Superior Trading Skills through Education

It's not Rocket Science Print
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Wednesday, 12 April 2017 10:24

  Detective Clipart 25573Just some detective work as a discretionary trader. It's not slavishly following a 'cast in stone' algorithmic style, the type of system that only considers a never changing set of criteria that is much better traded by a computer than a human.

Detective work takes a look at the chart to find those clues that just might build a case to put on a trade.

One of our recent Traders Class trades was the New Zealand vs Japanese Yen. The evidence started with a classical charting pattern, a Double Top.


The chart shows the right hand, second top, that formed in January and then price action backed away.

The red line above it, picked out the high of the first top in December and, at the bottom of the chart, our Activity Index set up a classic divergence pattern with a much lower high.

This telling us there was much less buying activity during the second top forming. These were the first two pieces of evidence, so this pair was now put on watch!

We just needed to wait for the neckline to give way at 80.66.

Then there was a nudge from the underlying fundamentals. At the end of January, Trump 'talked' on the phone with the Japanese PM Shninzo Abe, inviting him to visit. Trump had previously tweeted that the Yen was way too low, creating unfair competition. The scene was set for Abe to receive an ear bashing and more if he didn't allow the USD to weaken against the Yen!

Add in New Zealand finance ministry comments that they would like a lower NZD to help their dairy industry and the background was set.

Even without having read this news, the chart was giving way niceley. On 9th Feb a rally started that became another classic retracement patern, the A-B-C, Zig-Zag-Zig. It's THE most common pattern in all markets.

The C wave then completed just under the Fibonacci retracement 61.8%, another classic trend bounce back and continuation pattern.

During this A-B-C bounce, the Volume Activity Index dropped below it's zero line, the Swing Trend turned red - the down trend is underway. That's now four more pieces of chart evidence pointing to a potential down trend. 

Price now tested the neck line, bounced, and found sellers pushing it back down from the middle of the Bolinger bands, one of the other tools we use.

Finally the neck line broke down and so the trade is fully confirmed. Seven pieces of chart evidence had presented themselves plus the two, non chart, fundamentals.

The lower red line was the classic double top target level at 313 pips and it's still running - adding on a further 150 so far.

Evidence like this, is readily on view, we just need to know hat to look for. Twice a week, Traders Class, members receive updated videos showing the charts that are presenting the evidence that gives us runs like these.


From the blog

Want to See What's Next for the Economy? Try This....

Want to See What's Next for the Economy? Try This....


On Monday 15th July, US stock markets made a new all time high. Does this also mean that the US economy is doing just fine?

The US Federal Reserve believe so despite the naysayers who so often tell us the 'real' economy is about to collapse into recession. Next Wednesday, the last day of July, is Fed day when many commentators believe it is highly likely there will be an interest rate reversal.

We've had a stream of quarter point rises. For some, the expectation is now for at least a quarter point cut, maybe more. Will this be enough to save off recession and keep the market buzzing to new highs?

Read on for the Socionomic view from Elliott Wave International...

Don't listen to the naysayers -- there IS a way to forecast the general health of the economy. This method has repeatedly proven itself.

Yes, you can anticipate the likelihood of a recession, even a depression -- or, conversely, when major economic measures -- like jobs -- will be robust.

That surefire way is the performance of the stock market.

That's right, despite the widespread belief that the economy drives the stock market, it's the stock market which leads the economy. Why not the other way around? Because the economy is a slow boat.


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