Must See For EUR bears

ECB boss Draghi has spoken once more last week. Jawboned the EUR lower. But the effect lasted a couple of hours until the Fed had its turn. So, if you are a EUR bear in June 2019 you must see this chart.

EURUSD weekly chart showing double channel support

I know trendlines and channels only work when they work and I don’t really like them all that much. But like anything in technical analysis they are just a tool. I think Burak from tradingchannels.uk would be proud of my analysis.

Double Channel Support

So consider the blue channel to possibly guide the EURUSD higher in an ABCD. we might have just recently completed a huge retracement and bounced off of double channel support for the continuation move to >1.30. Not unthinkable at all.

Disclaimer

* Remember, I don’t give investment advice. These are not trade recommendations. I write these posts for joy and entertainment. Always take responsibility for your trading decisions and analyses and don’t ever blame me or anybody other than yourself. I might or might not be positioned in the instruments I write about.

Trader’s Hunch: Man-Made Climate Change Most Likely a Hoax

Killer Gas CO2 

Climate change features prominently in headlines across the western world. Even more so in Germany after the green party to a massive chunk of the vote in recent EU elections. The theory as I understand it in very simplified terms claims that greenhouse gases like CO2 cause our climate to heat up. Therefore, reduction of CO2 emissions will save our climate. 

Flash Of Insight

Now as a good citizen, I repeatedly try to understand and evaluate the science behind the climate change topic. Yesterday I watched another video to confirm my bias that man-made climate change is a hoax and I can keep breathing with good conscience. (Don’t bother watching unless you speak German).

The portrayed expert, professor of geology Werner Kirstein, explains how climate scientists came to the conclusion that CO2 is a leading indicator for earth’s climate. Looking at a 30 year stretch of historic data for temperature and CO2 concentration which coincidentally shows both rising in unison, experts deduced a causational relation. 

Now I am not here to argue in favor or against climate change or the science behind it. I leave that up to others. But in flash of insight it struck me, that there are strong parallels to trading system development and backtesting. 

Trading Systems And Backtesting

Anybody who at any point in his life was serious about trading has tried to develop and backtest a trading system using historical chart data. And anybody who tried also knows it is a difficult endeavor. There are various pitfalls to be navigated around before backtest results are feasible and trustworthy. Let’s take a look at two of them.

Backtesting With Too Little Data

One of the simplest and most obvious pitfalls is to use a set of data that is too small to cover all types of market conditions. Say you are backtesting a daily bar bullish breakout trading system on the Nasdaq 100 for the set of data between 2009 and 2019, you will likely have brilliant results and by projection become a billionaire within a couple of months. Backtest the same strategy on different markets, in other times and changing timeframes and you will likely see that your first billion will take a bit longer to achieve.

Manual Visual Dishonest Backtesting

Another mistake I have made for which I don’t know a proper term is that I looked at historic charts and marked entries and exits as I thought I would have taken them as the market evolved. Some of theses tests showed great results!

The only problem was that in my backtest I actually had a view of the market after the fact. I did not utilize a bar by bar replay to simulate the “hard right edge” of a chart. Guess what, I was never able to come even close to the beautifully profitable test results. It simply was not the same. My explanation is that in the backtest I was simply not able to ignore the way the market behaved after my entry. My brain always introduced a bias towards what the market did “in the future”. So there was no honest backtest. It always was a after-the-fact should-have-done trade. It is damn hard to even produce an honest backtest! (By the way, bar by bar replay is the best I can come up with to alleviate this problem.)

The Parallels

So I described two typical backtesting pitfalls that set me back in my studies of trading. The moment I listened to the video about climate change and that the scientists inferred from a 30 year data stretch that CO2 concentration and temperature have a causal relationship, I was struck by the similarities to my experience with trading system development. Could it be that the scientists made these novice mistakes with their data?

I saw how difficult it is to define a hypothesis about how prices will develop based on historical data and find a statistical tradeable edge. The odds are stacked against you in every respect.

Skepsis

I am certain for anyone to find an adequate all-encompassing theory about climate and causal relationships with whatever internal system parameter is exponentially harder and more complex. The likelihood that scientists make mistakes is so high that I remain extremely skeptical of the validity of their models.

In the best case, they are well meaning people blinded by their hybris. They think themselves fool-proof by credential and don’t even consider blind-spots in their process. Climate change is a high stakes game and it would be fun to watch their theories go up in flames some day, were it not such a politically heavyweight topic with the potential to destroy civilizations and generations until disproved.

EURGBP says sell

Whatever is going to happen to the pound and the euro after Brexit and all that jazz…who knows? I am not smart enough to assess the situation and consequences for the currency pair. So I keep looking at the charts. And the weekly I find interesting.

As you can see, the trend is on the weekly is switching from bull to bear. Ok, sideways for now. It’s not perfect, I admit. But sometimes it’s better to be early than late.

So this chart is telling me to sell. Minimum target are the latest lows, extended targets are marked by black horizontal lines on the chart.

For the sake of completeness, this trade will be invalidated if price surpasses roughly 0.9030.

* Remember, I don’t give investment advice. These are not trade recommendations. I write these posts for joy and entertainment. Always take responsibility for your trading decisions and analyses and don’t ever blame me or anybody other than yourself. I might or might not be positioned in the instruments I write about.

Into resistance – DAX approaching 11.850

A couple of weeks of strength in the markets and everybody is cheerful again. In the weekly context this looks like a normal retracement of last year’s sell-off. The weekly trend is down.

We are trading below the 100 week SMA

Weekly trends are solely for the very patient investor. And cost of carriage will kill you on any scammy retail-trader brokerage account. Still I want to note that a touch of 11.850 would pose a good place for a long-term short.

Let’s see how it plays out. But don’t be surprised if markets run into trouble in the coming months.


* Remember, I don’t give investment advice. I write these posts for my own joy and your entertainment. Always take responsibility for your trading decisions and analyses and don’t ever blame me or anybody other than yourself. I might or might not be positioned in the instruments I write about.

This $EURNZD Swing Would Be Massive

Looking at the charts, I notice that this $EURNZD swing would be massive. It could yield upwards of 3000 pips! Take a look yourself.

And again, I talk about possibilities here. So to be clear, it is POSSIBLE, that the market will move in the depicted direction. Not probable, not predicted, just possible.

Momentum Is Bearish

The pair has sold off very quickly from highs around 1.80, which means that momentum is bearish and thus not on my side. But on any trade I only have my rules. And the rules state to enter in trend direction as indicated by the 100 period simple moving average. Enter at stop-fishing levels, highlighted by the dashed lines (only one of them has been touched as of now). And last but not least, give this beast time to turn up.

Disclaimer

* Remember, I don’t give investment advice. I write these posts for my own and and your entertainment. Always take responsibility for your trading decisions and analyses and don’t ever blame me or anybody other than yourself. I might or might not be positioned in the instruments I write about.

 

Massive Run In $GBPUSD Ahead

I think this is going to happen. The market is set up for it. The trend has already changed from bear to bull on the weekly despite the endless sell off we saw. The sentiment is extreme on Europe and Brexit and everything.

Follow the trend!

* Remember, I don’t give investment advice. I write these posts for myself and entertainment purposes. Take responsibility for your trades and analyses and don’t ever blame me or anybody other than yourself. I might or might not be positioned in the instruments I write about.

GBPUSD Ripe For A Bounce

GBPUSD suffered heavily in recent weeks. It lost approximately 1500 pips without any retracement to speak of. Now it trades at a level which can serve as a springboard. In my opinion $GBPUSD is ripe for a bounce.

Short-Term Base

Check the 15-min chart and see for yourself. Looks like a dependable base to me. If there is any such thing as dependable. Anyway, clearly something to trade against and speculate for higher prices in the coming sessions.

 

Sentiment at lows

Sentiment on the pound must be at lows with all these absolutely horrific news. Brexit disasters painted every day. Nobody is bullish the pound it seems. Anyway, you know that logic, everybody has already sold the pound…which never makes sense to me, because someone was on the other side of those sellers and bought from them.  But, and that’s a but I find more appealing: Taking out a prior low and utilizing triggered liquidity to either offload shorts or build longs makes a lot of sense. Let’s see if there are any big boys out there playing the pair in that direction.

* Ok, always remember, no investment advice here. I write these posts for myself and entertainment purposes. Take responsibility for your trades and analyses and don’t ever blame me or anybody other than yourself. I might or might not be positioned in the instruments I write about.

Spotted some bulls in crypto currencies

Fundamental Scepticism

I consider myself a crypto currencies sceptic. I am fascinated by the technology behind it (distributed ledger, blockchain), but I have never traded any and still am not trading them…yet. I despise the costly transactions and do not see how the existing crypto currencies can revolutionize the financial world without widespread application and acceptance in everyday life. And yet, I believe I have spotted some bulls in crypto currencies.

I believe that at some point governments around the world will pick up the tech and simply implement their own version of bitcoin. Backed by the force of the gun this new coin will make the “free” versions obsolete or condemn them to a niche existence.

Hedera Hashgraph

By the way, coming from an IT background I looked into the stuff a few months ago. I tried to understand how it works. The one place the made sense to me so far is hashgraph which has nice explanatory videos. So make sure to check that out!

$IOTUSD, $BTCUSD, $LTCUSD

But back to trading. I noticed that some of the coins trade at interesting levels. See the Iota ($IOTUSD) chart for example:

This is the kind of charting situation where turnarounds like to occur. Faking out the bears, buyers eat the supply from trapped breakdown sellers to build meaningful long positions. (You can see the same pattern in my recent post about the $EURUSD)

Same same in bitcoin ($BTCUSD):

Need more? Here’s Litecoin ($LTCUSD):

OK, I think you get the point. I am sure there are others with the same pattern. If correct, the upside is huge from a charting perspective. The downside…well that’s basically up to you to decide when to pull the plug. But safe to say, a meaningful drop below the most recent lows invalidates this trade.

Anyway, compelling stuff, thought I would let you know about it. Tell me in the comments what you think! And stay safe out there!

* Never forget, this is not investment advice. I am not recommending the purchase or sale of anything I write about. I am not allowed and don’t want to be an investment adviser. I might or might not trade the instrument I write about for my own portfolio. Do your own due diligence, take responsibility for your own trades, don’t blame others when it doesn’t work out, especially not me!

 

Silver Bull Market Ahead? XAGUSD Setup With Fantastic RRR

Silver went nowhere since a few months, probably frustrating a lot of traders in the process. Pulling them in, shaking them out. Rinse and repeat! And yet my analysis suggests a new silver bull market is in the making.

Congestion

The scenario is very simple, as trading should be. From the healthy base the metal formed in 2014/2015, in 2016 it moved strongly and impulsively upwards to a new high at around 21.00 USD. The subsequent long and grinding correction already lasts more than 2 years. And price action has been crammed into a tighter and tighter range. See the congestion on the chart for yourself:

Accumulation and a great RRR

I assume that big players currently accumulate large positions, hence prices don’t fall and congest to increasingly smaller ranges as they withstand the downside. In my scenario I anticipate silver to bullishly extend the drawn channel in the next couple of months (see chart below). There is a clear invalidation point of my trade idea. As soon as price action breaks the downside channel boundary I was wrong and want to be out of the trade and reassess.

Conclusion

This trade idea has a few things going for itself. From a risk to reward perspective this is as good as it gets. We have a very long-term scenario which allows us to turn to shorter timeframes to accumulate a sizeable position at favorable prices. The market sentiment is extremely negative towards metals after a massive and prolonged drop from 50 dollar highs in 2011. All these factors combined make this a very tasty trade which I will be looking to exploit.

 

* Never forget, this is not investment advice. I am not recommending the purchase or sale of anything I write about. I am not allowed and don’t want to be an investment advisor. Do your own due diligence, take responsibility for your own trades, don’t blame others when it doesn’t work out.