Monday, March 15, 2010

Chart analysis

A difficult week for bears as the S&P continued its slow grind higher, made new highs but closed just below the previous high. The price action was not good for a top, no sign of an exhaustion spike, or race up to the level and bounce. Instead the grinding stair climb makes 1160 look inevitable and a squeeze even higher not out of the question. The dollar index fell but not significantly and not across the board. Commodities were not able to move higher, which is interesting given the dollar weakness and sentiment. The Baltic Index is not a pretty picture for commodities either. For once FX was not all one trade (risk on/off) and not all driven by the dollar. Although it looks doom and gloom for the dollar, only select currencies moved against it and the others were flat and choppy.

Before I started my analysis tonight I was expecting that the charts would be more bullish than they are, across the board most markets have stopped at or failed to break key levels and this week could go either way.  The stars could be aligning for a big risk-off week. If the dollar rallies from here then my favourite trades tonight are short Aussie (particularly AUDCAD and AUDUSD) & NZD (EURNZD long, NZDUSD short). Continued dollar weakness and I like EUR & GBP long and USDCAD, USDCHF short.

Dollar index:
Continues to correct off the key 81 level and is tipping over trendline support.  Bear flag could be forming. Looks set fall further and test support and 61.8fib at 78.40 which I expect to hold, so more dollar weakness in the short term is possible. Uptrend still intact and if the pattern of the previous upswing is repeated then the pullback should not fall below 78.


- Weekly bullish continuation, daily spinning top, a weak reversal sign. The price action is not a signal to short here and the slow grinding move upwards looks set to continue. A pullback to 1130 is a good long entry if this is to make a three drives pattern.  The first two legs up are almost identical size at this point which suggests a pullback here.  If the pullback is symetrical to the first move the downside target is 1128-30.  If the 3 drives pattern plays out from there the upside target is 1199-1201.  Ugh.

Weekly high roller doji after a huge climb the week before with almost no pullback is huge and it can’t all be the weak pound. Daily rising wedge is bearish and looks set to pullback. Whilst the uptrend is in place I would buy a retest of 5500, below that says a greater correction is underway. A break below 5240 says the bulls’ party is over. If 5500 holds as support we could see a 3 drives pattern measure move. On the futures the first swing higher off 4973 was 401 ticks and the swing from 25 Feb gives 402 ticks. This not only gives weight to this being a swing high but a 3rd drive could project a target of 5900 (obviously subject to where we pullback to and launch from).

Weekly spinning top pause, daily is bearish outside bar. The ascending channel has held but price looks set to pullback before moving higher. Daily trendline has been broken and a test of 80 looks likely, if that fails next major support is $78 and then $76.50 Waiting for more confirmation of a bearish reversal, and until them $85 looks more likely than $75.

Weekly bearish engulfing, daily bearish engulfing this looks all set to shank right? Hmm … except two attempts to break 1100 have failed. I am holding my short but want to see it broken to keep me in to trend-line support around 1080. A break of 1070 puts 1025 in the target next. Above 1125 and the uptrend is on again.

SILVER. Weekly bearish pause, daily is sideways above 16.75 support. The close back below 61.8fib is encouraging. The upswing looks laboured and corrective and my bias is short. I would short a break of 16.75 with a target of 15.60

Currencies - Majors

Weekly small bullish continuation bar, daily bearish at the 78.6 fib (AUD favourite fib). The pattern off the high of 94 has formed a perfect bearish Gartley pattern (reliable). Price has bounced off descending trendline resistance at 92, above 92.35 negates this bearish pattern but it looks like a very interesting low risk short here. I’m bearish off this level.

NZDUSD – Weekly spinning top following two weeks of doji’s, all held below the weekly 20ema. The daily slow rising wedge pattern is bearish. This 70.50 area is a great area to sell from, downside with a target of 0.6640/0.6580. Resistance just below 71.00

USDCAD – The best performing commodity currency for the second week it smashed through 1.02 support on good employment numbers and parity looks like a reality. A sell on a retest of 1.02 from the underside is a good entry. If the dollar rallies this week then this would not be my best choice long. USDCAD loves to fake you out, and the balance of longs to shorts last week was 5:1 which maybe why this failed. Back above 1.03 I am in long with a target of 1.15 but I may have to wait a while for this trade.

Second weekly hammer, daily bullish continuation this does look tempting long. Price has bounced hard off a big daily trendline from the lows of Jan 09. Cable were to make a third drive south in a measured move then this is where it would be from and the downside target would be around 1.4140. A break above resistance at 1.5250 lines up 155.30 and then possibly 157.30 / 158 and the descending resistance line. The UK news stories this weekend were not good.

EURUSD – After four weekly doji’s in a row EURUSD broke for the top of the range before banging its head at 1.38. We really could go either way here,however the rounded shape of the bottom it has formed here makes a continued upmove look more convincing. CoT reports show that after 4 weeks of extreme bearish sentiment it has eased slightly which usually indicates a bottom. If the market continues to correct higher then 1.40 or 1.44 are likely upside targets and a good old short squeeze is not out of the question. But another leg down from this 1.38 level is just as possible.  This one will be interesting to watch.

USDJPY – Weekly doji inside bar, daily sideways in congestion. Flat.
I have been very bearish this pair for a very long time and in this descending channel I am still a seller of rallies however … USDJPY has held its gains of two weeks ago, blew through the 50%fib retracement from the decline from 92.17 and we sit at 61.8fib retracement. We may move up from here to test the upper channel line which is now at 91.  A break up through 92.30 means we have a higher low in place and above 93.80 we should rally pretty smartly to test 101.43. What will pull USDJPY down is the crosses and another risk aversion leg down, then I stick with my prediction of 77.60

USDCHF – Reverse of EURUSD. I am not sure this pair is the driver but is pulled by the others. I am short countertrend to 1.0550 and only a drop below 1.05 changes my bullish longer term view. First target 1.10, second target 1.15

AUDJPY – I am a seller of rallies and only a break above the January highs changes it. The weekly is a bullish continuation and the daily is a bearish doji. The 78.6 fib retracement is at 83.85 and if we do not close above that then we have the same bearish pattern as AUDUSD. Like AUDUSD this is a good short entry if we have a risk-off week or bad news from China.

NZDJPY – Weekly doji indecision, daily is a bearish long legged doji. I like this short and I like the fundamentals behind a short and this is a good level to sell from. Only a break above 64.50 changes my bearish view for now.

CADJPY – The strongest currency this is at the top of a big weekly wedge and threatening a breakout. Given the other charts I think this is unlikely but not out of the question. If we have a risk on week this is a great trade long on the break of the weekly wedge or buy a retest of 88.50. As a short I think there are much better opportunities vs. the yen and I will pass

AUDNZD – Uptrend, weekly doji inside bar, daily bullish consolidation. This pair has broken from a long time consolidation range and I would buy dips or a retest of 1.2935 Fundamentals support this continuing higher.

EURNZD – Weekly bullish doji, a month of sideways indecision following a strong downtrend. Daily is bullish but still countertrend at the moment. If the indices fall and this pair can get back above 2.00 and confirm a bottom in place then this would interest me long. Until then I am passing.

GBPAUD – weekly bullish hammer at the end of strong downtrend. Daily bullish continuation. If this pair can get above 1.6755 then one could buy dips countertrend with a target of 1.7150 where I would look to sell again. The safer trade is to wait to sell.

AUDCHF – Big weekly bullish marabuzo, daily high roller doji after massive rise and new highs, this pair has stalled at the top of its ascending channel and I would wait for a pullback to 94.15 to get long.   A trend reversal back to the downside if we have another bout of risk aversion.

Downtrend, weekly inside bar, and in a very tight triangle.  I am a seller of rallies (I like 9389 level) or a break of the weekly inside bar at 92.50 which would also be a break of daily trend-line support. I see this as a US/China trade, I like this one a lot …

EURAUD – Weekly bullish hammer off significant new lows, daily uptrend looks corrective not impulsive. Not enough information or a good enough level to tempt me long. I would look to sell a pullback to 1.54

GPBJPY – Weekly bullish hammer-like continuation, daily bullish continuation after a very big drop. I am a seller of rallies, but I am counter-trend long this pair, target 139 / 141 where I am looking for price action to sell again. If we revert to risk off this week then the symmetrical move would be from the 50fib retracement level at 137.80 here and the downside target would be around 127.20 where there is minor support.  Thats another big drop ...

GBPCHF – Attempting to carve out a bottom above 1.60 after a big drop in a strong downtrend. If it can manage it then this has potential to get to 1.66 but I am not convinced of a bullish reversal yet. A retest of the lows at 1.51 looks more likely at this time.

EURGBP Two weekly shooting stars, daily bearish, this is still in an uptrend and has not quite reached the upper trend-line resistance. I have been burned once shorting this, I will wait for a break of 90.40 or a break of the support at 89.70

interesting chart. It is at important resistance at 125 and could go either way. A break south has a measured move target of 117 (from 124) but a further correction up to 127 or 129.70 is also possible if 125.22 resistance does not hold. My longer term target is 112

EURCHF – A good friend told me he thought the SnB were softening and would accept 145 and I ignored him. I won’t next time.

Very similar to USDCAD, broke support, in this case also down out of an equal triangle on the weekly and I am waiting for a retest from the underside.  This could be a fakey move if the dollar rallies this week. If it holds and US dollar weakness continues then this has a short target of around 5.7 and weekly rising trendline support.  As a long the dollar trade this isn't my favourite.

USDSGD – Weekly bearish continuation, daily bearish marabuzo pushed down to touch rising trendline support (from the Nov lows) and support level at 1.39. This pair has formed a base and an uptrend is underway. This looks a good long opportunity at this level.

No comments:

Post a Comment