The British Pound Lash back - Daily Chart of GBP/USD

(1) The zone shaded in red is the point on the chart where I was being stopped out and selling short the GBP/USD

(2) The horizontal arrows denote sell short entry filled orders with the two locations at 1.360 and 1.34789

(3) I have averaged with enough size to over-take the levels where I was stopped out in the middle of the British pound rally, or dollar sell off

The horizontal lines above and below price shaded in grey and green are stop losses and exits.  I plan on exiting this trade near 1.32, but with a pyramiding strategy I could see myself add the same amount of size with 40, to 60 points in length.  Meaning if the pair continues trading down I will add to it with the same amount per trade.  This is scaling in, at its best!

Owning Your Mistakes

By the indications I drew on the charts it may have sounded like I was growing more bearish and inferring that the market would collapse and that the trendline would hold and that the target at 21,469 will be met but it turns out that did not come to pass and newer highs are already printed and you can see with the caption that says break it was the break of the all-time highs from August 8

It is not savory to make mistakes like calling the all-time tops but there are cases when a collection of different factors work together like seasonality and lower volume trading to that end those facts shaped some of my opinion going into the end of August of a lower market but is always a good idea to have a positive outlook and reframe the situation as something to learn from rather than be ashamed about it.

On the other hand a sign of strength is and how distribution days have been falling off account and they have been fading away with time when distribution becomes less powerful the market just tends to grind higher and the Bears need a cluster of those distribution days with higher volume to prove that they have a presence and that they are going to be selling at the peaks of every rally (counter-trend rally in this case we are not in a bear-market) also when I do a triple screen analysis I would be interested in checking every time frame to confirm a prices point on the curve or trend and whether it is at the high side or low side of the range.  And these types of conditions make it challenging because there are no other references for previous highs that can hold as resist points

The surge higher has been relentless that even though these are eight hour candles the stock market has yet to open for Monday's trading and it has already gapped higher (these candlesticks are continuous but ETFs and other equity markets have not yet stareted trading)

So it is early to be very bullish or think that the market go to 22,500 because there are a lot of political headlines coming and this week has an important driver which is the Federal Reserve decision, it is in my interest to see the markets down but I would entertain projecting prices at higher levels in spite of other factors working against it like not having a correction and the amount of time the rally has run its course.

Zoom Out then Zoom In

Hi Everyone

This first image is one of the yearly candlestick of the SPY which goes back to 1997.  Here is a description of what happened.  The market rallied for the five years after the technology bubble of 2000-2002, and then topped out in 2007 and had one negative year, the gigantic plunge in 2008 was contained to one year.

• Each year volume declined making it non-confirmatory

The drawing tool retraces the fibonacci levels from the March 2009 lows at 60 to today's high of 250

The 78.6% mark at $208.73 coincides with many of the orders that were filled in the 2015 and 2016 yearly lows and should be attractive again when mean reversion sets in.

Comparing candlestick chart patterns when price consolidates and then breaks out.  The larger view includes a 20 year history of the monthly candlesticks in red and white and the shorter term picture is this year which exhibits congestion that is occurring this week

The 20 year chart of SPY has a declining dotted yellow trendline in which each of the volume bars are respecting the decline very well.  The price and volume relationship has been a powerful indicator re: trend changes but in this market there are an infinite amount of possibilities.

Objectives Met

I thought these images would speak for themselves so I am going to be light on  the commentary today.  But here are three images: the weekly, daily and 4 hour chart in the EUR/USD.

Rough rejection of the dotted green line at 1.20583





Topping wicks proved strong enough to drive it down to 1.18762, and it also broke through the ascending trendline

Display of the most important resist point in the red shaded zone and a possible area of covering and resetting a strategy of buying the dip and selling the rip.  

The Quadruple Screen

Analyzing the technicals for the EUR/USD on 4 Time Frames Today

Weekly 1.20583 and 1.22639

• Resist point at 1.22639 was the "generator" for the sell off in terms of exacerbating the sell-off into the 1.10 and below territory, I would highlight this area as a much more potent target than how 1.20+ has held up so far as resistance for recent weeks
• Important week of 7/21/2012 it was a point of origin of one of the most powerful 2 year rallies in the currency pair.  It also denotes the effect of "former support becoming resistance" 
• The other inference from this chart is 12/27/2014 the first crossover of the dotted green line at 1.20583
• Price is 1679 pips away from the yearly trough

Daily: the break of 1.19284

• Breakaway gap created in April spurred on a long and powerful rally to reach our objective at 1.20+ but in the past 2 weeks there have been minute sell-offs that are shaded in orange (circles)
• The trendline in green captures a majority of the price movement and price has been flirting with a subtle break of it 
• For a true reversal with staying power price needs to consolidate and congest before finding overhead supply that sticks

 4 Hour

• Enhanced definition of psychological hit-points yet still maintains the uptrend
• the two negative days from the daily chart cast an overhead "seller" yet price is making an attempt to come back and try to smash through the over-head box  shaded in red at at 1.20546 and 1.20948

 1 Hour time frames

• More pronounced display of the difficulty of challenging the 1.20
• Appearance of "bounces" in each of the grey shaded supportive areas act as speed bumps in slowing price down when it gets to that location: 1.18445 and 1.18264 and the other two support points below

The Low Risk Peak and Probabilities of Success

What did I do right?

1. Scaled back risk
2. Waited for optimal entries 

What did I do wrong?

1. I did not let the profits run longer in this AUD/USD 

How can I improve?

1. Continue to trade like this in GBP/USD

I removed risk by elminiating some of this AUD/USD short over the weekend.  There was not telling what could happen over night, however by removing the trade it cuts my profits by 100% and I am waiting for another chance to re-enter, its on a pop higher.  By the time I closed out the trade I was in the money by 10 pips but I am watching it move FURTHER in my favor, this trade will be updated sooner.  

EUR/USD; I am nursing this losing position here but its only a few candlesticks away from breaking even, today's change was significant regarding direction and possible pattern relevance

The supply pattern came into effect, and the perception I had in entering this trade was to get short at the same level as the "departure" of that sell zone between Aug 1st and Aug 3rd

This image above was the first time I entered the USD/JPY short, it was time for a possible rebound in the Yen and it was right in line with another potent area of resistance

An updated view of the trade and its progress, I can show further details re: the stop placement and logic for unwinding this trade

1. On September 7th

Excitement to be short the Dollar index by the length and speed of this real body with solid bearish close

1. On September 8th

Bottoming tail displaying tremendous buying pressure and it is followed by a bullish candle on Monday's open

1. On September 11th - STRENGTH 

Bullish follow-through with a degree of excitement relating to the size, momentum and departure out of 11,794

1. On September 12th 

Indecision; yet is is as of now the second bullish day, in this next series of a rally attempt and "follow through" 

Trend Following

These are the charts that I will share that included Japanese yen over six timeframes  I had a hunch that the yen would be strong but I did not act on it fully up until now and the trend is beginning to pick up a lot of steam so onward to the monthly point of view

It is below the prior month's bottoming until at 108.295, and getting to 107 is definitely within reach so far for the month it did move 317 pips

Now regarding the weekly candlestick charts the 107 50 helps temporarily because it was a prior area of resistance but 105 is more of the midrange target for an area of congestion weekly timeframe

The finer aspects of the trend are in plain view it how the ranges play out day-to-day but 106 even is so much more critical from this point of view that a move down to 107 trigger off more buyers that I anticipate on the weekly timeframe

The details of the hammer formation are more clear here and a possible supply at 108 this frame has a finer perspective of the overhead supply and it gives color as far as entry points to so short and the inherent risk of the trade that may not be visible when zooming out so much on the higher time frames

The unique thing about this frequency is that three hours displays a trendline much better for entry and exit for the trade and where to sell an exhaust point for the buyers in other words where the short-term trend has run out of steam.  The crests on the three hour chart are not absolute but they are also good selling points

This is the shortest timeframe available and it does not give us a big picture as far as location of trend but assist more with order entry and exit been anything else if I should need to tighten a stop or change a limit order would be using this time frame and it would aid in the precision of scaling back size or would give me confirmation of where to increase the size of the winning trade.

Resetting Everything

What did I do right?

What did I do wrong?

What did I learn?

How can I improve?

I ask myself these questions often, and find that the longer I stick to my own process of trading the more I learn and can adapt to whatever level of strength the overall trend has to offer, the pay when it comes to going with the flow is generous.


Set up potential for tomorrow USD/JPY

Confirmation of a continued move on the break through the shaded circle.

In this chart of the Aussie I was floating a small loss, shaved off half of my risk and then reset the stop to accodate to the smaller sized position, I would be happy with a break even or a small gain, and I can tighten stop accordingly 

21,955 was the key level I mentioned for the Dow 30, it has since proven a strong area of distribution of US equity shares

Euro acting well and reaching higher highs, yet still below the stronger resist point at 1.20997

Turning a losing trade into a winning trade, patient enough to allow the price to consolidate before taking action > strong Euro but much stronger Yen

USD/CAD following through with powerful momentum.   

Masterpiece

This daily chart resonates with today's low which happened at 1.21452

And with the Bank of Canada suggesting they won't be raising rates for a while supports the argument a temporary bottom may be in place for USD/CAD.  

Ongoing themes in Technical Analysis

These posts are dedicated to Forex for the most part but I tend to diversify my domains of attention to these ideas when making observations

• EUR/USD
• The Dollar Index
• S&P 500 [SPX or ES futures]
• Dow 30 
• CBOE Vix Index, which includes VXX, TVIX and XIV
• The Carry Trade and its swaps [collecting interest everday]
• AAPL - getting income from AAPL 

AAPL is in a current state of unwinding its uptrend for the year.  It is inbetween a sell and a short term swing buy.  What looks best in terms of risk/reward for options income is a 162/158 bearish put spread to profit on the downswing from today's closing price and its bottoming formation at 158 or slightly above.  

The daily chart shown below features bollinger bands with a central band indicating the mean at $160.15, and the upper and lower bands at $164.95 and $155.6; price departed from its highs at 164 in quick fashion today and Friday of last week, that type of price action is favorable to the bears who were even able to drive it to within pennies of the mean.  

What does this tell us?

Interim lows, and deeper price retracements are still income generating opportunities and should we get some momentum to the downside the lashes back (counter trend bounces) will be profitable set ups.  

Specifically for this time frame reaching and staying near $160 for tomorrow is highly likely.  From there price has a good probability of getting to the lower end of the summer trading range at 155.0, its very interesting to see how each levels of the band are coming together at these price points:  the upper band is near 165, the mean is at 160, and the lower band is at roughly 155.00.  These conditions could change in a heartbeat, but from my point of view I favor 155 and 150 as potential set ups for options income when it involves verticals and bullish put spreads.  

Note also that the gap fill would be compelte at $150.27 which sits right above the bullish candle put in place on 8/1/2017 [Earnings Gap]

This one covers the risk to reward set up in this trade.  It is writing a bearish call spread with a strike price of $163.50 by $166 to receive credit and it makes money as the stock price goes sideways or down, so any movement in the dark yellow rectangle is a good location to make money on the call options expiring worthless.  Also, The green zone highlighted from 162 to 155 makes money on the entire height of the green zone.  This trade makes more money the faster it goes down.  The losses are also contained or maxed out at the high end of 164+

Global Studies: Stocks, Currencies, Options

The first chart here is a 15 minute chart of the Dow Jones futures.  This is the second time this week that the futures gap down except this time it was with more force. Chances are that there is still a partial bill pending on this, even though most cases is hard to tell when exactly a gap will fill it can be for an indefinite period of time.   So in our view the open Tuesday could be very neutral in that a charge back up to the center of the gap or the base of the gap will not lead to that much upside anyway .  

We are looking for some confirmation on whether the highs put place for the year are confirmed by lower points, meaning if Friday's action is indicative of selling pressure then we will start to see some lower lows and more dramatic selloffs. 

Ideally the target I would like to set a temporary bottom in this week's chart is between 21689 and 21583.  So approximately 21648 is in the middle and then there is not much demand until much lower

The supportive zone at S1 was only violated for a matter of minutes or an hour but still marks the change in positioning where I could not account for any of the lower highs set in August but recent action has prompted me to still entertain the idea of a or dollar future weeks if something along the lines of a monetary policy change or an issue in the US government that would make the dollar less attractive versus the euro these things are considerations but the bottoming tales have been pronounced and the declining red trendline and declining black trendline above should not be to difficult of hurdles to overcome now what we can see on this chart here at our one is that big average and a black descending trendline are located in the same area around 12,000.  With this index so heavy on the euro we would need to compare the two which brings us to the next chart

R3 and R2 are being respected as points of resistance and with the topping tales and longer height of the "real bodies" it pressure on the buyers to give up ground.  There is some signs of a change in trend based on how bad it is acting.  But from a perspective of where to sell and where to buy 1.18 is the next major target and then 1.17 is where the buyers were at their strongest.  And this pair was not that influenced by the Jackson hole meeting and that announcement so we are on standby until Thursday when more information comes out from the European Central Bank

The Australian dollar is in what seems to be a range high and on this six hour chart it is not necessarily in the middle button near the top,  I have the red rectangle above to show a very extreme position but I don't think it is strong enough to get there going to 0.79927 is very possible or even higher, but if there should be any amount of dollar strength that will be powerful enough to drive it down to 0.78726, which was noted by the dark blue line.  There is an area at 0.77933 that shows a very powerful origin of a rally I plan on covering a short position in three different locations and I can share that when the trades do trigger.  I am waiting for some more confirmation that the trend has run its course and that I am not caught short in a powerful blast higher to 0.799 or higher.  

In the 13 trading sessions after the all-time low in the VIX it reached a mini peak at $17.28 and then drifted down, it has been 16 trading sessions since the mini peak at $17.20 so it is coiling again and the market is at highs this inverse correlation to the overall market is something to be aware of that in the event of something happening politically or an event that would give the market pause this would drive the Vix higher, and another thing to point out is that the Vix has not reached a lower low spite of the markets being near all-time highs.  Newer highs is great for a long-term bull market but the dangerous condition of the Vix being the slow for this long means that investors were not being that cautious, so if this is a cycle high to cycle low and the bottom is confirmed for September 1, then we can look to another 10 to 14 trading sessions of higher Vix before another climax.  

The Push for S&P 500 and Reaching 2480 - To Sell the Rip and Buy the Dip

I was using this chart been found support and resistance points to be between 2401 and 2488 and the strength of last week was greater than what I imagined.  There is a cluster of bullish candles which hit a very hard resistance at 2480 

Every candle featured here is two days.  So the highs for the year at 2488.5 and Friday's close at 2473.75 show that price is midrange but it is high and extended.  It does not mean that the market cannot go higher but the S&P 500 is right near a "trigger" it is at an extreme high in the range, and when I first put together this chart, I had in mind the first resistance zone at 2455 and 2459, it is clear to see that price went through that resist point very quickly.  Then the shaded rectangle just above those two points was quickly taken out as well.  The zone between 2475 and 2488 is the most powerful zone and it seems that price is respecting it very nicely.  

If there should be any type of bearish activity it would involve more confirmation and some momentum on the downside.  The topping tell between 2480 and 2473 is strong enough to believe that the third zone of resistance will be everything we need to prevent the market from going higher at least in the short term.  There are some good buying points below, but it would take a few days for them to reveal themselves.