Trade Spotting: Trade Week Analysis April week 1

Last week: 2 x TS Forex signals give 660 pips! After weeks of receiving few and choppy TS signals the last week made up for this in spades. There were two FX signals that were received on the previous Friday and that kicked on to give hundreds of pips. These moves were already being stalked in the lead up to these signals as both of the currency pairs in question were setting up for potential technical breakout trades:

The EUR/AUD signal was received on Friday 21^st off my 4 pm candle and this gave up to 410 pips. This signal came along with a triangle break down as well.
The GBP/AUD signal was received off my Sat 22^nd 4 am candle and gave up to 250 pips. This signal came along with a H&S break down as well.

There was also a TS signal on Gold from my Monday 24^th 4 pm candle that delivered a move of $36. This signal came along with a bearish trend line break down.

There were also technical patterns on the A/U and AUD/NZD that I've been stalking for some time that went on to deliver hundreds of pips too: The A/U gave up to 200 pips in the bullish move from the 0.905 ‘neck line’ and the AUD/NZD bullish ‘double bottom’ move gave up to 100 pips for the week before pulling back.

This week:

There is a lot of data scheduled for next week with NFP finishing the week off on Friday. The important Chinese official PMI is due out on Tuesday.

Monday is the final day of the trading month and quarter. Watch to see how monthly candles close and, then, for new monthly pivots. Thus Tuesday, being the first day of the trading month AND Chinese PMI, could be a significant day.

The S&P500 is still trading within a symmetrical triangle and a few FX pairs are also trading within similar triangle, or other styles of technical, indecision-style patterns. Traders need to monitor trend lines for potential breakout.

The USD index, whilst struggling over recent weeks, looks like it could be setting up with a bullish technical pattern. This needs to be monitored as any renewed bullish action with the USD has obvious consequences for many USD denominated FX pairs.

We are heading towards Easter so it it probably isn't too surprising that a bit of 'Holy Trinity' alignment kicked in on Friday. Just a tine bit. The S&P500, U/J and Nikkei all had good days and I'll be watching to see if this continues.

Events in the Ukraine still have the potential to undermine any developing ‘risk’ appetite and needs to be monitored. President Obama has spoken with Putin over the w/e and any change in tension could trigger market movement; Reduced tension could trigger a relief rally but, obviously, heightened tension could trigger further 'risk off'.

Stocks and broader market sentiment:

There is a bit of fear creeping into stock markets BUT I’m not seeing a clear new direction for the major index of the S&P500 just yet. S&P500 stocks were choppy again last week BUT the index is still contained within a symmetrical triangle and just as likely to break up as down! I’ll continue watching these trend lines for guidance.

I am still seeing divergence on the monthly chart and, as previously stated, this might be warning of a pause as the index navigates new highs but the chance of a pullback cannot be ruled out either. There has not been any real deep pull back since the break up through the 1,577, 1,600, 1,700 and 1,800 levels and the major break of the 1,577 level was only tested once.

I continue to watch out for further clues as to any new momentum move, long or short though! In particular I’m looking out for:

S&P500 daily chart: I’m watching for any break of the daily trend line but price is holding above this for the time being. Price is trading within a triangle pattern and I’m watching for any triangle breakout here, up or down!

Ichimoku S&P500 chart: a clear cross of the blue Tenkan-sen line below the pink Kijun-sen line. A new bearish Tenkan/Kijun cross evolved on Friday 28^th March. This cross is deemed ‘weak’ though as it evolved above the Cloud and, also, the Tenkan/Kijun lines were angled the wrong way for a bearish move. Price is still trading above the Cloud so any new bullish Tenkan/Kijun cross above the Cloud would be quite significant as the last such bullish cross marked the start a long running uptrend.

EURX chart: The November and December monthly candles closed above the major S/R level of the monthly 200 EMA. November was the first monthly close above this S/R level in almost 2 ½ years! This was a major achievement for the index but it failed to hold these levels for the January close. Price closed back above the monthly 200 EMA for February though and this is rather bullish. Price has held above this level again this week. With only one trading day left for March I'll be noting on Tuesday where the March candle close.

S&P500 monthly chart: a break of the monthly support trend line (see monthly chart). The monthly trend line remains intact. A break of this support level would suggest to me of a more severe pull back or correction. The look of this ‘market top’ still appears quite different to that of the previous two market tops from back in 2000 and 2007. I am seeing a bit of divergence creeping in now on the monthly chart. This may just be as the index pauses and ponders this new high or it could be warning of a pull back. Elliott wave suggest a big correction here though. I am still thinking that the 1,600 level might be the new base line for this index. The saying that ‘Old resistance becomes new Support’ holds here. I still believe that it would not be at all surprising to this 1,600 level tested again. It has only been tested once by a monthly candle since the bullish breakthrough and I would expect a significant level such as this to be tested more than once. Maybe I’m wrong here though as there have now been seven consecutive months of candles that have closed above this key level, and, without testing this region at all. To add to this thought of bearish pull back potential, the previous candle close ‘highs’ from back in 2000 and 2007 were down near the 1577/1580 area so it is entirely feasible that price may even test this region again before any continued move upwards.

Items to watch out for:

Mon 31^st: NZD Business confidence. EUR CPI Flash estimate.
Tue 1^st: G7 meetings. CNY Manufacturing PMI & HSBC Final manufacturing PMI. AUD Cash rate. GBP manufacturing PMI. USD ISM manufacturing PMI.
Wed 2^nd: AUD Building approvals. GBP Construction PMI. USD ADP Non Farm employment.
Thurs 3^rd: AUD Trade Balance & Retail Sales. GBP Services PMI. EUR cash rate & ECB conference. USD Trade Balance,& unemployment claims & ISM non-manufact PMI.
Fri 4^th: USD NFP & unemployment rate.

E/U: Price chopped around under the major resistance of the 61.8% fib from the 2011-2012 bear move all week. It broke down through a recent support trend line but this bearish move did not trigger any new TS signal. Price bounced up off the support of the 1.37 on Friday. In looking over the E/U charts this w/e I’m now seeing a bullish descending wedge holding price on the 4hr time frame.

The E/U is still at a pivotal level as it trades just under the 61.8% fib level and the monthly triangle trend line. Whether this level marks a major break out for this currency pair or proves to be a turning point for a move back lower still remains to be seen but I had stated that this period would be marked by choppiness and we have seen this again last week. EUR interest rates are announced next week on Thursday and there might not be much clarity of this overall situation until at least after that news is released.

Monthly chart triangle breakout looming? The E/U is still poised just below the bear trend line of a major triangle pattern that has been setting up on the monthly chart since back in 2007; the start of the major bear move. Traders need to be on the lookout for any triangle break here as the suggested move from any such breakout could be of the order of upwards of 3,000 pips! The theory behind these breakouts is that the ‘height’ of the triangle represents the possible pip quota for any breakout move. I consider that I have been reasonably conservative with my target as I have only measured the height of the triangle from the 2011 region. The height measured from the 2007 region would suggest a much larger target.

Price is trading below the Cloud on the 4hr chart, above the Ichimoku Cloud on the daily and weekly charts and is trying to push up through the Cloud on the monthly chart.

The weekly candle closed as a bearish candle.

I’m watching for any new TS signal on this pair, the 61.8% fib and the monthly triangle trend line.

E/J: Price chopped sideways within the symmetrical triangle and just above the major level of the 61.8% fib level from the 2008-2012 bear move until Friday. Friday’s trading saw price slip below this support trend line and below the major 61.8% fib level but, then, rally later during the US session to trade back above both of these levels.

Like the E/U, this pair is trading at a pivotal level as it navigates this 61.8% fib of the 2008-2012 bear move. This level will ultimately also prove to be a demarcation point for price action here and I’m watching for clues as to which direction this will be, either bullish continuation or bearish reversal, but there are no clear signs as yet.

Price is trading in the Cloud on the 4hr, just above the top edge of the Cloud on the daily and above on the weekly and monthly charts. The November and December candles were the first to close above the resistance of the monthly Ichimoku Cloud since 2008! I had thought that price might pull back down to test this key break out level before any possible bullish continuation and this seems to have evolved. Price has already pulled back to test the top of the monthly Cloud.

The weekly candle closed as small and bullish but almost as a ‘spinning top’ style of candle.

I’m watching for any new TS signal on this pair, the triangle trend lines and the 61.8% fib level.

A/U: Comments from RBA Gov Stevens helped to boost the AUD this week. The bullish ‘inverse H&S’ pattern on the daily chart has evolved and price rallied up to 240 pips above the 0.905 ‘neck line’ level. Price action stalled to see out the week parked at the daily 200 EMA.

I mentioned at the end of last month that the AU had presented with a bullish-reversal looking 'railway track' pattern for the monthly candle close. Price has now rallied almost 400 pips since that post. The monthly chart, with just one trading day left, now looks as follows:

Daily chart inverse H&S: This technical pattern has already delivered 240 pips of a ‘suggested’ 380 pips. The theory with these patterns is that the suggested bullish continuation is equivalent to the height of the H&S, that is, the height of the ‘Head’ from the ‘neck line’. The height of this H&S is about 380 ~ 400 pips or so. This would suggest a target for any bullish follow through to be up near the 0.945 region. The Aussie is trading below the Ichimoku Cloud on the weekly time frame but the bottom edge of the weekly Cloud comes in at around the 0.94 region. This isn't too far from the inverse H&S target so it would seem like a good 'take profit' region:

Price is trading above the Cloud on the 4hr and daily chart but below the Cloud on the weekly chart and in the bottom region of the Cloud on the monthly chart.

The weekly candle closed as a large bullish candle.

I’m watching for any new TS signal on this pair and the continuing inverse H&S.

A/J: The A/J continued to grind higher after the previous week breakout from the bullish, broadening descending wedge. Price is not too far below the highs reached last October and the daily chart is starting to form up with a potential ‘double top’ look to it.

Price is trading above the Cloud on the 4hr, daily, and monthly time frames which is bullish.

The weekly candle closed as a large bullish candle.

I’m watching for any new TS signal on this pair.

G/U: The Cable chopped higher this week within a descending channel and this continued giving the weekly chart a bit of a ‘Bull Flag’ look. Price eventually broke out and up from this channel on Thursday but this bullish movement did not trigger any new TS signal. The Cable is still not too far below the resistance of the monthly 200 EMA but a continued hold below this level would be bearish. Any new break back above this major resistance zone would be a very bullish signal though.

It is important to remember that February was the first monthly close above the monthly 200 EMA since September 2008 and also the highest monthly close since the bear move of 2007-2009. These were major achievements. Whether this zone marks a demarcation before the next major move higher or marks a turning point before moving to trade lower still remains to be seen here.

A possible target for any continued bullish movement is best determined from the monthly chart. The 50 % fib level of the 2007-2009 bear move is up at around the 1.73 region and the 61.8 % fib is at the 1.82 region. Both of these levels might be possible profit targets. The 61.8% fib level is only about 1,500 pips away and might seem an impossible task but I’d advise you to look at the monthly chart of the E/J and U/J before you reject this idea.

Price is now trading above the Cloud on the 4hr, daily and weekly charts and in the Cloud on the monthly chart and represents a bullish shift.

The weekly candle closed as a bullish engulfing candle.

I’m watching for any new TS signal on this pair and the monthly 200 EMA.

Kiwi: NZD/USD: Price chopped higher last week within the ascending triangle pattern and, once again, traded right up to the major triangle trend line on the monthly chart. Positive Trade Balance data on Thursday helped to lift this pair and it broke out and up through the triangle pattern but this bullish move did not trigger any new TS signal. Price didn’t get too much further for the week though after making this impressive bullish breakout. The previous high, up at near the 0.88 region, now looms as forming a potential target but this would also be quite a resistance zone and a possible ‘double top’ region.

Price is now trading above the Ichimoku Cloud on the 4hr, daily, weekly and monthly charts which is bullish.

The weekly candle closed as a large bullish candle.

I’m watching for any new TS signal and the monthly triangle trend line.

EUR/AUD: Price continued lower following on from the bearish triangle breakout and TS ‘sell’ signal from the previous Friday. This bearish signal has now closed off but delivered up to 410 pips.

The height of the triangle here was about 700 pips and thus the breakout move could be expected to extend by the same order of magnitude. I had been thinking that price might get at least as far as the daily 200 EMA and 61.8% fib area. This region is another 150 pips or so below current price and the move has already delivered 410 pips.

The E/A is still trading below the Cloud on the 4hr and the daily charts which is bearish.

The weekly candle closed as a large bearish candle.

I’m watching for any new TS signal.

The Yen: U/J: The U/J is still trading within a triangle on the daily chart and continued chopping around just under the monthly 200 EMA until Thursday. Price rallied on Friday though and closed up above the monthly 200 EMA and even reached up to near the top of the triangle.

The 61.8% fib of the 2007-2012 bear move is still well above current price now. This is a major demarcation point here. A continued hold below this level would be bearish but any new close and hold above would most likely signal bullish continuation.

Price is now trading above the Cloud on the 4hr, weekly and monthly charts and in the middle of the Cloud on the daily chart which suggests choppiness BUT with a new bullish bias. November was the first monthly candle close above the Ichimoku Cloud since mid-2007 though and a look at the monthly Cloud chart shows how a test of the monthly 200 EMA, and even the top edge of the Cloud, would seem quite reasonable even if there was to be bullish continuation. Price has struggled since it emerged from the monthly Cloud and we may still get a further test of this support but any continued hold out from this region would suggest bullish continuation.

The weekly candle closed as a bullish candle AND above the monthly 200 EMA.

Weekly Chart Bullish Cup’ n’ Handle pattern: The theory behind these patterns is that the height of the ‘Cup’ pattern is equivalent to the expected bullish move from the ‘handle’ breakout. The height of the Cup for the U/J weekly chart is around 2,400 pips. The interesting point here is that a 2,400 pip bullish move up from the ‘Handle’ would put price up near the 124 level. This level is the last major swing high for the U/J from back in 2007 and represents the 100% fib pullback for the move down in 2007 to the lows of 2012. Possible targets along the way include the 61.8% fib retrace level at the 105.5 region and the 78.6% fib up near the 112 region.

I’m watching for any new TS signal, the monthly 200 EMA and the triangle trend lines.

Nikkei: Price closed below the 15,000 level this week BUT above the previously broken trend line. The monthly candle here has just one day until it closes and I’ll be keen to see if it can manage to hold above the trend line and back above the 15,000 level.

The Nikkei closed for December and for 2013 above the 16,000 level and, also, above a major bear trend line that had been in play for over 20 years. This is a significant development for this index and is a rather bullish signal.

Note how the 15,000 level is near the 38.2% fib retrace level of this huge down move. The 61.8% fib level is back up near the whole number 20,000 level and would be an obvious target for any continued bullish momentum.

UJ and S&P500: The U/J and S&P500 traded with positive correlation for much of 2013 and after some recent divergence they are still back in sync.

Nikkei and U/J: (U/J: black. Nikkei: green). These two are still pretty highly correlated:

Nikkei and S&P500: (S&P500: green. Nikkei: black). A bit of divergence had crept back in here but they traded in sync at the end of last week. I'll be on the lookout for any continuing alignment.

GBP/JPY: I am still watching the daily chart here as the bullish 'inverse H&S' pattern still seems to be setting up.

Price is trading above the Cloud on the 4 hr, daily and weekly charts which is bullish.

The weekly candle closed as a bullish candle.

There was a new TS signal on my Sat 4 am candle BUT this candle was outside the Bollinger band and, thus, is not valid.

AUD/NZD: The A/N traded higher until Thursday and this bullish momentum continued to support the evolving ‘double bottom’ pattern. The daily chart shows how this developing bullish reversal pattern is forming up just above the 100% fib pull back level of the 2005 low. The stronger than expected NZD Trade Balance data on Thursday helped to boost the NZD though and this resulted in the AUD/NZD pulling back a bit but it still closed higher for the week.

Price is now trading above the Cloud on the 4hr and below on the daily charts which suggests further choppiness but with a bullish bias.

The weekly candle closed as bullish candle.

I’m watching for any new TS signal and the ‘double bottom’.

GBP/AUD: This pair continued to chop lower last week after breaking down through the ‘neck line’ of the H&S pattern and triggering a new TS ‘sell’ signal at the end of the previous week. This TS signal closed off on Friday but not before delivering 250 pips.

Daily chart H&S pattern? The theory with these patterns is that the suggested bearish move would be equivalent to the height of the H&S, that is, the height of the ‘Head’ from the ‘neck line’. The height of this H&S is about 1000 pips or so. This would suggest a target for any bearish follow through to be down near the 1.70 region which isn't too far from the weekly 200 EMA.

Price is trading below the Cloud on the 4hr and the daily chart which is bearish.

The weekly candle closed as a bearish candle.

The continued hold above the 1.75 level for now remains as bullish though. The monthly chart shows how this pair has had a major move down starting back in 2007 and only bottomed out in April 2013. The 61.8% fib retrace level of this down move is back up at the 2.1 area and this is also the region of the monthly 200 EMA, just for added confluence. This 61.8% fib area might be a possible target for any continued bullish momentum.

The Cable started to look bullish again towards the end of last week and I’ll be watching to see how this moves next week as any continued bullish momentum with the Cable might make the GBP/AUD choppy.

I’m watching for any new TS signal.

Silver and Gold:

Silver: Silver continued to chop lower last week after opening under the $20.50 support level and following on from the bearish engulfing weekly candle of the previous week.

Silver is now back trading below the Ichimoku Cloud on the 4hr, daily, weekly and monthly charts which is bearish.

The weekly candle closed as a bearish candle!

The major support level below $20 seems to be down at $15, near the monthly 200 EMA.

I’m watching for any new TS signal.

Gold: Gold fell below a daily support trend line and the key daily 200 EMA S/R level on Monday and also triggered a new TS ‘sell’ signal. This bearish signal yielded up to $36 but price stalled at the end of the week to close just above the 50% fib of the recent bull move.

Gold is now trading below the Ichimoku Cloud on the 4hr and weekly charts and just above on the daily chart. The February monthly candle closed up into the bottom edge of the Cloud. It is worth remembering that the November candle was the first monthly candle close below the Ichimoku Cloud since January 2002, a period of almost 12 years! The current March candle is trading just under the monthly Cloud.

The weekly candle closed as a large bearish candle.