Triple Screen Analysis of the Aussie Dollar - AUD/USD, /AD

 Here's Why We Are Growing More Bullish on the Australian Dollar Against the USD

Although price did probe into a much lower level which stimulated this demand, it still has the length required fora bottoming candle for very short term.  Overall the monthly candle (closed) bearish that could mean much worse things, but for the moment it closed with the positive nature of how long the tail was during the rebound attempt.  

In most cases a bullish reversal has these characteristics.  The sellers get exhausted, and exit their positions.  Price tightly consolidates.  Then price breaks out in the opposite direction.  We feel that with the power of Friday's daily candle, the AUD should attempt to continue climbing until it reaches a point of stiff resistance. 

Seeking out resistance

This trade has a balanced risk/reward picture to it.  In this instance, protective stop loss orders should be somewhat tight because who knows if it could be a false rally attempt.  Also, I provided some levels where I would want to be a seller in anticipation of stalling or potential weakness from hitting barriers above 0.7434, 0.75, 0.755 should try to stop the Aussie from rallying and could be decent levels to scale out of temporarily close long positions. 

Changes, adjustments and Excuses

SPX

*enlarge this image to see it fully

• I shrunk down the yellow gap zone  accommodate the past two attempts to fully break into it (2745-2753) it is just slightly smaller
• There is a 12 period EMA to show how closely price is moving along with the moving average 
• Potential for a series of lower highs since June 14th

As I type this the SPX is only up 0.77% and 21 points so far for the day.  Yet the market on a smaller time frame is couched between two decisions: Fade the gap (imbalance) or finish rallying to the origin of the sell off at 2750-53.  

This last chart here shows more distributive action, where its becoming more clear that the rallies are being sold with greater force:  its written in the tape!

Hit and Run

Establishing a Motive 

*enlarge this picture to see it fully 

• Downside break-out
• Buying Trigger-point
• Return to Value

Short selling carries with it unlimited risk, because there really is no ceiling for how high a stock can go and with that being said there should be objectives for where to cover, or at least anticipate where the buyer will act.  

I have shaded in a series of covering points for where to exit a short position in NFLX.  

The box above at the top of this chart between 423 (all time high) and 390 is what we are using as a measured move for determining how far down it should pull back.  The height from bottom to top of this rectangle is 66 points.

The buyers are losing their grip.  Each one of the trigger points is where we believe there could be either new buyers, former buyers adding to positions on pull backs, or shorts like myself covering positions out of the need to be careful.  

The return to value here is at the base of the range at 305!  I know it may sound extreme but who can really be totally sure what news will come out in the next few days and weeks that would impact the stock.  

A good goal is to take today's break out point at 390 - 66 and cover right below the second horizontal line at 326-327

This is how we would approach this from the parameters of risk and reward.  

Holding period:  4-5 days

Gain 35-50 points

Loss:  25 points

If there is any chance NFLX would go to 500 or even more we would not want to be short, but the beautiful thing is how it already started to show some early phases of a topping pattern yet to be confirmed.  

The Aggressive Buyers that are distant for now....

SPX - 4 hours, goals met

*enlarge this chart to fully see the image

1. Confirmed downside gaining momentum
2. Support points are not being respected
3. The dome or arch shape of a rounded top has come full circle
4. Expanded Average True Ranges

What it takes for a decline to wipe-out the entire series of gains is beginning to happen much quicker these days.  In just a few candles, the SPX can have the power to eliminate gains that happened within 1-3 trading sessions or even a week's worth of "Rallying"

 We are just surveying the size of each of these 4 hour ranges, and it turns out they are getting comparatively taller with each passing moment.  For instance, the range on this very last candle for today was 28.04, where in a quieter market stat like back in May and April the ranges were half that or even 10 to 15 points per 4 hour interval

Even the first 4 hours of trading today were wild in terms of going up and down 20.58 only to follow-thru on the downswing at a rate of 28.04

Support Points - the Logic of the Average True Range

• The Most Aggressive Buyers
• The green shaded zone which formed the very long shaped hammer between 5/1 and 5/3

Even 2700 which has been a major support point recently has already been revisted, the prior days lows are not holding up and it would take entire measured moves to their completion before the bulls begin to see solid support.  Now, if the SPX moves 40-60 points minimum per day it would be logical to surmise that maybe the next bounce would happen at 2675 or even 2620. 

Dome Shape vs. Arch Shape - the formation of bottoms and tops

The inverse head and shoulders was beautiful back in April and likewise the more recently printed rounding top for this months beginning.  We are not half-way in terms of completing this move, and granted a bounce could happen on Thursday we still feel the losses will be consolidated before getting worse.  On the other hand, after all the destruction, assets will be generally cheaper and better deals will be made.  

VXX 33.24

A Study Involving Short-Term Gaps 

60 Minute Time Frame; enlarge the chart to fully see the image

• Sequence of events dates back to last Wednesday
• Purpose is to demonstrate how a gapping price point can fill and when this fill does occur
• Yellow gaps are gap-downs, and green gaps are gap ups
• The imbalances in supply and demand have their tendency of settling when price either enters the gap or fully closes it
• The hourly candlestick can open or close near the gaps opening and closing points

Trading with or against the direction of a gap fill

In three cases of a bullish gap they have all filled eventually.  The price action on Monday really created a massive imbalance that is starting to work its way through today.

What we have done is we have placed notes on each sides of the gap showing when they open and when they close and in almost every case the "closed" notations in italic highlight the price territory when the gap finally partially or fully closed.  

We believe that 33 plus or minus 25 cents is a reasonable area to start buying VXX again either though shares or call options with strikes above 33: such as 35, 37 or even 39's

Here's why Personal Notations Matter

SPX According to Plan

• The horizontal line at 2700 was only coincidental, and when you go back and read my other post about the importance of that level you'll see why it bounced so quickly out of that price point
• The intended target
• Resolution at lower price points that assets are "coiled"

I did not plan on price dipping just slightly below 2700 before making that long and stretched lower shadow on today's candlestick, but as fate would have it 17 points of a counter-trend rally occurred right after the fact.

The Rally Point

Between 5/25 and 5/31 were the key support points that drove SPX up to 2790 and it has since faded, confirming the series of lower lows for this year, and like most rallies have been shaping up. this one is fully out of gas and momentum would begin to swiftly increase to the downside

Resolution

We believe that teh green zone at 2675 or so (see shaded rectangle) would be one of the best price points to look into getting long again to exploit the imbalance in the equity market; the trend overall favors bounces to the tune of 100-225 points in a short period of time.  The nature of this fractal can change faster than we are able to adapt, but we feel like this is the reason why having chart annotations is so powerful.  They can provide personal references why I was right or why my thesis was wrong.  

Trade well.  

The 200 Point Airpocket in SPX

Monthly

Enlarge these charts to see them.  

When the upper band was tested and proven to be a good resist point, price swiftly went down in the direction of the mean (middle band) and the coiled up to make a rally attempt after some filling in and consolidation in the late Spring.  The rally has since faded, and no new highs were printed yet for the year.  And so it still stands that rallies are being sold, and this month in particular has one of the topping tails similar to that of January, February, March, and for the most part June has had some degree of a topping (higher wick with a lot of distribution)

The horizontal line across is a marker that we are using to denote value and demand which is at 2500, this will definitely need to change and possibly move up because we are referencing the middle green band as a stopping point, and in the next month that is sure to change and drift higher

Weekly

The weekly candles here have the clearest reversal patterns (bearish turn arounds) and The first one in January was more of a full-bodied engulfing set-up, with just two candles.  The one in March was more of a test of the lows and then a confirmation that engulfed six weeks in one.  The last bit here is the recent turn around that could be described as a 3-candle pattern, and we believe it has more staying power because of the time it took to "wind up" so to speak.  

Daily

Obviously there is more noise on this chart because its a lower time frame.  What sticks out to us the most is the 2700 and a few points below, because that is a rally point for some of the bulls, who would believe its time to buy again, and most mid-range situations set up for short squeezes, where the bears rush into things thinking they will be ahead of the pack.

On the daily, it is more of a waiting to see confirmation of newer lows with perhaps faster momentum.  If there is any more of a text-book scenario of a 3rd phase of a down move this is it, and what I mean by that is stage one is the rally, stage 2 is the consolidation, and stage three is the break-out and in this case it has broken down just enough with a Vix creeping up again.

Trade Well!

  

Scaling in 1/4, 1/4, 1/4, 1/4

The trading style here is not an all or nothing mentality.  As long as there is flexibility about the zones you are intending to get in, thats fine, the market is not going to stop at a dime and turn completely in your favor.  

Here's what I mean by this, The first buy point at 1.31920 and second at 1.31314 were my chosen long entry areas.  I was willing to take risk between 65 pips of territory while keeping my stop fixed at 1.31.  The risk reward was still close to 1.5 to 1 or 1.1 to one but thats fine, lately we have preferred higher accuracy trades.  (the draw downs on CaD were ugly) 

It may seem like I added to a loser 3x but thats not the case.  Each blue arrow marks where I took a long position in the GBP, I was also very close to having my stop taken out.  At the time I was floating a moderate sized loss but it was not bringing my average entry too far away from my stop.

Of course, I don't know how the exchange rate will react to news but it definately worked out in our favor and we closed near the resistance at 1.32617

Global View vs. Local View

The Question was how far?

US-Dollar v. Canadian Dollar

• The global view is that of the USD/CAD over the past year, but put into the daily time frame
• The local view is a snapshot of this weeks recent advance.
• The comparison is of our notes on both of these time frames
• The question was where do you sell.

The global view 

The yellow zones above indicate where the sellers were likely to pound the USD/CAD.  It is now in zone A, where I first found to be a stretch to achieve but we are now scratching the insides of it.  Frankly, we didn't think it would get this far this fast, but the more recent 400 pip advance is likely what happens with such a volatile currency (CaD tanking like this)

The local view; the blast-off in USD/CAD is to the tune of 465 pips from tough to peak. 

Entered short position at 1.3303

1.33594 stop
1.31 or 1.3095; more concerned about a protective stop than hitting that big of a target

It is the same currency pair with a target below that allows for a very rewarding short position.  We believe it will pull back, at the same time, a pullback of 224-225 pips is a real long shot but anything is possible.  The asymmetric nature of this risk-to-reward set up is appealing because the most that can be lost on a trade like this is 60 pips. 

Pull back up NZD/JPY targeting 0.75

The zones in NZD/JPY

The spot in the middle at 76.39 is where I would like to sell short.

 If it does trigger that line I will be short the position in expectation of it going to 75 at least.  Now, the reason why I like this trade is because my maximum risk is above 76, the 50-period simple moving average stands at 76.92 right now, and based on the the rate of decline it would seem that my choice of entry at 76.39 would be right where the buyers are starting to get exhausted. 

The risk and reward is in a decent balance.  For every unit of risk in yellow the reward is more than 2x that!  There is reason to believe also that the Yen will start to pullback, it has been very strong against most other currency crosses and its only a matter of how it trades.......... the give and take

GBP, attempt at redemption

The Reasoning Behind a Bullish Push Toward 1.33868

1.322 has been a strong support point. It held three times very nicely, if this rebound continues we can start perceiving the motive as being more bullish and each target should be set to higher prices as we go. 

You will see two vertical lines on this chart, the one from 4/26 and 5/2 - they were the points where I was going to draw the retracement, but I decided to go with the more recent 5/2/2018 at 1.36537.

We are looking for a price range in which to sell again. So here are the two scenarios:  it hits the 38.2% retracement at 1.33866 and quickly backs off.  The other is that GBP/USD hits the 50% retracement and it goes to 1.34384

These measurements are far distances away  and should that happen we would think about price coming into some trouble.  The first long position was taken at 1.3240

Snapchat

Oh Snap!

Double Screen today

• Shares of SNAP or Snapchat and their tendency to fill gaps whether 100% or partially has ben a working strategy that rewards both bull and bear
• The long view and the short view

The Long View

At first glance, it appears that Snap had trouble right out of the gate.  This has been a losing proposition since day one, and the downtrend is very clear, and the only surprise was the earnings gap from February of this year that probably shocked a lot of bears.

It would have been so clear to get short this name right after that volume spike and reaction to only follow the logic of buying dips and selling rips.  There has really not been much mercy for this name in the long run.  To make things worse, we are comparing the earnings reaction in Febuary of this year to the most recent advance on May 17th 2018

The Short View

This is what happened since May 2nd, SNAP was unbalanced and punished unfairly for the news that was released only to find that it spent that brief period of time inbetween 10.50 and 11 before a massive breakout to 14.10; the uptrend is still working but it is showing some warning signs of having trouble lifting itself above 14.15 for the moment. 

The danger of topping tails

$14.50 would be like trying to bust through a steel door for this stock.  We aren't convinced that the trend has completely run out of gas yet, but the most recent 4 days aren't encouraging.  Price is right now in the cross hairs of the sell-off's point of origin between 5/1 and 5/2

Hitting a barrier and "Selling the Rip"

After all the stock ran up 35.08% already and this "exhaustion" should have the collective thinking maybe its time to revisit the May lows (and reevaluate the information) or see if we can mean revert and retouch the moving average at $13.00 again. 

The first Bullish Reversal of them All

Following the Signals

S&P 500 , January through April of 2003

The Time Bound System - declaring corrections and declaring rallies

States of Market Direction

• It is very clear that the correction in 2003 began to climax in March of 2003
• The most powerful drops in our generation coming to its end
• Correction from peak to trough and the begging of a series of bases and upside breakouts

In this case, it took 56 trading days for the bottom to completely set in.  What signaled the reversal was the most obvious hammer shaped candlestick formation after 3/10. The follow-through that happened is what institutions would need to know in order for the collective to start buying again.

Setting Goals in Writing

USD/JPY Short Selling Opportunity

Big Indecision on the Daily Chart

• I am at a risk of 50 pips - originally when we placed this trade it was with the intention of setting a limit order to exit at 50 pips below 110.60
• The risk/reward ratio is almost 1 to 1, but in this case we are scaling in.  In this pyramid type of trade we'll layer on a trade that is about 1% of capital risked, and then expand it 2x, and then 2x that which would add to gains    
• For the most part keeping asymmetric risk reward doesn't matter as much as managing risk itself, what I mean by that is I would never move a protective stop loss order, I would only protect capital by moving it tighter if the trade moves in my favor
• Let the trade run for a few hours up to a day before changing anything

Before when we looked at the formation of topping tails, we discovered that there still could be some breach of supportive points (so below 110.40 is crucial here) and that would confirm that the downtrend will likely continue, and the Yen would strengthen.  

Downside Continuation

For now GBP/USD

Bears take control and hold it down!

In the next day or so we expect a minor pullback which is just mean reversion.  Judging by how badly the GBP/USD went down it would only be right to think that the trend will persist.  So then the new goals would logically be 1.32, right after some push back  and then down to 1.31,  or even 1.30.  Psychologically, the 1.30 hasn't been touched in months and that is where some of the stongest buyers stepped in. 

Right now we believe that we are in the "air pocket" which would lead to a much greater plunge.  News is important here and should be weighed carefully, but it seems the jury is out and the decision has been made to continue driving it down until it probes into a price point with much greater value than what everyone perceives it to be at the moment.  

A collection of topping tails: 1 day , 2, day and 3 candle reversals

USD/JPY

Possibility of validating a shooting-star

These chart patterns have one thing in common, for the top side of the pattern they tend to reverse whether it takes one day to validate the direction or as much as two or even three days. 

Lets go over each of them.

October 2017, it was a rounding top with a momentum picking up speed at the crossover of the 114 and 113 levels, it was not as powerful

December through January the three mini peaks.  The dollar has been losing its ground against the Yen, and these may have been decent range trades, we weren't involved in them, any time it marginally goes above 113 it gets quickly shut down, but notice the highs are just slightly less higher than the previous (sequencing)

In January the top was a bit of a "former support becomes resistance" where the drive up to 111 was met with a measured move down.

The most powerful one in my opinion is the early February one, it even correlated with the shake up in the stock market.  It was a one candle reversal and a bearish engulfing pattern

Recently the tops in the USD/JPY - dollar weakness relative to Yen strength are more confrontational tops meaning they are taking their time to roll over.  The thought process is one of needing to be totally sure that the pin-action would occur late (the right side edge of the chart) and maybe Yen bulls are a bit cautious in this instance.  

Currently Near 192

AAPL

Monthly - Maximum Available Time 

Warning or Opportunity?  It is matter of perspective

• For what its worth the monthly candlestick is showing an element of a one-candle reversal
• The chart overall has intense layers of demand
• Price has not touched a critically important psychological level of $200
• The momentum of the decline would need to move at average true ranges of 3-5 points per day to confirm any further downside

So much of the company's success has already been priced in, but why can't it continue expanding if it finally starts investing its cash in newer and better projects for the future.  

Can't Touch This

Bitcoin Futures

• Chart should speak for itself
• Demand is beginning to soften
• 5970-8000 is still a wide and loose base that is broad for a potential bottom

The bulls of Bitcoin- BTC should hold this if there is any reason to believe the 6,000+ levels have any staying power.  

If this fails to settle a bottom we can begin to probe the depths for other buying opportunities.  Ever since the futures contract was created there has been so much trouble for this type of trading instrument, and in our opinion it has to do with the ability to sell this short.  

The Next Phase of the Dollar Index

This is a daily chart of the Dollar Index

• Comparing the Dollar's Advance to a basket of other currencies 
• The trouble with the Canadian Dollar 

• Formation of a bull trend with a partial retracement already set in (it may be complete) 
• It may not be near a complete termination of its bear phase but it is getting close
• We will compare fibonacci retracements to different time frames

The recent down draft in the dollar index is almost finished.  We would suggest the pullback is similar to that we experienced already in May and it could follow a similar pattern

• Sideways consolidation with a prior trend of negative movements
• Series of lower highs and lower lows
• Tied to crude oil prices, sensitive to interest rates and trade policies

Since September of last year, the CAD showed a few signs of making major breakdowns after periods of consolidation.  This recent action led to a few break-downs with minor consequences.  The 0.7734 level is currently in the middle of its 0.77 and 0.78 range and gives us some context about what to expect from what the resolution would be if the currency would continue sliding.  

The AUD has shown some weakness and should be monitored if it shows some signs of quicker downside momentum which would correspond with weakness in CAD as well.  

Short Entry

Selling Short the NZD/JPY

Reasoning for Yen strength, there are many factors driving the Yen trade but I am sharing this trade because I had to take it quickly and I thought it was a good example of a decent short entry 

1. 77.35 was where I entered earlier in the day  (blue line)
2. 76.62 was where I see myself taking off 1/4
3. Protective stop is above at 77.65

Gotcha - Island Top

The Topping Formation in QQQ

We are entertaining the idea of a double top, should there be any reason to believe new highs would print in the markets let that be so, but the past 15 trading sessions may be new money being put to work to capture some gains.  

The focus today is on yesterdays candle, today's consolidation and then the break out tomorrow

• Topping patterns don't have to be the exact same structure every time
• The indecision on today's candlestick marks one of the rarest type of candlestick patterns 
• 3-bar reversal pattern needs a bullish base, a tight doji (nearly unchanged) formation and then a follow through down on the right side

The rush higher, the pause and very tight consolidation, then the breakdown - in this case a possible resolution to the downside 

The QQQ did not penetrate above 175.21

The test today found that the upper channel of the resist points established in mid-March held so far and that there is an intense amount of stalling

Deliberation before the next directional move, at the bottom edge you'll also see very dry volume conditions.....

Trade well and be careful!

US-Dollar Potentials

Confirmation of the Pull-Back

• Series of Lower Lows
• Euro Strength?
• Commodities compared to the dollar 
• The 50-SMA and its distance away

In essence, what we have here is a daily chart of the dollar index showing a reversal with mild confirmation.  The reversal was triggered by a stalling above 12,000 and the decline has been occuring but with one speed bump.

The next motive would be to expand the average true range and reach a point where the dollar falls faster, and we make a move down toward (at or below ) the 50-Simple moving average.

After all is said and done, the dollar has a firm base of support just above 11,850 and that would be a good reference for a moderate support point.  

QQQ Buy Low Sell High

More Room to Run?

From the depths of Feburary (152.50) until mid-March QQQ adavanced 14.89% only to find that nearly the entire move was negated.  

Since April QQQ has been attempting to reclaim the high for this year, and for whatever reason it happened the 173-175.21 area was the trigger point for the bigger sellers who caused the decline 

The Bull Side

175.21 gets taken out and the rally continues with a new assumption of 180, 185 etc (possibly in 2% increases until the next fibonacci extension)

The Bear Side

A late January or March style decline happens again and the bears drive price down to the upper channel of the gap at 149.09 and 148.  

The Status of the Yen Pullback

The Far Reaching 111.33

Break-Out Further Confirming Yen Weakness and Dollar Strength 

• Deeper Demand Held
• Yen More Independent
• Plenty of Surprises
• Momentum

Well, this is only an 8-hour chart that we are observing today but it does show plenty of buyers below.  The fact is that on the larget time frames the 108.50 and 108's were levels of the most intense interest in buying USD/JPY or on the other hand the sellers were willing to step in and sell the Yen hard.

What I have noticed is that JPY tends to move independent of most markets as its on an island of its own, if US-equities decline again it may not coincide with a Yen mini-rally and for that reason we would have to just follow the sequence of this interim Yen weakening.  

The surprise here for me is how the 110 and even higher could be penetrated when this could be perceived as a dead-cat bounce. The consolidation has been established and what we are left with as traders is some upside momentum, so lets capture whatever there is left.