Conviction trade in USDSGD

Base and Rally

USDSGD is one of the pairs that currently sparks my interest. After a decade long decline the exchange rate has based in the years following 2010 and subsequently shot out of that base with a powerful rally, appreciating from below 1.25 to a price of 1.45 at the peak.

But this rally did not continue and the rate has been sold back down to current levels around 1.30.

Liquidity level triggered

So to recap, I see a base, a strong rally and a vicious pullback in USDSGD which has run into an important level defined by the prior low at approximately 1.3150.

For large players, these are the ingredients to build a meaningful long position. Frustrate the long speculators and run their stops placed below the prior lows. Trigger short speculators who might play this as a short breakout trade. Collect all this short volume to stack up longs and reap profits in the coming months.

Outlook for my USDSGD scenario

In the end it’s simple. I am long and looking to stack up if more opportunities present themselves. But as always, I try to cover my butt. Trade small, very small in fact! This is long-term – sit back, relax and rejoice the carry you are collecting! Patience is key. Find a healthy balance between stacking up and taking small profits. Remember, no matter what you do, you will not have done the optimum!

Trade small

This trade, like any other, is uncertain. I might be completely off with my idea. But if that is the case I am confident my disaster recovery mode will get me out without much or any damage at all, because the sell-off in USDSGD has stretched so far already. This game is risky and the Mr. Market knows no mercy. Trade small! Trade small! Trade small! I can’t repeat it too many times. I have seen people puke up their account in no time!

Work the trade

Trade around your positions. Stack up only on great entries. My first profit taking areas are the highs at 1.3280 and 1.3340. That’s where I will trade around my position. Afterwards, I aim higher for 1.37 and above. This is going to be fun 🙂

Disclaimer: Don’t take this as investment advice. This is just my view of the market I am an amateur. Do your own analysis and take responsibility for your trade!

Has The Market Correction Ended? Dow Jones Chart Analysis

The recent stock market correction was one of the biggest and fiercest corrections in the history of American capitalism (point-wise), with its selling climax last Monday. Yet the recovery rally seems equally strong. Tuesday’s and Wednesday’s price already negated half of the sharp decline. What’s next?

Status Quo

I don’t have a crystal ball and neither do I believe anybody else has one. (If you do, please get in touch!) As I mentioned before, the best we can do is find situations in which the probabilities are tilted in our favor. Let’s take a look at what the charts show us and if we can potentially take advantage or protect from further losses.

Dow

It’s clear that the market correction has damaged the trend on faster timeframes. But make no mistake, we have intact bullish trends in the DJIA charts on the weekly and monthly timeframe. The weekly actually presented a beautiful long setup to buy the dip which paid off handsomely. Hence it is not at all clear that the selloff marks the end of the multi-year bull market.

On the other hand I notice the recovery rally does not nearly show the same strength as the previous selloff. We are slowly grinding higher.

Level To Watch

What particularly catches my eye is the 4 hour chart. As painted on the image above, I expect at least a temporary resistance at about the 25460 level.

If you think the selloff has meaning and continued downside then pay attention at that level. I will be taking profits on longs and possibly enter a short if we get there.

Let me know in the comments what you see happening.

Please always remember, I am not a financial professional and give no financial or trading advice. I present my opinion, that’s it. Do your own analysis and take responsibility!

Chart check ahead of FOMC

Yellen’s last FOMC

Tonight at 8pm CET the Fed will publish their latest interest rate decision and FOMC statement. It’s going to be Janet Yellen’s last official act as head of the Federal Reserve before she is succeeded by President Trump’s pick as the next Fed chairman, Jerome Powell.

Although some experts have voiced opinions of 3-4 hikes in 2018, the consensus does not see any interest rate hike in tonight’s meeting. Thus, the focus will be on the FOMC statement and its wording. As this is Yellen’s last FOMC she will possibly leave office with a more hawkish stance than shown during her term. This pattern was previously observed with Bernanke as well.

Chart Analysis

So here is a break down of some charts that interest me ahead of the release. Let’s start off with the Dollar Index #DXY.

The USD weakness smashed through all trend supports on timeframes shorter than the monthly chart. The question is when the relief rally will start. The north American economies still seem to be in best shape of all and certainly have been the only ones raising interest rate substantially from GFC levels. For the Fed I don’t see an end to the hiking cycle and with inflation picking up in the states the pressure to raise will not subside.

A possible explanation for recent USD weakness is the expectation that other central banks around the globe soon follow suit and enter a prolonged hiking cycle to fend off accelerating inflation. This would lead to bond yield convergence. And to be clear, a bond yield spread for the 10 year between the US and Germany of more than 2 % is unsustainable in my opinion. Said in other words, the US 10y bonds yield is more than four times higher than that of the German 10y! By my logic interest-seeking capital thus flows into the USD.

EURUSD

This leads us to the #EURUSD chart shown below.

As we can see, EURUSD trades at trendline resistance on the monthly chart. It already stalled at this level and I find it a great setup to initiate an extended relief rally. I see downside targets at 1.2160 and around 1.1915.

Commdolls

The two currencies I also find vulnerable against the USD are the Aussie and the Kiwi. They both delivered an extended rally and are ripe for a setback. In the case of the NZD I even consider selling a projected channel completion at ~0.75.

In AUDUSD the channel completes higher as shown in the daily.

AUDNZD

These observations coincide with the #AUDNZD chart analysis. AUDNZD is in a bullish trend on the weekly and until proven wrong I’m biased bullishly. Although last night’s selloff warned me that anything is possible at any time.

So I am positioned for a relief rally in the dollar and hope tonight delivers some volatility in my favor.

Disclaimer

Please note: I am an amateur retail trader and nothing I write is meant to be investment advice. Always do your own analysis and take responsibility for your own investment decisions.

The “Technical Evidence” For A Bigger Correction

The number of markets that are currently trading at technical targets/resistance is staggering. Usually these targets act as resistance and suggest a bigger correction. I expect stocks to sell off and a little more volatility in the coming weeks.

$Nikkei was one of the first markets to show a reaction after bumping up against resistance.

Next up is the German $DAX, which crumbles rather slowly but has already given back over 400 points from its all-time high. Price action in the $DAX looks very healthy though. Looking with my bullish lense, there is a chance that the $DAX is simply retesting the breakout point from the large channel (solid blue lines).

Moving on to our US American friends. US stocks have gone almost vertical for such a long time that most traders forgot corrections and sell-offs even exist or are too young to have experienced one. $DJIA has been one of the strongest markets and has overshot a couple of major technical levels before this trendline on the weekly chart. $Nasdaq has been the stallion in the stable but it too is trading at a level at which bears commonly come out of hiding. The $S&P500 shows a perfectly clean long-term channel completion. Similarly the $Russel2000 small cap index has completed a long-term channel.

A $GDX Trade With Awesome RRR

RRR-wise, it can’t get much better than this $GDX trade! My estimate is an initial RRR of about 20:1!!! How are the odds that this plays out as planned? I don’t know, as I have never backtested wedge breaks. But it doesn’t really matter that much, be it 50% win ratio or 20% or even 10%, this bet is good! Let the wedge break to the upside and long the shiz out of it. Stops below the recent lows or below the supporting trendline.

* Please don’t take this as investment advice. I’m just presenting my opinion about the market.

DAX finally completes ascending channel

The German DAX finally touched the upside of a long-term ascending and immediately gets rejected almost 150 points. Technically this provides an opportunity for a bigger correction, but with all this central bank support of the financial markets you never know. Anyway, I am still cheering for a correction, I have not managed to participate in this rallye enough!