Month: November 2010

How to Spot High-Probability Trading Opportunities

By Elliott Wave International

The “moving average” is a technical indicator which has stood the test of time. Nearly 25 years ago, Robert Prechter described this indicator in his famous essay, “What a Trader Really Needs to be Successful.” What he said then remains true today:

“…a simple 10-day moving average of the daily advance-decline net, probably the first indicator a stock market technician learns, can be used as a trading tool, if objectively defined rules are created for its use.”

Indeed, “objectively defined rules” are vital to the successful use of moving averages. And as you might imagine, advanced rules and guidelines work to the benefit of more advanced technicians.

What is a moving average? As EWI’s Jeffrey Kennedy puts it, “A moving average is simply the average value of data over a specified time period, and it is used to figure out whether the price of a stock or commodity is trending up or down.”

Jeffrey also says, “One way to think of a moving average is that it’s an automated trend line.”

A 15-year veteran of technical analysis,  Jeffrey wrote “How You Can Find High-Probability Trading Opportunities Using Moving Averages.”
[Descriptions of the following charts are summaries from that eBook]:

Let’s begin with the most commonly-used moving averages among market technicians: the 50- and 200-day simple moving averages. These two trend lines often serve as areas of resistance or support.

For example, the chart below shows the circled areas where the 200-period SMA provided resistance in an April-to-May upward move in the DJIA (top circle on the heavy black line), and the 50-period SMA provided support (lower circle on the blue line).

Let’s look at another widely used simple moving average which works equally well in commodities, currencies, and stocks: the 13-period SMA.

In the sugar chart below, prices crossed the line (marked by the short, red vertical line), and that cross led to a substantial rally. This chart also shows a whipsaw in the market, which is circled.

Jeffrey’s 33-page eBook also reveals a useful tool to help you avoid “whipsaws.”

You can read the first two chapters for FREE for a limited time, once you become a Club EWI member.

The first two chapters reveal:

• The Dual Moving Average Cross-Over System
• Moving Average Price Channel System
• Combining the Crossover and Price Channel Techniques

Jeffrey’s insights are all about making you a better trader. Remember, the first two eBook chapters are FREE through November 30. So take advantage of this limited time offer by clicking here!

Europe’s sovereign debt concerns and escalating tensions between North and South Korea boosted Gold prices to a two week high as investors fled to the safety of the metal. Political and economic uncertainty tends to benefit the commodity as it is perceived as a haven investment. The renewed investment wave in the metal began as the Irish debt crisis unfolded as people began shedding risk. Gold futures for December delivery rose $16.50, or 1.2%, to $1,374.30 on the Comex in New York. Discouraging signs from the U.S economy also contributed to today’s rally.

It is difficult to say. However, whether today’s gains signal a short-term bounce or return to the momentum that has driven prices to a record high of $1424 an ounce earlier this month.

Volatility has been extremely high in Gold trading over the past few months; driven mostly by economic growth expectations from China and uncertainty about the pace of rising demand. Monetary policy in the U.S and China tends to have the strongest impact on the commodity. Gold’s rally was hindered by expectations of monetary tightening by China that may precede other developing nations thus curbing demand.

Gold traded lower as investors were liquidating their positions throughout last week, ahead of today’s options expiration and as the rollover continues from December futures into 2011 contracts. As options expire Gold prices could trend lower. Overall the momentum seems to have subsided slightly with investors getting more nervous as we get close to year end.

It is likely that Gold prices will remain higher for this week, heading to the long holiday weekend in the U.S as economic and political turmoil seems to dominate market sentiment. Any escalation in relations between the Koreas’ or further disappointing news from the euro-zone will likely push Gold above $1380 an ounce. We are, however, unlikely to see Gold levels breaching $1400 again ahead of the new year.

The Blackstone Group (BX) and Dynegy (DYN) said today they intend to scrap their merger agreement after todays shareholder meeting, where the deal proposal is expected to fail. Blackstone said it is disappointed that its best and final offer of $5 per share failed to win support of some of Dynegys biggest shareholders, namely Seneca Capital and Carl Icahn.

Hewlett-Packard (HPQ) posted expectation-beating fiscal fourth quarter results yesterday after the closing bell, and hiked its forecasts. HP said profits totaled $2.54 billion, or $1.10 per share, compared to $2.41 billion, or $0.99 per share, in the same quarter last year.

By Greg Holden – As I mentioned in an article yesterday, the price of Gold has been operating in long-term cycles of advance-and-retreat for the past year-and-a-half. While the overall trend is bullish for precious metals (Gold, Silver, and Platinum), there are periods of downturn in each. Looking at our chart below, it seems as if evidence is mounting for just such a movement.

Expecting a bearish correction is different than claiming a trend reversal. I am in no way disagreeing with other analysts whose claims place precious metals within a bullish channel. To the contrary, I agree with such claims, but would like to recognize the opportunities for short-term profits within the cyclical fluctuations of these instruments.

As we can see in the chart below, Gold has been moving with a rather distinctive pattern. Marked with a red line on the chart below, we can see the general direction of the overall trend of Gold. But notice that the price deviates away from this trend with sharper upturns. It’s as if the market is slamming its foot on the gas pedal and then hitting the brakes, over and over. I call this the “teenage drag-racer” formation.

But it goes beyond chart formations. We have a descending RSI, moments away from exiting the over-bought region. We also have a recent bearish cross on the Stochastic. Both indicators suggest bearishness. Also, if we follow our “teenage drag-racer” pattern, we can pick a great entry/exit point for traders.

Those going short on Gold may want to place their Limits near $1280. Those waiting for an entry point for another Buy position on the general uptrend should likewise aim for $1280 an ounce. If the bullish channel persists through the winter season, as it should, targets upward of $1500 an ounce may not be far off following this retracement.

Gold – Weekly Chart

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

Good day FX friends! I’m back and kicking once again! Anyway, in today’s forex feature is a technical update on the USDSGD pair – that’s the greenback versus the Singapore dollar. In case you do not know, the Singapore dollar (SGD) has been gradually beating the US dollar’s ass since March of 2009 much like what Manny Pacquiao was doing to Antonio Margarito in their fight last November 13. Notice, however, that the Sing’s ascent over the USD has hastened by June of this year up until recently. Over the past several weeks, the SGD has lost some of its steam and it even appears that it is consolidating into a possible inverted head and shoulders formation. If the USD continues to show some strength and the pair manages to break above the pattern’s neckline at around 1.3100 the it could swing back to at least 1.3350. On the flip side, a failure to move above the said level could just send the pair back in consolidation mode. In any case, whether the pair breaks out and reverses on the medium term, the long term bias would still be bearish for the it (bullish for the Singapore dollar and bearish for the USD) since it would still be riding on a long term downtrend.

More on LaidTrades.com …

By GCI Forex Research

Fundamental Outlook at 0800 GMT (EDT + 0400)

USD

News of an exchange of fire on the Korean peninsula led to a sudden increase in risk aversion towards the end of the Asia session. The dollar strengthened sharply, in particular against the yen given Japan’s geographical proximity. EURUSD traded 1.3542-1.3634, USDJPY 83.23-83.74. We expect further dollar strength into year-end as dollar bears look to unwind positions. The US data calendar was quiet at the start of the holiday-shortened week, which only heightened market participant scrutiny of Eurozone developments. Minnesota Fed President Kocherlakota, a 2011 FOMC voter, said that he expected QE to have only a “modest” impact. But he nevertheless supported it as growth is “alarmingly” slow and uncertainty in the economy is too high. Upcoming releases include the second estimate of Q3 GDP and the latest FOMC minutes. The minutes will include updated central tendency forecasts. We expect these will show a lower real GDP growth projection than the 3.5%-4.2% central tendency reported at the June meeting.
EUR

Increased political uncertainty in Ireland, coupled with a ratings agency warning of a potential “multi-notch” downgrade continues to weigh on the euro. Irish Prime Minister Cowen said he would not dissolve parliament immediately or step down. But he said it is important for the government to work on passing the budget and finish aid talks. Cowen said should the budget pass on Dec 7, he would dissolve parliament and call for elections in early 2011.
ECB Governing Council Member Liikanan said the euro will survive this crisis and that it is ‘impossible’ for the Eurozone to split. ECB President Trichet said the euro has delivered exactly what was expected and the euro was not at stake. He shares the view that a dollar that is credible among the major currencies of the advanced economies is in the interests of the US. Trichet also said non-standard ECB measures are temporary in nature and that Europe is in a better fiscal position than Japan or the US.
UK Chancellor Osborne reiterated the UK will not be part of a permanent mechanism but would offer bilateral loans to Ireland.

TECHNICAL OUTLOOK
EURUSD focus on 1.3363
EURUSD BEARISH Focus is on 1.3363; break through the level would expose 1.3265. Resistance at 1.3786 ahead of 1.4282.
USDJPY BULLISH Push through 83.99 would expose 85.93. Initial support at 82.40 ahead of 81.66 reaction low.
GBPUSD NEUTRAL Model is neutral; 1.6379 and 1.5840 mark the key near-term directional triggers.
USDCHF BULLISH Following the break of 0.9977, the pair has room for a run towards 1.0183. Near-term support at 0.9829.
AUDUSD BEARISH The pair has support at 0.9652 ahead of 0.9542. Resistance at 0.9954 ahead of 1.0183.
USDCAD BULLISH Sustained break of 1.0380 required to confirm the bull trend. Initial support at 1.0070.
EURCHF NEUTRAL 1.3834 and 1.3229 mark the near term directional triggers.
EURGBP BEARISH Sell-off from 0.8942 found support at 0.8449 ahead of 0.8390. Initial resistance at 0.8638.
EURJPY BULLISH While support at 111.05 holds, require a break through 115.68 to confirm a bull trend.

Forex Daily Market Commentary provided by GCI Financial Ltd.

GCI Financial Ltd (”GCI”) is a regulated securities and commodities trading firm, specializing in online Foreign Exchange (”Forex”) brokerage. GCI executes billions of dollars per month in foreign exchange transactions alone. In addition to Forex, GCI is a primary market maker in Contracts for Difference (”CFDs”) on shares, indices and futures, and offers one of the fastest growing online CFD trading services. GCI has over 10,000 clients worldwide, including individual traders, institutions, and money managers. GCI provides an advanced, secure, and comprehensive online trading system. Client funds are insured and held in a separate customer account. In addition, GCI Financial Ltd maintains Net Capital in excess of minimum regulatory requirements.

DISCLAIMER: GCI’s Daily Market Commentary is provided for informational purposes only. The information contained in these reports is gathered from reputable news sources and is not intended to be U.S.ed as investment advice. GCI assumes no responsibility or liability from gains or losses incurred by the information herein contained.

By Russell Glaser – The daily chart of the USD/SEK is showing an interesting chart pattern that hints at a reversal in the long term trend of the pair.

Despite the renewal of the European debt crisis the Swedish krona has struggled to make up ground versus the euro. During the period of the Irish debt crisis the Swedish krona has since depreciated against both the euro and the dollar.

As fears of another fiscal crisis rip through Europe, the euro is stronger versus the Swedish currency. After months of speculation that Spain, Italy, or Portugal would be the next nation to require rescue funds from the European Financial Stability Mechanism, it was the Irish banking crisis that has caused Ireland to agree to a funding option from both the European Union and the International Monetary Fund.

Even Sweden is offering up to $1.6 billion in aid to shore up the Irish banking system. In a speech yesterday the Swedish Finance Minister announced his country’s intention to provide aid to a fellow EU member nation. To promote trade amongst EU members it is in Sweden’s best interest to give financial support Ireland.

It is no secret that a healthy EU will allow for more open trade and economic growth. This may explain Sweden’s enthusiasm for offering loans to Ireland. Should the economic crisis spread to Portugal and Spain, the economy of Sweden may experience a drop off in economic productivity.

As such, an explanation for the weakness in the Swedish krona may be a result from the European debt crisis. European nations that are part of the European Monetary Union account for more than 32% of Swedish exports. An economic slowdown in these nations could take a toll on the Swedish economy and is a downside risk for the Swedish krona.

The daily chart of the USD/SEK is showing some interesting chart patterns. The long term trend line which held since early June was recently breached. This trend line should serve as a new support level.

The pair made a head and shoulders bottom beginning in the month of October and through early November. The neck line has since been breached. This could signal a reversal of the long term downward trend. When measuring the neckline of the head and shoulders pattern an estimate of the potential move may be 2800 pips from the breach of the neck line. This measured move coincides with the support level from the August low at 7.0390.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

By Greg Holden – We’ve been watching the price of precious metals soar over the past several months and many analysts will tell you to expect a continuation of this trend. We must not forget that global economies are still suffering financial concerns and that normalcy remains elusive to the current state of the world economy. In such an environment, safe haven investments – like Gold and Silver – tend to rise.

But to short-term, intraday traders there is yet another side to this story. While it is true that Gold and Silver are on the rise, and will likely remain so for some time, it is also true that every trading instrument moves in cyclical patterns.

Gold and Silver each possess a number of technical indicators which point to a buildup of bearish pressure. This is clearest on the Gold weekly chart (see below). A pattern has emerged on the price of Gold which is worth exploring in greater detail.

Stay tuned this week for a deeper look into the cyclical pattern of Gold which has developed over the past year-and-a-half, as well as its implications for other precious metals, such as Silver.

Gold – Weekly Chart

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

Source: ForexYard

The euro dropped on concern Ireland’s debt woes will spread to other euro-zone economies such as Portugal and Spain. The possibility of an election in Ireland also pressures the euro as it may hinder the nation’s aid talks with the European Union and the International Monetary Fund.

Economic News

USD – Dollar Rises as Investors Fear Spain, Portugal May soon Follow Ireland

The dollar rose against the euro Monday, continuing the trend during today’s Asian trading as investors turned their focus to other euro-zone nations that are facing debt problem and may require financial aid.

The dollar initially dropped after Ireland formally agreed to request aid from the International Monetary Fund and European Union to the sum of €80 billion to €90 billion ($109 billion to $123 billion), aimed to address the country’s budget deficit and banking system’s problems, reaching near $1.3800. However, after the initial euphoria, concerns regarding other euro-zone nations’ debt issues resurfaced and the EUR/USD pair soon sank below $1.3600. The pair reached a low of $1.3545 overnight and is currently trading around $1.3570.

Gold futures rose modestly Monday but a stronger dollar capped the gains. Gold futures for December delivery gained $5.50, or 0.4%, to settle at $1,357.80 a troy ounce on the Comex division of the New York Mercantile Exchange. Silver futures for December delivery rose 28.2 cents, or 1%, to $27.461 an ounce. The metal gained 7.7% in the previous three sessions.

A busy news day is expected today from the U.S heading towards Thanksgiving weekend; traders should follow the release of the Prelim GDP numbers at 13:30 GMT as well as the FOMC meeting minutes release at 19:00 GMT. Better than expected GDP numbers may help push the EUR/USD pair back towards $1.3500 and Gold towards $1355 an ounce.

EUR – EUR Drops below $1.3600 despite Initial Surge

The euro dropped against the dollar Monday, surrendering all gains made following Ireland’s official request for aid as investors turned to Spain and Portugal as the next possible euro-zone sovereign debt casualties. The Irish government Sunday said it had formally applied for tens of billions of euros in aid from the European Union and the International Monetary Fund.

Political uncertainty, brought on by Ireland’s Green Party’s call for new general elections in January added to the negative pressure on the common currency. The EUR dropped below $1.3600 after nearing $1.3800 earlier on Monday. It also dropped over 150 pips versus the JPY to currently trade around 113.00.

Commodities such as Gold and Silver have been benefiting from the uncertainty surrounding Irish government’s request for financial aid as well as other indebted euro-zone nations as the metals are perceived as an alternative investment with Gold reaching a high of $1367 Monday.

A busy news day is expected from the euro-zone today with the release of the French, German and euro-zone Manufacturing and Services PMI data at 8:00, 8:30 and 9:00 GMT respectively; better than expected numbers may provide a much needed boost for the euro.

JPY – JPY Gains versus EUR, GBP

The USD/JPY continues its recent range trading, staying comfortably between 83.00 and 83.60. The Japanese currency, however, made great gains versus the EUR and the Pound Monday, gaining over 150 pips against both currencies. The yes is perceived as safe haven currency and tends to benefit greatly in times of financial uncertainty as is the current situation in the euro-zone; with the euro dragging other riskier currencies down with it, the yen benefits.

With a bank holiday in japan today, no news is expected from the region. Traders should follow, however, any news release from the euro-zone and the U.S, as well as any new developments regarding the Irish debt crisis as these will likely have great effect on the JPY.

Crude Oil – Crude Declines Below $82 a Barrel

The January delivery contract during today’s early Asian trading dropped to $81.72 a barrel on the New York Mercantile Exchange. Earlier, it advanced as much as 0.4 % to $82.10.

Oil traded near $82 a barrel in New York yesterday after climbing Monday as analyst estimates showed crude inventories dropped for a third week in the U.S., the world’s largest energy consumer. Spot crude declined this morning as the dollar strengthened versus the EUR and is currently trading near $81.50 a barrel.

Despite the decline in inventories Oil prices remain under pressure over speculations that Europe’s debt crisis might spread, debilitating economic growth and thus reducing fuel demand. Traders are advised to follow any development from the region as any negative data will likely push oil prices back towards $80 a barrel.

Technical News

EUR/USD

Some upward movement may be expected for the pair as a bullish cross can be seen on the 4 hour chart’s Slow Stochastic while the RSI for the pair is floating in the oversold territory on the hourly and 2 hour charts. Going long with tight stops may be advised for the day.

GBP/USD

While the pair is range trading at the moment with most indicators floating gin neutral territory, some upward correction may be seen today as a bullish cross is evident on the 4 hour chart’s Slow Stochastic. Going long for the day may be advised.

USD/JPY

The pair is range trading at the moment between 83.10 and 83.60, with most indicators floating in neutral territory, waiting on a clearer direction for the pair may be advised

USD/CHF

While the par is currently range trading, with most indicators in neutral territory, it seems that there is still room for the downward momentum to continue as the daily and weekly RSI are floating in the overbought territory. Going short may be a good option for the day.

The Wild Card

GBP/CHF

The RSI for the pair is floating in the oversold territory on the 2 hour and 4 hour charts. A bullish cross is evident on the 4 hour chart’s Slow Stochastic while a doji candlestick is seen on the chart, indicating a possible reversal in direction. Forex traders may be advised to go long for the day.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.