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Prop Trading Futures

Chart Patterns and Trading Strategies for the week of July 7

In this review of charts patterns and trading strategies for the upcoming days I’m going to introduce some small changes (more to follow) based on the feedback provided by subscribers to my free mailing list. If you have any constructive input, and you haven’t shared yet, feel free to drop me a message.

As explained in the previous market update:

I classify the markets that I’m following (around 50) in trending and no trending markets. In the first category fall all those markets that have a “Pattern in Play” or, in other words, a completed classical chart pattern (of duration of at least 10 weeks) and the price is moving to its pattern’s measured objective.

In the second category fall all those markets that are potentially forming a classical chart pattern, but are not quite there yet. They are what I call “Developing Patterns”.  Everything that falls outside these two categories is “Market Noise”.

Below is a chart aimed to briefly explain these three situation and how they may evolve from one to the other.

PropTradingFutures.com

Macro-framework that I use to read the markets.

PATTERNS IN PLAY AND OPEN TRADES

New Zealand Dollar/United States Dollar

Technically speaking, the Symmetrical Triangle in NZD is completed, as shown in the monthly plot. A break above 0.8856 would give me more confidence about the possibility that the measured objective gets hit.

New Zealand Dollar/United States Dollar

As shown in the weekly chart, the market is still pretty choppy, while a valid breakout ideally would exhibit a stronger convinction. Something that we haven’t seen yet in NZD.

New Zealand Dollar/United States Dollar

PORTFOLIO POSITIONING

I have a position in this market equivalent to 50,000 NZD/USD per $100,000 of  Trading Capital.

My average entry price is 0.8642. On Friday I moved my stop to 0.8657. The target above 0.95.

British Pound/United States Dollar FX

The case of Cable is, in some regard, equivalent to the one discussed above for the New Zealand Dollar. The lack of decisive breakout above 2009 highs make me wonder if this market really wants to rally or is just trying to get on board enough longs…to fool.

British Pound/United States Dollar FX

The daily chart shows very well that there is no decisive breakout, but just a slow grind to higher prices.

I’m a cautious long and open to flip my position and get short GBP if a valid valid setup develops.

British Pound/United States Dollar FX

PORTFOLIO POSITIONING

Long 100,000  @ 1.6917 targeting 1.942, stop at @ 1.6917 (amended from 1.6694).

British Pound/Japanese Yen

Another bullish setup for the British Pound, this time against the Japanese Yen.

British Pound/Japanese Yen

PORTFOLIO POSITIONING

I’m long 12,500 GPB/JPY. Entry price: 174.6. Stop @ 172.0. Target at 185.4

Physical Platinum Shares

Platinum futures and ETF (shown below) formed an Ascending Triangle.

PPLT measured objective is @ 160.0.

Physical Platinum Shares

PORTFOLIO POSITIONING

Long 100 shares @ $147.53 with SOC @ $144, 143 and EHS @ $143.30, one cancels the other.

iPath Goldman Crude Oil

Technically speaking, the breakout shown below on the weekly chart it is still valid, but a long black weekly candle brought some doubts about its validity.  I have no position in this market.

iPath Goldman Crude Oil

United States gasoline Fund

Same situation as described above for OIL. For the ones willing to get long this market, an entry on Monday with a stop below June 10 low could be a good setup.

Personally I do not like to get involved in a trade if I have mixed signals and the markets is not behaving as I would like to see.

PORTFOLIO POSITIONING

I was long this and last week I got out at BE. I’m not willing to be long again. At least not in the short term.

United States gasoline Fund

United States Brent Oil Fund

Another near to perfect bullish setup in the energy complex that now is close to fail.

Yes, classical charts patterns fail and actually fail quite often. But they still provide a relatively simple and robust framework to trade them for money.

BNO ascending triangle

I have a position in this market and I feel quite stupid for that. If  the market do not reverse in the first trading hours of next week I’ll be out.

PORTFOLIO POSITIONING

Long 250 shares of BNO @ $43.79 with SOC @ $44.50, EHS @ $44.00. On this trade I’m risking approx. 70BP.

BNO Trading strategy

iPath Dow Jones UBS Livestock

This market offered a great opportunity to be on the long side back in 2013 when it completed a multi-year Descending Wedge.

iPath Dow Jones UBS Livestock

…then another clear setup few weeks back (visible on the daily chart shown below).

iPath Dow Jones UBS Livestock

Right now I have no position in this market. I’m considering to open one at current levels to bet on the outcome of a Double Bottom pattern that you can see in the weekly and monthly plots.

I could enter at current levels with a stop at $30, targeting $40 BUT this would be a poor 1:2 risk/reward setup and may take months to develop. So I guess I’m going to fish elsewhere.

DEVELOPING PATTERNS

United States Dollar/Japanese Yen

A close above 103 could generate a move that could potentially retest April highs (@ aroudn 104.0).

United States Dollar/Japanese Yen

Longer term this pair may be developing a bigger move, but it is still to early to speculate on that.

Monthly and Quarterly charts are reminding us that what we saw in the last couple of months is nothing compared to the moves that the Yen developed in the past years -> Do not get too exited on short term market fluctuations when there are thousand of pips  to be made with the bigger moves.

United States Dollar/Japanese Yen

iShares MSCI Canada Index Fund

A breakout to new highs would complete an Ascending Triangle and possibly generate a move to $50. I’m willing to buy this market above $33.

iShares MSCI Canada Index Fund

T-Notes 5Yr

Another possible shorting opportunity.

T-Notes 5Yr

September 2014 NG

A shorting opportunity. Equity traders may short UNG (ETF)

September 2014 NG

October Sugar #11

A setup very similar to the one of Natural Gas (shown above).

October Sugar #11

FAILED PATTERNS AND LOOSING TRADES

Here are the worst developments we have seen (and, in some cases, we also participated) last week.

Australian Dollar/United States Dollar FX

My long position in AUD/USD lasted only few hours before I got stopped out for a 63 BP loss.

Australian Dollar/United States Dollar FX

iShares Barclays 20+ Year Treasury

I mentioned this market in last week report. At that time I showed a Failed Head and Shoulder pattern.

This week that Failed Head failed. This is more than enough for me to remove this market for my watching list for at least few weeks. I had no position in TLT.

iShares Barclays 20+ Year Treasury