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Prop Trading Futures

Commodities, Financials and FOREX Special Situations – Nov 10, 2014

Here are my views of what is going on in the FOREX, financial and commodities markets as well as the charts that I’m looking in preparation for the new trading week:

  • Patterns in play: US Dollar Index, Gold, Silver, Live Cattle, Rice, Nikkei 225 Index, China Index Fund, Nikkei. USD/SGD, AUD/USD, EUR/JPY, USD/MXN, USD/CAD.
  • Developing Patterns: EUR/USD, AUD/JPY, AUD/NZD, NKY.

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Patterns in Play

US Dollar Index

On September 24 the Dollar Index completed a 56-week Symmetrical Triangle that brings with it a measured target above 1oo. Since then, the buck has not given any sign of weakness. The 2.8% retracement that took the shape of Flag (barely visible in the chart, more clear in the daily chart) from October 3 to October 22 adds further confidence that an important bullish move in the Dollar is started. 

I do not hold any contract in this market.

US Dollar Index

Gold

Last week Gold set the lowest close in years. Then, on Friday, excessive bearishness fuelled a rally. Looking at the bigger picture this rally should end soon and the downtrend resume within the next few trading days.

Resistance can be found at $1190 and $1243: this last level shall not be violated for the bearish scenario (see the dollar at $1000) to remain valid. Below, support can be found at $1125.

I’m short Gold via futures contracts.

Gold

Gold

Silver

Both medium and short term, Silver is the weaker commodity of the precious metal complex. Right now it has two unmet targets below: $1391 and $1019.

Resistance can be found at $1670.0 and $1845.5. A close above $1845.5 would negate the Descending Triangle interpretation for the move that took place from mid 2013 to mid 2014.

I’m flat.

Silver

Live Cattle

I rarely trade meats and the chart I present here is purely for studying purposes.

A 61-week continuation Head and Shoulder pattern was completed on September 29. After a retest of the low of the breakout day, the market moved higher, consolidated, formed a small flag, and now seems ready to attach its measured move target at $172.575.

Live Cattle

Rice

Another market in which I have no position, but that presents a good case study. Here we have a 56-week Head and Shoulder failure (as the Head and Shoulder, the Head and Shoulder failure is itself a pattern – actually a very good pattern).

The formation was completed on October 28 with decisive down close (that is a close in the lower 30% of the daily range). After a mild pullback, that brought Rice to a lightly retest the price level of the right shoulder, the price is now moving lower toward the measured target indicated by the failed H&S: $1172.5.

Rice

Nikkei

I report here the Nikkei adjusted continuation futures contract as of a case of market that technically had a breakout, but that is not convincing me, because of lack of participation in the Japanese stock market (lack of breath).

I did not take this trade, but I’ll be long Nikkei 225 Index Fund (shown at the bottom of this post) if the ETF and the rest of the market participants to the price discovery higher.

Nikkei

FXI

I’m long this market after that previously I have been stopped out. My risk point is $37.02. Above the long term target is $54.13 (it may take 1+ years to get there)

Support can be found at $37.02. Resistance at $42.56.

FXI

USD/SGD

I like very much this setup (and usually when it happens, it is not a good sign and the market fails to please me!). The weekly chart shows a clear reversal candle (bearish). Let’s see if next week we can close in the green and negate it, if not the Singapore Dollar may take a long and deep correction before resuming its trend. Right now my stops are at 1.2769, but I may close my shorts earlier if the pair shows further weakness this coming week.

The whole 155-week pattern would be negated in the case of a close below 1.2640. Above the target is at 1.358.

USD/SGD

USD/SGD

AUD/USD

A long term Head and Shoulder may be forming in this cross rate, but further price deterioration should follow in order to confirm the bearish outcome. Resistance is present at 0.8642 and 0.8763.

AUD/USD

AUD/USD

EUR/JPY

This looks like a good breakout (decisive thrust followed by sideways consolidation). The current price offers a good spot to scale in longs with tight stops.

Above the measured move target is at 151.544.

EUR/JPY

USD/MXN

If the long term Symmetrical Triangle plays out, a new bullish market of this pair (a bear market for the Mexican Peso) will materialize.

In the short term the market needs to break above 13.654 and do not close below 13.664 for the bulls to run their course in early 2015. Otherwise, expect more price consolidation in the 13sh area.

USD/MXN

image

Developing Patterns

EUR/USD

I have been discussing the bearishness of this FOREX pair since long time. Right now we are at a level where a bounce could occur. If that happens, any short term reversal setup on the downside can be used to scale in shorts.

EUR/USD

AUD/JPY

A decisive momentum bust from these levels is likely to bring to a retest of 2013 high and eventually a move to 107.38.

Continuation patterns like the Channel forming in this FOREX pair are extremely good setups.

I expect the advance to 107.38 to be quick without much consolidation. So, if I see a strong green candle on the daily chart, it’s likely that I jump on this trade with a very tight stop and a decent leverage.

AUD/JPY

AUD/NZD

AUD/NZD is trading in the lower part of a multi/decade trading range. Hence the vast majority of the traders that I know are expecting higher prices from here (extreme consensus among traders should be read as a contrarian indicator. Mmhh…). At the same time a rounding bottom is forming on a weekly chart and an Ascending Triangle is potentially developing on the daily.

Technically a decisive close above 1.304 would complete the two above mentioned patterns and trigger a buy signal. With a predominant bullish consensus I guess I expect the bullish trade to fail at some point and eventually these two patterns to morph into something else (likely a longer range consolidation).

AUD/NZD

AUD/NZD

NKY

This is the ETF that I do intend to use to gain some long exposure on Nikkei 225. I’ll be looking at $18.50 a decent spot to get long and trade an eventual breakout.

NKY