Trend is a blog about global daily, weekly, monthly and yearly market trends in such financial markets as Forex, stocks and commodities as well as various day, swing and Forex trading strategies and ways to invest your money. In the blog I am going to share what happens in these markets on a daily basis. I hope you will enjoy my trend analysis. Welcome to my blog.
I have been watching Gold very intensely recently, particularly, when it approached very important resistance of 1350 last week. When it ran to 1348 and suddenly retraced, I initiated a short position (I sold Gold). Why?
Gold flirted with the level for quite some time and will most likely flirt for some more time. Every time it reaches the level, the price gets rejected and runs to support. From my perspective, this time is no different. I believe we are going to see 1000 level before strong uptrend resumes. We might see a brief run up slightly up 1350, but technical picture on weekly and monthly charts give me a bearish perspective. I will continue shorting Gold (selling it) when it runs to various resistance levels along the road. Of course, I have stop losses, in case I am wrong. But, my profit targets always bigger than stop losses (3:1, 4:1, sometimes even more).
Short term profit target is 1300. I think we will go further to 1200, but not that fast. More waves up and down are in store for us. Anyway, by this post I simply wanted to draw your attention to the fact, that you can play both sides (buy and sell) in any instrument: Gold, currencies, stocks or cryptocurrencies.
Disclaimer: All trading involves risk. Only risk
capital you’re prepared to lose.
Past performance is not an
indication of future results. This
content is for educational purposes
only and is not investment advice.
It
is obvious that gold has been battered in the last couple of months. However,
most recent price action suggests that gold may rebound in the nearest future. In
fact, the recovery has already started. I want you to look at the chart below
to see for yourself. From 20th of July to 10th of August,
2015 gold has been in bottoming process. The last low on the 20th of
July was quickly rejected as price crashed dramatically and then rose suddenly. TRADE GOLD, OIL AND CURRENCIES ON eToro Disclaimer: All trading involves risk. Only risk
capital you’re prepared to lose.
Past performance is not an
indication of future results. This
content is for educational purposes
only and is not investment advice.
In
the next couple of weeks a process that traders call “accumulation process”
occurred. You can see how price tried to test previous lows on at least 5
separate occasions and failed. Each time buying pressure came and price rose. On
the other hand, price was also rejected at resistance. You can see how the
range was “squeezed” during these couple of weeks. Narrowing range is a strong
indicator that a break will occur sooner rather than later. It often presents the
best opportunities for trading a breakout.
Most
breaks fail and I would strongly advise against trading them. However, when you
see a narrowing range it is one of those rare situations when breaks turn out
to be true rather than false. This type of situation happened on the 10th
of August when price eventually broke the narrowing range and now is rising up
in waves.
Just
by measuring the base of the narrowing range pattern I assume that the minimum
target for the move is around 1143 level (classical technical analysis count).
Of course, price may go well beyond that and it is really difficult to say
where exactly the rise will be over. However, a technical trader would at least
try for the minimum target. Buying on dips seems to be the best strategy now if
initial “buy on a break” strategy was not implemented.
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.
Let me continue my series on chart patterns in the
post. Last time I wrote on flags and now I want to discuss about
pennants. In the same fashion as flag, a pennant is a continuation technical structure. It
means that when the formation is broken you will most often see a thrust in the
direction of a previous move. While a flag is a rectangular in shape a pennant
resembles a triangle. It should not be confused with triangle as its duration
is much shorter and it actually is a short respite before current trend resumes
itself. Triangles tend to be longer in duration before they are broken.
As it is a triangle in shape a pennant has two
converging trendlines. This shows that prices are consolidating after a
previous move and now the range inside the pennant is narrowing putting
pressure for price to go out of the pattern and continue the trend. A pennant
will have a pole that would end at the top or bottom of the pattern (depending
whether the pattern bullish or bearish) and it marks the point of the first
trendline that we expect to be broken. As the prices start consolidating the
second point is made that marks the point from which the second trendline is
drawn that will probably not broken and hold counter trend moves.
When you are through with the article, read my other posts on the topic and watch the video below:
Watch a video on how you can trade this specific technical structure:
Bullish
pennants
Bullish pennants are bullish continuation patterns
that break out in the upward direction when the consolidation of the structure is
over. A break of the upper trendline is a sign that current trend will resume
itself after a short break. One should be ready to jump into a trade at the
break of the upper trendline.
How
to trade it
You can look at gbp/jpy chart above to see how the
bullish formation looks like and where you can enter your long trade. After a
strong move upwards gbp/jpy started consolidating and formed a bullish pennant
in a period of four days (from 27th of December 2012 till 31st
of December 2012). The breakout point was marked by 139.28 level which the pair
reached and retraced a little. So, you should have bought the pair at the break
of the above mentioned level. Our stop level was a few pips below the
retracement at 138.87. As you may see the pair broke the level and rallied around
350 pips before reversing and forming another pattern: bullish flag. You could
exit your position in portions at even numbers (if you had two or three
positions) or move your stop loss order by placing them below 4 hour candle
clusters till your stop loss was closed when prices reversed.
Bearish formations
Bearish pennants are bearish continuation patterns
that break out in the downward direction when the consolidation of the pattern
is over. A break of the lower trendline is a sign that current trend will
resume itself after a short break. One should be ready to jump into a trade at
the break of the lower trendline.
How
to trade a bearish structure
You can look at Gold chart above to see how the bearish
pattern looks like and where you can enter your short trade. After a strong
move down xau/usd started consolidating and formed a bearish pennant in a
period of five days (from 15th of February 2013 till 20th
of February 2013). The breakout point was marked by 1600.00 (per ounce) level
which the security reached and retraced a little. So, you should have sold Gold
at the break of the above mentioned level. Our stop level was ten bucks above
the retracement at 1610.00. As you may see the pair broke the level and collapsed
around 45 bucks before finding support. You could exit your position in
portions at even numbers (if you had two or three positions) or move your stop
loss order by placing them below 4 hour candles till your stop loss was closed
when prices reversed. It may have been around 1563 area.
Conclusion
A pennant is a continuation pattern that might help
you to enter extra positions in the direction of the trend or open your first
one if you accidentally missed the initial move. The pattern indicates that the
security is in a stage of rest (consolidation) and the prices will move pretty
soon. In forex market pennants often last five days or even less and present
you with great trading opportunities.
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.
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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 http://trend0.blogspot.com/ is of educational
nature and cannot be considered as advice, recommendation or signals to trade
in any financial markets.
