TradersClass

Superior Trading Skills through Education

 
It's not Rocket Science Print
Written by Site admin   
Wednesday, 12 April 2017 10:24

  Detective Clipart 25573Just some detective work as a discretionary trader. It's not slavishly following a 'cast in stone' algorithmic style, the type of system that only considers a never changing set of criteria that is much better traded by a computer than a human.

Detective work takes a look at the chart to find those clues that just might build a case to put on a trade.

One of our recent Traders Class trades was the New Zealand vs Japanese Yen. The evidence started with a classical charting pattern, a Double Top.

  nzdjpy

The chart shows the right hand, second top, that formed in January and then price action backed away.

The red line above it, picked out the high of the first top in December and, at the bottom of the chart, our Activity Index set up a classic divergence pattern with a much lower high.

This telling us there was much less buying activity during the second top forming. These were the first two pieces of evidence, so this pair was now put on watch!

We just needed to wait for the neckline to give way at 80.66.

Then there was a nudge from the underlying fundamentals. At the end of January, Trump 'talked' on the phone with the Japanese PM Shninzo Abe, inviting him to visit. Trump had previously tweeted that the Yen was way too low, creating unfair competition. The scene was set for Abe to receive an ear bashing and more if he didn't allow the USD to weaken against the Yen!

Add in New Zealand finance ministry comments that they would like a lower NZD to help their dairy industry and the background was set.

Even without having read this news, the chart was giving way niceley. On 9th Feb a rally started that became another classic retracement patern, the A-B-C, Zig-Zag-Zig. It's THE most common pattern in all markets.

The C wave then completed just under the Fibonacci retracement 61.8%, another classic trend bounce back and continuation pattern.

During this A-B-C bounce, the Volume Activity Index dropped below it's zero line, the Swing Trend turned red - the down trend is underway. That's now four more pieces of chart evidence pointing to a potential down trend. 

Price now tested the neck line, bounced, and found sellers pushing it back down from the middle of the Bolinger bands, one of the other tools we use.

Finally the neck line broke down and so the trade is fully confirmed. Seven pieces of chart evidence had presented themselves plus the two, non chart, fundamentals.

The lower red line was the classic double top target level at 313 pips and it's still running - adding on a further 150 so far.

Evidence like this, is readily on view, we just need to know hat to look for. Twice a week, Traders Class, members receive updated videos showing the charts that are presenting the evidence that gives us runs like these.

 

From the blog

Buy the rumour, sell the fact

Has it all been over cooked? The Trump US$ rally seems to have kicked off on the basis that his policies will be inflationary and so interest rates will have to rise. Added to this, the Fed has been telling us all year there will be at least a modest rate increase. Next Wednesday 14th is the last opportunity the Fed and Janet Yellen have to do the deed, consequently the market is convinced it's a done deal and priced it in with the Trump rally.

But the TMEST swing chart is suggesting the dollar rally could be rolling over. So we had best trade what we see and not what we think, or have been told to think!

Markets have a habit of rising on rumours of good news and then promptly reversing when it's actually announced, as further expectations of good news slip away. Perhaps the market is coming to the idea that the US economy, talked up over the last year is just that, talk.

If Trump is to boost the economy it's not going to happen instantly. Any delays, and if the US economy actually turns out to be weak at the start of 2017, could result in what usually happens in the year following a two term presidency. Recession.

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