Analys från DailyFX

A CAD/CHF Long with Sky-High Reward

Published

10 år ago

12 november, 2013

DailyFX

Talking Points:

The False Breakout in CAD/CHF
Inverse Head and Shoulders on Daily Chart
How to Enter and Execute This Trade

Readers will have noted my more cautious tone of late, and it is helpful to explain why. No matter how good a trader one becomes, the markets will always do what the markets will do, including granting some periods of success and some extreme dry seasons.

(Being selective and cautious in the markets has paid off generously, however, as evidenced by these results since late-October, which can be seen on the Straight Talk Trading Blog.)

Nonetheless, such spates tend to be balanced by dry seasons, and it is important not to get carried away with images of some “Holy Grail” of trading. It is often when traders become euphoric with their personal equity curves (and start thinking of increasing their risk sizes) that the market sneaks up and takes everything back and more.

Especially after a good run, defensive trading is the way to go. In fact, trading floor managers will often rein in traders who have exceptional short-term results because they have seen this pattern unfold again and again before.

There are also traders who try to predict their own equity curves, skipping trades after a long good spell, hoping to miss the losers. I am not one of these traders. Ultimately, since no one can really predict what will happen next in the markets, this can be a tricky strategy (although, in some cases, it can be surprisingly effective).

All the while staying selective and cautious, we look today to CADCHF, which provides the most interesting trade opportunity at the moment.

The weekly chart shows a false breakout to the downside in the last couple of weeks. Since false channel breakouts in the direction of a trend—in this case, down—are a sign of a potential reversal, the long side of CADCHF looks interesting, especially since there are a few hundred pips of potential profit there.

Guest Commentary: The False Breakout in CAD/CHF

The daily chart below shows a potential head-and-shoulders pattern developing. Of course, the right inverted shoulder is almost entirely imaginary at this point. However, it is worth noting that in spite of spiking up to touch resistance, price has been moving sideways for about nine days. This suggests that there may be a weakening of the bears, and also helps the case for a long.

Guest Commentary: Inverse Head and Shoulders in CAD/CHF

The main concern at this point is the large bear candle currently developing, however, when compared to the other arguments for a long position, it merely suggests that the support zone should be calculated a little lower to account for momentum. This has been done on the four-hour chart below.

Guest Commentary: Carefully Calculated CAD/CHF Support Zone

As price pulls back to retest the declining lower channel on the weekly chart, there may be an opportunity to enter. The zone of support is estimated from the trend line averaged over the period and adding a small buffer zone, making it 0.8657-0.8706.

The trigger for this long CADCHF trade would be found on the hourly chart (not shown) and would come in the usual form of a pin bar, bullish engulfing pattern, or bullish reversal divergence. It is true that this trade is counter the weekly trend, however, even a small bullish weekly bar would potentially provide excellent reward for risk on this trade.

By Kaye Lee, private fund trader and head trader consultant, Straight Talk Trading Blog

Analys från DailyFX

EURUSD Weekly Technical Analysis: New Month, More Weakness

Published

7 år ago

30 september, 2017

DailyFX

What’s inside:

EURUSD broke the ‘neckline’ of a bearish ‘head-and-shoulders’ pattern, April trend-line
Resistance in vicinity of 11825/80 likely to keep a lid on further strength
Targeting the low to mid-11600s with more selling

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Coming into last week we pointed out the likelihood of finally seeing a resolution of the range EURUSD had been stuck in for the past few weeks, and one of the outcomes we made note of as a possibility was for the triggering of a ’head-and-shoulders’ pattern. Indeed, we saw a break of the ’neckline’ along with a drop below the April trend-line. This led to decent selling before a minor bounce took shape during the latter part of last week.

Looking ahead to next week the euro is set up for further losses as the path of least resistance has turned lower. Looking to a capper on any further strength there is resistance in the 11825-11880 area (old support becomes new resistance). As long as the euro stays below this area a downward bias will remain firmly intact.

Looking lower towards support eyes will be on the August low at 11662 and the 2016 high of 11616, of which the latter just happens to align almost precisely with the measured move target of the ‘head-and-shoulders’ pattern (determined by subtracting the height of the pattern from the neckline).

Bottom line: Shorts look set to have the upperhand as a fresh month gets underway as long as the euro remains capped by resistance. On weakness, we’ll be watching how the euro responds to a drop into support levels.

For a longer-term outlook on EURUSD, check out the just released Q4 Forecast.

EURUSD: Daily

—Written by Paul Robinson, Market Analyst

You can receive Paul’s analysis directly via email bysigning up here.

You can follow Paul on Twitter at@PaulRobinonFX.

Analys från DailyFX

Euro Bias Mixed Heading into October, Q4’17

Published

7 år ago

29 september, 2017

DailyFX

Euro Bias Mixed Heading into October, Q4'17

Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.

EURUSD: Retail trader data shows 37.3% of traders are net-long with the ratio of traders short to long at 1.68 to 1. In fact, traders have remained net-short since Apr 18 when EURUSD traded near 1.07831; price has moved 9.6% higher since then. The number of traders net-long is 15.4% lower than yesterday and 16.4% higher from last week, while the number of traders net-short is 0.4% higher than yesterday and 10.5% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EURUSD prices may continue to rise. Positioning is more net-short than yesterday but less net-short from last week. The combination of current sentiment and recent changes gives us a further mixed EURUSD trading bias.

— Written by Christopher Vecchio, CFA, Senior Currency Strategist

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

To be added to Christopher’s e-mail distribution list, please fill out this form

Analys från DailyFX

British Pound Reversal Potential Persists Heading into New Quarter

Published

7 år ago

29 september, 2017

DailyFX

British Pound Reversal Potential Persists Heading into New Quarter

Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.

GBPUSD: Retail trader data shows 38.2% of traders are net-long with the ratio of traders short to long at 1.62 to 1. In fact, traders have remained net-short since Sep 05 when GBPUSD traded near 1.29615; price has moved 3.4% higher since then. The number of traders net-long is 0.1% higher than yesterday and 13.4% higher from last week, while the number of traders net-short is 10.6% lower than yesterday and 18.3% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBPUSD prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current GBPUSD price trend may soon reverse lower despite the fact traders remain net-short.

— Written by Christopher Vecchio, CFA, Senior Currency Strategist

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

To be added to Christopher’s e-mail distribution list, please fill out this form