nd of June 2011

Today was another volatile day in various markets. Let me begin with the British pound. It was a good opportunity to trade the currency from a technical perspective today. If we take into account that pound has been falling for a few days, we know that we have to search for possibilities to play pound pairs from bearish side. The way to do it is not very complicated. You need to wait for a rally that would reach a resistance or overbought levels on smaller time frames (15 minute chart recommended) and finally develop a reversal pattern. 

At around 8 GMT pound pairs (gbp/usd and gbp/jpy) rallied and at around 10:15 GMT reached the peak. Then pound started collapsing. Gbp/jpy did not form a nice technical reversal pattern, but gbp/usd did. If you looked at 15 minute chart you can clearly see both head and shoulders technical pattern and a famous 123 reversal structure. I hope you know what you had to do. The best thing was to place a sell stop below the number 2 point and when it was hit again, you simply had to follow the market till most recent low of 1.6310 level (support). 

It looks like the pair formed some temporary double bottom pattern at the level. It will be confirmed if the pair is able to go up through most recent resistance at 1.6420. Short term support starts at 1.6345. If the pair goes back to this level and again forms a 123 pattern, preferably at the time of European session, it would be a sign for me to enter a long order in the pair. If oil continues to rise (which he did today) gbp/jpy might join the move up. Let us see if the market ready to take bullish actions in pound pairs. 

A very similar story happened to silver today. As markets are global you can see some securities behaving in the same way at the same time. We can see that silver started a rally much earlier than gbp/usd. It found its short term bottom at 19:45 GMT yesterday and it was climbing up till the end of European session. Then it formed 123 pattern and started going down around 45 minutes earlier than pound did. It is again sitting on another support level (yesterday’s support of 36.30 was broken). Now it is resistance and the commodity might try to take it out. I am not sure if it will be able to do it. 

At present I am more inclined to think that silver is going to 33.00 level and it will start bottoming there. So, if you want to day trade with it you can sell, but be very careful with it for silver has a lot of bull waiting to buy it. I am one of them. I would better recommend playing with pound pairs and other currencies in day trading and keep silver for investing. I believe that would be a good way to diversify. Good luck. 

Sorry, I am having problems with my computer and will not be able to display charts for a couple of days. Hope to solve the problem soon. 

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