Trade Week Analysis for 25/02/13

Another choppy week.
Last week: The week opened again with Cloud divergence and this continued the choppy markets. TS signals were few and choppy to start the week: A/U= -20, U/J= -45 and EUR/GBP= -80. Then, price on the USDX daily Ichimoku chart punched up and away from the Cloud mid week though and this produced some more reliable ‘risk off’ signals: A/U=20, E/J=140, A/J=85 & E/U=140. The overall maximum pip haul for the week was slightly better than last week at 220.

This week: There is still divergence across the Index Cloud charts so I will be wary with trading TS signals off 4hr charts. The charts could flip towards either full ‘risk off’ or ‘risk on’ alignment again this week so I will be on the lookout for signs of these developments.

This weekly chart of the broader S&P500 keeps making me think we might get a bit of ‘risk off’ before any continued market rally. I am not ‘married’ to any directional view though and will trade with the dominant trend:

Some key events to watch out for include:

  • Impact of Moody’s credit downgrade of UK. This came through after market close on Friday.
  • Italian elections Sunday 24th and Monday 25th 
  • Monday 25th Chinese PMI data
  • Ben Bernanke speaking Tue 26th and Wed 27th
  • AUD data Thursday 28th
  • Friday  1st Chinese PMI data

I’ll continue to leave out the A/U and G/U from my ‘risk on’ focus pairs. The Euro and Kiwi seem to be holding better ‘risk on’ status at the moment.

Pairs I’m leaving for the time being: I am leaving out the USD/SGD as there has been a lot of noted and documented anomalies with this pair. I’m also leaving the USD/CHF too whilst there is pegging of the CHF to the Euro. I’m leaving the Loonie out too. I’m realising it is better to watch fewer pairs, the ones that are delivering trends, and to watch them well.

BTW: I have updated my Stocks + Triangles page. I am having great success here ‘spotting’ triangle, and other, trend line breakout trades. I am actually finding that the gains on these breakouts trades are better harnessed by using Option ”buying’ rather that ‘selling’. 

E/U: Price is trading within a symmetrical triangle on the monthly chart. A weekly bull support trend line is in place and, as suspected, this has been tested this week. Price is trading in the Cloud on the daily Ichimoku chart but is below on the 4hr chart which is divergent. So, price action may be choppy whilst a new equilibrium is sought. The weekly candle closed as a large bearish candle. The current monthly candle is printing a bearish engulfing candle. There is an open TS SHORT signal on this pair that has yielded up to 120 pips.
  • I will look to SHORT the E/U on a new TS signal, a close below the bull trend line and if ‘risk off’ returns.
  • I will look to LONG the E/U on a new TS signal and if ‘risk on’ returns.

E/J: Price traded sideways to start the week and then fell towards the end.  Price still looks to be trading within a possible ‘bull flag’ trading channel pattern on the daily chart. Price is still trading above the Cloud on the daily but is now below the Cloud on the 4hr chart which is divergent so means price action may continue to be choppy. The weekly candle closed as a bearish engulfing candle. There is an open TS SHORT signal on this pair that has yielded up to 140 pips.
  • I will look to LONG the E/J on any new TS signal and if ‘risk on’ returns. 
  • I STILL WON’T SHORT the E/J this week given the ongoing stimulus.

A/U: Price action has chopped around this week and tested the bottom support triangle trend line from the monthly chart. Price has now bounced back up from this area of major support, a bounce that I was wary of.  Price is below the Cloud on the daily but is now back above the Cloud on the 4hr time frame which is divergent and suggesting further choppiness. The weekly candle closed as a small but bullish engulfing candle. Chinese and AUD data this week might feed moves on this pair. It may even return to being a ‘risk appetite’ vehicle.
  • I MIGHT look to SHORT the A/U on any new TS signal and close below the major support trend line.
  • I will look to LONG the A/U on any new TS signal and if ‘risk on’ returns. 

A/J: Price continued to chop around under the 97 level to start the week. The bull support trend line from the daily chart was then broken but support was found in the form of the 95 level. The daily chart pattern also looks a bit ‘bull flag’ like, along with the E/J. The upper boundary of this Flag seems to be the 97 level and lower boundary seems to be the 95 level. Price is still trading above the Cloud on the daily and on the 4hr chart which is bullish. The weekly candle closed as a Long Legged Doji candle. Watch for Chinese and AUD data with this pair too.
  • I WON’T SHORT the A/J this week given BoJ stimulus.
  • I will look to LONG the A/J on any new TS signal, if ‘risk on’ returns and if price closes back above the 97 level. 

G/U: Price fell again on this pair all week but found support at the weekly 200 EMA. It bounced up from that support level mid week but fell back again in late trade on Friday following Moody’s credit downgrade. It is trading below the Cloud on the daily and on the 4hr chart so which is bearish. The Moody’s downgrade, that came through after market close on Friday, might give this pair renewed grief. The weekly candle closed as a very large bearish candle. 
  • I MIGHT look to the LONG G/U on any new TS signal. 
  • I MIGHT look to the SHORT the G/U on any new TS signal. 

Kiwi: NZD/USD: Price traded sideways to start the week but soon fell away before finding some support in the monthly pivot. It is trading just above the Cloud on the daily but below the Cloud on the 4hr chart which is divergent so price may be choppy.  The weekly candle closed as a bearish candle. The current monthly candle is now printing an indecision style Long Legged Doji candle.
  • I MIGHT look to LONG the Kiwi on any new TS signal and if ‘risk on’ returns.
  • I MIGHT look to the SHORT the Kiwi on any new TS signal and if ‘risk off’ returns.

EUR/AUD: Price has chopped around sideways and then downwards within a trading channel for most of the week. Price found support at the bottom edge of the trading channel, monthly pivot and 1.28 level towards the end of the week but finally broke down through this late on Friday. It is still trading above the Cloud on the daily chart but is below the Cloud on the 4hr chart which suggests further choppiness. The weekly candle closed as a large bearish candle. 
  • I will look to LONG the EUR/AUD on any new TS signal and if price holds up and out of the trading channel.
  • I will look to SHORT the EUR/AUD on any new TS signal and a break and hold below the 1.28 level.

The Yen: U/J: Price has chopped sideways for 3 weeks now but is still supported by a weekly trend line. I have relaxed this support trend line during the week though to reflect latest support. Price has been choppy as it trades under the key S/R and psychological level of 95. As with the E/J and A/J, the daily chart here looks a bit ‘bull flag’ like. Price is still trading above the Cloud on the daily but only just above on the 4hr which is still bullish. The weekly candle closed as a small bearish candle.
  • I MIGHT trade the USD/JPY LONG on any new TS signal and if the USDX keeps rallying.

EUR/GBP: I am back looking at this pair as it is trading at an interesting level. It is trading near the upper edge of a trading channel on the monthly chart that dates back to 2009. Price is currently trading within a smaller ascending wedge pattern on the 4hr chart but, in doing so, is chopping around just under the monthly trend line. Price is trading above the Cloud on the daily and 4hr chart which is still bullish. The weekly candle closed as a bullish candle. The UK credit downgrade might help to boost this pair.
  • I MIGHT look to LONG the EUR/GBP on any new TS signal and hold above the bear trend line.
  • I MIGHT look to SHORT the EUR/GBP on any new TS signal and a hold below the bull trend line.

Silver: The bullish ‘Cup and Handle’ patterns on the weekly chart has broken down this week with the break below the support trend line. Price is trying to hold above the $28 level.

Gold: The bullish ‘Cup and Handle’ patterns on the weekly chart seems to have faded now on Gold. Price has fallen down through the major support trend line that dates back to early 2008. This is a major break down for the metal. The next major support level seems to be at $1,525. Price bounced up from just above this level during the week.