Posts Tagged ‘Pattern Recognition’
European Stock and Currency Summary
The Federal Reserve Bank chairman Ted Bernanke commented Tuesday that the U.S. recovery will remain intact. This continues to lend a prop to risk appetite as did talk that Thursday’s China export data will show a 50% increase. European equity exchanges traded positive throughout the session.
The risk currencies advanced, CDS rates came down and peripheral Euro Dollar zone bond rates came down somewhat. EUR/USD nudged 1.20 from a 1.1924 low, GBP/USD recovered from its ratings-worry sell off Tuesday adding one cent to 1.4534, despite a surprise widening in the visible trade balance to GBP7.2B. USD/JPY pivoted around 91.50. The main European indices are up around 0.4%, gold is down $3 at 1234oz after printing a lifetime high Tuesday and oil is up $1 at $73bbl.
Where the turnarounds are happening are all around strong support/resistance lines all historic in importance. The Dollar Index Futures hit a major resistance line yesterday at an in day high above 89 points and retreated. This seems to be the end of the monthly upwards trend that started when prices broke the long-term symmetric triangle upwards as I pointed in my previous article. The Futures Index will not, it seems to me, make its intended goal of 92.3 points, but this is true for most pattern breaks. It is hard to say for now what will be with the US Dollar rates around the world, but the upswing seems to be ended when looking at Dollar/World Currency pairs as they end streaks and hit s/r lines in addition to seeing the Dollar Index Futures as is shown on the Chart Below.
This is the way the Chart looks:
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OOOooops!!
I was wrong. The rule “buy at breakout only” slipped right by me this time. No, Technical Analysis is not to blame for MY mistake, only yours truly. Fact is I WAS right about the Dow Fiasco and I did say the S&P 500 was due to make a correction, then recover. Nobody has a monopoly on accuracy and I take full charge for the words I wrote in this page not so long ago.
But, now that there is a breakout, I can say truly that according to Technical Analysis the truly Mighty US Dollar is headed in a new upwards trend that should take it up at least 10% in the next few months or so. Time is hard to judge with Technical Analysis and we only have the time-frame of the broken-out triangle shown below to help us. This is the large, long-termed Monthly time-frame and its symmetric triangle pattern HAS been broken upwards, so be patient in investing on the FOREX Dollar Futures, it’ll get there in time with a target of 92.3 points on the DX Futures. There is no SURE THING!! but here there is about a 70% chance that I am right which is better than the 50-50 of tossing a coin.
This is the way the Chart looks:
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The US Natural Gas Fund
The United States Natural Gas Fund (symbol UNG) is now in the process of testing the $7.7 price line that is acting as a resistance. The momentum indicator (MOM) is giving a positive value and that is a good sign; and the RSI is going into buying territory as well. There is a rectangular pattern, as seen in the Closing Line Chart below, that is emerging and is smaller at the right end of the scale and may break upwards, which is the likely way as market indicators show a chance for it to break upwards. The fact that the pattern is diminishing and is not on an upwards ascent and, in contrast the RSI and MOM indicators are showing an upwards trend starting means that there is here what we call a divergence between the indicators and the price line. This shows decision in favor of the upwards trend. This may come soon or later on, but this equity most probably will continue in this pattern for a while.
The indicators show us the way to a good opportunity, though not for certain. There is a high demand for Natural Gas in the US and prices are, fundamentally speaking, supposed to be going up. They may be, if this analysis proves correct and the pattern breaks in the right direction.
Below you see the Japanese Candlestick Chart showing the support/resistance line and the divergence in blue, the indicators going up and the prices down., and the Closing Line Chart showing the rectangular pattern. I picked the Line Chart because is many times makes clear ambiguous signals from the Candlestick Charts as to the placement of Line Studies.
This is the way the divergence looks on the Candle Chart:
This is the way the pattern looks on the Line Charts:
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FOREX Trading Update
The FOREX Dollar, as the base currency in which trading occurs in the Foreign Exchange of Currencies, is itself traded as a future in the Chicago Mercantile Exchange. This future, known as the US Dollar Index, is now nearing the end of a symmetrical triangle pattern and is poised at the top of the second rise on the waves of that pattern. Today, it rose, on the daily charts, to the topmost part of its downwards swing line. Yes, it is true; the Dollar is BOTH in a sideways pattern and a downwards trend pattern at the same point in time.
This is why we trade long term, medium, or short term trades–each of them separately. There is not to be a mixup of them. If you want to go for the less profitable, but the one more quick to reward you, then consider the shorter term investment and maybe following the short term downward pattern is for you. If you have a lot of patience and more investment capital (because these investments tend to cover a bigger price range) then you might opt for the long term investment of a year or more that may be much more rewarding financially but will take more time to materialize.
Such would be the case in following the Monthly Charts of the US Dollar Index. The possible profit to be gained here, whether the break is in an upwards of downwards direction, is about 23% over the long haul; if it breaks all the way, monthly speaking. I know this seems like slim pickings for a long term investment of an equity, but we are talking about a currency future and as such, it is less likely to make big moves over short periods of time than a standard stock.
If you’re really looking for BIG action, my next report should interest you. I will be covering the Forex non-US Dollar trading pairs and specific Charts will be shown of FOREX trading in different brokerages on those pairs. We are speaking here of leverage of up to 400 times, getting 400% profit from each specific trade you make. But beware; many trading houses are cheats or con artists and you have to check out the companies well before you invest there.
Anyways, here is the mighty US Dollar. First the monthly chart, or trading method showing the symmetric triangle and second the daily chart showing the current trend.
This is the way the Monthly Chart looks:
This is the way the Daily Chart looks:
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Tokyo’s System Pro-flagging for attention
This is a really easy to write piece. Because, all you have to do is look at the chart and it explains everything. System Pro in the Tokyo Stock Exchange has made 2 flag patterns, one after the other. The first one was bullish and ended, as expected, breaking out to the full height of the flag. The second one, in my opinion, may very well break out BEARISH. This also happens with flags. Which is why I always say “buy at breakout”; that is, immediately after it has finished the pattern or retested for sure the support line. In fact, since the RSI has taken a strong down trend after the 1st flag, I really do expect, with a reasonable degree of certainty, that the flag might break out bearish. Check out the chart below. Also check out the August 2009 Fannie Mae where a similar 2 flag pattern occurred and made a lot of investors from the “herd” lose their pants, or panties.
This is the way the System Pros’ Chart looks:
This is the way Fannie Mae looked August 2009:
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Googles’ cup runneth over
Google, the worlds largest search engine and a whole lot of other things beside, has taken a beating in their battle with the Chinese over censorship. I applaud their firm stance, even though it made them lose ground on the stock market and NOT break their all-time record as seen by many. Their stock prices (candlesticks) have made a very popular sideways pattern called a Cup and Handle. The cup extending from 520 to 570, a little less than 10%, and the resulting target is 620 which puts them near their recent high. This coming true is not a certainty, as technical analysis never aspires to predict the future, only saying that the way things have gone in the past, as is the case with patterns, is the way they will surely go in the future. With the chance being between 60%-70% in your favor. This is the weekly chart that shows the pattern.
This is the way the Chart looks:
