\"Quantcast\"/

Prop Trading Futures

Commodities, Financials and FOREX Trading Strategies for the week of January 26,

In this issue:

  • COMMODITIES: CC (Cocoa), SB – Sugar, Precious Metals (GC – Gold & SI – Silver), Beans (ZM –  Soybean Meal – ZS – Soybeans – Soybean Oil – ZL  )
  • FINANCIALS: FESX, TW, FTSE 100, FXI – IShares FTSE China Index Fund
  • CURRENCIES: GBP/EUR, DX – Dollar Index, USD/SGD, NZD/JPY, USD/MXN, AUD/USD, EUR/AUD, EUR/USD, EUR/NZD

To get the Special Situations reports (in .pdf) every Sunday in your inbox sign up here. It’s free.

COMMODITIES


CC (Cocoa)

clip_image001

A 1 year Head and Shoulder formation that, if resolved, could bring Cocoa futures to retest 2012-2013 lows.

The daily chart offer a compelling, high reward-risk, setup to short this market.

For those with smaller accounts NIB (ETF) offers a viable way to get into the trade with less leverage.

SB – Sugar

clip_image002

Sugar 11 (above is the weekly continuation chart) bounced from the long term trendline, as expected. If the price fails to hold above $14 you could expect $10 to be tested sometime this year.

Usually channel trendlines offer support, but once broken the price tend to accelerate in a parabolic fashion.

Precious Metals (GC – Gold & SI – Silver)

clip_image003

This past week the price of Gold stalled just at the Apex of the long long term Symmetrical Triangle –   a zone that should provide some resistance.

SI – Silver

clip_image004

As Gold is facing the resistance at the apex of the Triangle, Silver is just trading below the $1859 resistance level (previous support).

Beans (ZM –  Soybean Meal – ZS – Soybeans – Soybean Oil – ZL  )

ZM – Soybean Meal

clip_image005

The 11-week topping formation that was completed last week is still in play. The small bounce that occurred during the last 5 trading days provides a good spot to short this market with a relatively better risk-reward setup than the one the was present at the close the same day the market breakdown.

The price of Soybean Meal futures could be very volatile. Again, low leverage and size are recommended when trading it.

ZS – Soybeans

clip_image006

In the past months, ZS behaved quite similarly to ZM, but Soybeans price action has deteriorated much more faster than Soybean Meal.

Similarly to Soy, also this market is expected to retest 2014 low before eventually bounce higher.

Soybean Oil

clip_image007

A very clear and actionable setup is possibly forming in Soybean Oil. As early as Monday the price action of ZL may trigger a continuation Head and Shoulder setup that eventually would bring to a retest of 2008 lows (in the continuation contract).

ZL has the potential to be the best setup to short beans.

To get the Special Situations reports (in .pdf) every Sunday in your inbox sign up here. It’s free.

FINANCIALS


FESX

clip_image008

Is the FED passing the QE baton the BCE?

A really nice continuation Head and Shoulder suggests that we should expect at least a 1-2 month rally in the Euro Stoxx 50. Or is just a bull trap?

Never forget to look at both side of the coin – especially when everybody is expecting a QE equity rally in Europe like the one we saw in the US in the last few years…

TW

clip_image009

A pattern similar to the one shown in the Euro Stoxx 50.

For whom interested to trade this market, we remind that TW futures are traded, in US$, at the Singapore Exchange.

As a side not, traders should remember that when a breakout fails it usually propels a quick moves in the opposite direction, so little room shall be given to a contract that misbehave after a strong breakout.

FTSE 100

clip_image010

After a year of sideway consolidation it looks like that his market is willing to break out of the roof of a multi-year consolidation in which it has been stuck for the last 15 years.

A setup like this may offer an invaluable opportunity, but it has to be approached a bit differently from swing or shorter term position trades.

FXI – IShares FTSE China Index Fund

clip_image011

A triumph of long setups in Equity index this past week!

FXI breakout follows FTSE and TW action.

Traders engaged in these markets shall pay attention to the correlations between global equities index when building a portfolio.

To get the Special Situations reports (in .pdf) every Sunday in your inbox sign up here. It’s free.

CURRENCIES


GBP/EUR

clip_image012

EUR/GBP just leaked from the multi year support level at .78. We are shorted it from 0.778. Below the target is at 0.668.

DX – Dollar Index

clip_image013

So far the Dollar Index has traded this whole leg up without any serious consolidation, but we doubt that the target will be met at this pace.

In the weeks ahead we are expecting at least some sort of sideway consolidation before the up trend continues.

USD/SGD

clip_image014

USD/SGD is still trading within a multi-month range channel to its measured move target (at 1.3558). It has been a relatively strong move, but not yet volatile or parabolic.

When we look at the monthly chart we cannot ignore the fact that we may be just at the beginning of an extended bull market in the SGD.

How to approach this market once the measured move target will (eventually) be reached? Should we stay in the trade or not? This is a typical trader’s dilemma that needs an answer.

NZD/JPY

clip_image015

clip_image016

In NZD/JPY we shorted the breakdown from the inverse Head and Shoulder failure pattern.

But when the market bounced back we begun to second guessing…(mistake)

We realized that:

  • We shorted a market that trading in the upper range of a multi year bull channel (it is never wise to short a strong market)
  • The pattern we were in was too short in term of time (we exclusively look at 10+ week patterns).

This kind of doubts are not healthy when you are engaged with a market. Hence we closed our position (wise choice) – at breakeven.

A couple of lessons here:

  1. One must have perfectly clear what are his or her setups, what is a decent chart pattern and what it is not.
  2. Attention shall be placed to read charts correctly: 8 week formation should not be counted as a 10 week formation if your plan is to trade only 10+ week setups (that is the mistake we did here. Ops!)
  3. If you start to question whether you should be or not in a trade get out ASAP.
  4. Never look back at a chart and think “if only I had kept my position”. In this case we miss a easy gain. But we have no regrets (well, just a little).

USD/MXN

clip_image017

Deteriorating action with a possible formation of a short term Head and Shoulder in the USD/MXN pair (visible in the daily).

A close below 14.370 could extend the current correction down to 14.000.

Until USDMXN trades above 13.8000 its long term target remains 17.000.

AUD/USD

clip_image018

The bounce that we were expecting last week from the small Inverse Head and Shoulder pattern (visible in the daily chart) failed to happen.

But we were able to take this opportunity (that is call a Head and Shoulder failure pattern) to short the Aussie.

EUR/AUD

clip_image019

Not an optimal Head and Shoulder setup, but still valid.

Note: this is one of the several “short the Euro” opportunity out there.

Traders should be careful of intermarket relations and correlation or get over excited about “EUR/USD at parity”.

When you get in that kind of euphoria get out of the market or cut your exposure of several times.

EUR/USD

clip_image020

Another weak week for the EURO. January 2015 is likely to be the weakest month (above the monthly plot) for the EUR-USD rate since 2009.

In our opinion a key (“make or break”) level to watch for shorts is 1.20. Below any bounce can spur some short covering rally but shall remain below 1.200.

Long term charts indicate EUR-USD rate at levels not saw since early 2000.

EUR/NZD

clip_image021

So far, the multi-week continuation head and shoulders formation is playing out very well despite some volatility. The launching setup was less than perfect, since the neckline was not horizontal, but the breakout is a textbook one.

The measured move target of this chart is at 1.3289. We were short but got stopped out from last week swings. We would likely re-short this market this week if it makes new lows.

To get the Special Situations reports (in .pdf) every Sunday in your inbox sign up here. It’s free.