Tag Archives: technical analysis

2 Comments

Trade Leader Or Kahana presents analysis of the AUD/JPY.

AUDJPY created numerous of bullish patterns on several time frames, from the hourly chart to the daily chart. The uptrend can develop into a monthly trend, depending on the monthly close.

AUD/JPY chart

AUDJPY created a bullish pattern in the Woodie's CCI hourly chart. The 50 CCI (in black) made a nice bearish movement by building two hills in the -200 CCI area and another hill in the -60CCI and crossed the zero line upwards.

In order to avoid the bearish correction, don't enter a long position in AUDJPY right away; wait for an hourly ZLR to perfect your entry. I've written earlier about recognizing Zero Line Rejects.

In the daily chart there is a potential for a ZLR in Woodie's CCI. If the 6TCCI (in blue) will reach the zero line a daily ZLR will be closed. It does not depend on the closing price level; it can be during this day or the next days. In the daily chart, the price also didn't reach to the upper band after it closed above the 20MA. Therefore, I expect the AUDJPY to target 96.440.

As mentioned in the first paragraph, this establishing uptrend can develop further even to the monthly chart.

Trade Leader Or Kahana presents technical analysis of the AUD/USD.

AUDUSD painted a bearish pattern on the weekly chart followed by a big bearish candlestick. Looking at Woodie's CCI monthly chart you can see AUDUSD is at the beginning of its downtrend. Last week the pair affirmed a bearish candlestick, which indicates the resumption of its weakness. The graph also created a technical pattern called 'Double Top.' The decline will start as a correction and might develop into a trend reversal.

AUDUSD-Multi-Bearish

Woodie's CCI daily chart built a bearish Vegas pattern. This pattern is created when the 50CCI climbs to the +200CCI, folds down and creates another hill in the +100CCI area (sometimes more than one) and crosses the zero line. (This particular pattern has a lot of nuances, so don't try to trade it based on this information only.)

When the 50CCI is crossing the zero line it's better to wait for the first red bar in the Woodie's CCI to affirm the bearish trend.

The daily chart also painted a bearish flag. A flag is a technical continuation pattern which is created when a correction of a healthy move is held in a tight range (sideways). The weakness of the technical correction indicates that we should expect the trend of the flag pole to continue.

Sometimes I am waiting for a candle that closes significantly (the amount of pips depends on the time frame of the flag) below the flag's support, but in this case I am using Woodie's CCI for improved entries. Woodie's CCI helps me to avoid minor or moderate corrections. I am searching for an hourly Zero Line Reject (ZLR) to join the downtrend.

I set three targets for the short and medium term on the weekly chart:

A: 0.9200

B: 0.9128

C: 0.9052

Trade Leader Alex Kazmarck presents analysis of the USD.

Update

Happy Friday traders! The dollar has continued to perform well against the majors as the dollar index rebounded last week from the key 79 level. This figure has provided support all the way back to September of 2012. Currently, the USD rally seems sustainable with the Fed taper plans and interest rate expectations fundamentally supportive. While much hinges on the sustainability of the US recovery, I think it’s important not to forget that global downside risks remain and this could also be supportive of the dollar given its safe-haven flow status.

Technicals

The trade weighted index for the USD has been supported at the 79 figure as mentioned earlier. The recent failure to close below the figure and the momentum that carried it above the 80 level is significant. Currently finding resistance within a triangle, a breakout and close above the 80.50 figure could provide enough momentum to test the 83 level sometime during the next 12 months. A break below the 79 level is very unlikely, but if broken, it would most likely be caused by a deteriorating US economy and more QE from the Fed.

dxy  eurusd

The euro has taken a turn for the worse since expectations increased that the ECB will take action against the long period of low inflation. While it’s difficult to say if the market expects a decrease in interest rates or purchase of some form of assets (EFSF bonds?), the recent economic data justifies further action by the ECB in the medium term. So if the euro rebounds on the fact that the ECB takes a conservative approach and takes rates below zero, it’s unlikely to find momentum to set new highs. It broke channel support two weeks ago and will now find short term support at the 200 day MA (~1.3630) followed by 1.3500 through 1.3180 and somewhere between the 1.28 and the 1.30 figure during the next 6 to 9 months.

Summary

While I believe technical analysis plays an important role in trading, fundamentals are the driving factor behind supply and demand, which is what drives price in the long term. There remain a lot of global risks: China, geopolitical conflicts, economic uncertainty, and government interventions. Traders must remain prudent in forming tactical trading decisions around both technical and fundamental factors.

1 Comment

Trade Leader Or Kahana presents analysis of the GBP/USD.

GBPUSD may create a bullish daily Zero Line Reject (ZLR) in Woodie's CCI. When the markets will open, a ZLR wouldn't be confirmed since the last daily candlestick closed with a shadow. There are many economic figures this week for GBP, so its pairs and crosses will probably make an aggressive movement. When a daily ZLR is affirmed (might look like the drawing in the right picture), I will search for an entry on shorter time frames.

GBP-17-5-ZLR-D1

On February 20, 2014 I wrote a post regarding GBPUSD possible strength due to a Bullish Right Triangle in the monthly chart. A confirmed trend on the monthly chart lasts months and even years, with deep corrections along the way. Whenever I see a strong pattern in the monthly chart I will look for a pattern in other time frames using my indicators and graphic patterns to join the trend.

When looking on GBPUSD daily chart, one may see the Woodie's CCI might provide us with the perfect entry for joining the monthly uptrend. This potential ZLR is nicely shaped; the 50CCI is quite close to the zero line, while the 6TCCI is in the -100 area, both bounds sharply in a V-shape.

Whoever wants to avoid the bearish corrections should look for a bullish pattern on the shorter time frames, using indicators or graphic patterns. I would use the hourly chart. Observing the hourly chart, I see a big bullish candlestick followed by many small bearish candlesticks, which indicate that the bears are weaker than the bulls. I would wait for an hourly bullish ZLR in the Woodie's CCI to join the bulls.

USD/JPY weekly Woodie's CCI is most likely to affirm a bullish Zero Line Reject (ZLR).

The weekly Woodie's CCI already painted a few ZLRs before, each of them gave a profit of a hundred to hundreds of pips. When talking on the fifth/sixth ZLR, it will give a nice profit, but bear in mind that the profit will be smaller than the profit of the first, second or third ZLR.

This ZLR is nice shaped, the turbo CCI (6) made a sharp V. I estimate that the current ZLR will give a profit of tens of pips.

USD/JPY weekly chart - click to enalrge

Observing the USD/JPY weekly chart, one can see that the price is held in tight range for the last 15 weeks which is more than 3 months. The Bollinger bands contract due to the tight range of the price. Whenever the space between the bands shrinks it is indicating that an aggressive movement will come. At the time of this writing, neither the bands nor the graph tell us when and where we are heading.

One who wants to reduce risks and avoid the bearish corrections should look for a bullish pattern in Woodie's CCI hourly chart to join the gains. A bullish ZLR forms when the 50CCI is between the +100 to 0 regions while 6TCCI is between the -100 to -200 areas, both rebounds sharply in a V-shape simultaneously. The pattern will be stronger if the V in both the 50CCI 6TCCI is big and very clear.

Bollinger Bands is a very common technical indicator that provides continuation and reversal patterns. The indicator works well on all time frames. I use Bollinger Bands from the hourly to the monthly chart. Like any other indicator, you must use another indicator and look for Japanese patterns to confirm the trend.

Logic behind the Bollinger Band is Normal distribution. By Gaussian distribution of a particular variable will be compared with the average, and this is reflected in the form of a bell so that the majority 68.2% of the group / feature being tested will be close to the average and the rest 32.8% are standard deviations from the mean.

Bollinger Bands consists of three bands. The middle band is a moving average (I use 20MA) and the other two are two standard deviations. Some use 5 bands, in the middle will always be a moving average and the first 2 bands which are lies close to the MA will be one standard deviation from the mean and last 2 are two standard deviations from the mean.

Bollinger Bands Strategies

I will give some examples of how you can use the Bollinger band when you are trading. I will combine Japanese patterns and Woodie's CCI to confirm the trend.

EURJPY-H1When one or two candlesticks close under the band and most of the body of the candlestick is under the band, the price will get back to the area between the bands. Woodie's CCI reached to -422 and folded.

gbpnzd-D1

According to some strategies traders tend to enter a position when the upper (for long) or the bottom (for short) line of the flag breaks. Bollinger bands have a critical role in those cases. Whenever the resistance/support line of the flag is lying on the upper/bottom band you might want to wait for a correction and then if the pattern is still valid, look for a better entry. The 6TCCI in Woodie's CCI folded down and gave a signal for a bearish correction.

AUDNZD-D1

Whenever the space between the bands shrinks it is indicating that an aggressive movement will come. The bands don't tell us to which direction we are heading or when it will come but we know that it will be massive.

This is the time to use more indicators to help us know where we are heading. Woodie's CCI created a bearish pattern, a reversed (V) shaped for short.

EURGBP-H4 Whenever the price touches the upper/lower band several times in a row without a correction to the middle band the correction will come soon, in most cases the price will correct to the middle band and in others it will even reach the other band. In EURGBP H4 chart the bearish correction is followed by an evening star for short and the Woodie's CCI reached far beyond +200 CCI and folded down.

Trade Leader Or Kahana analyzes recent developments in the GBP/AUD

Last night (on 22-04-14) GBPAUD created a bullish pattern in the weekly CCI, a weekly Zero line reject (ZLR). I am not using the standard CCI but rather the Woodie's CCI. The blue CCI (turbo-6) reached to the zero line while the black CCI (50) was and still is in the 40 region, both in a V shape.

GBP/AUD weekly chart - click to enlarge

You can see all the recent ZLRs have led to strong gains in this pair, between hundreds to thousands of pips.

A weekly ZLR does not mean one can execute a long trade in GBPAUD immediately!

In the daily CCI there is still a potential for a bearish ZLR. Before entering the bullish uptrend, make sure this potential ZLR is invalidated!

I would analyze the hourly chart and search for a ZLR after the opening of the first green bar or the following green bars in order to perfect my entry.

GBP/AUD hourly chart - click to enlarge

There are a couple of things you must note before taking the trade. The first thing is the negative swap. Longing GBP/AUD incurs a relatively high negative interest so it may be wise to target 30-40 pips (depending on the hourly range) as intraday take profits and to continue buying on dips if intraday technical patterns are confirmed, 1hr, 4hr and/or Daily chart should be used. The second is not less important than the first. When looking at the monthly chart you will see that this pair already gained approximately 5,000 pips from the bottom. Bear this in mind! I won't expect hundreds to thousands of pips as seen in the latest ZLRs. Taking this ZLR I would expect a smaller movement of about tens to hundred pips.

Trade Leader Alex Kazmarck of SpotEuro presents analysis of the JPY.

Update

The Japanese Yen has been stuck within a range for the past two months, trading within the 101-103 level for the most part. Friday’s strong move continued into Monday as the USDJPY is now trading above the 103 figure for the second time in March; it briefly tested these waters for three days during the first two weeks of March.  With today's commentary from Federal Reserve Chair Janet Yellen that the US economy will need extraordinary support for “some-time” and that the job market is not back to normal health have given traders appetite for more risk and thus we’ve seen a rally in equities as well as a sell-off in the yen as it is often used as a carry trade. While we remain in a volatile trading environment with the EU on the brink of easing to fend off deflation and geo-political concerns remaining in Eastern Europe, I think there is an outlook for both long and short trades in the near term.

Technicals

USD/JPY - click to enlargeUSDJPY – the pair is once again trading above the 102.80 level and is aiming to break out of the wedge with resistance just above the 103.10 level. A close above March highs of 103.76 will be bullish for the pair and a close above the figure will lead to test the 105 level which should prove difficult; However, if broken and the daily price sets a new yearly high, we should see continuation higher. A failure to hold the 103 figure could lead to a broader sell-off and target the 100 figure and possibly deeper into the mid-90s, targeting the region in which the pair spent most of last year.

EUR/JPY - click to enlargeEURJPY – trading within a channel for the past two years with moderate consolidations, the pair can be seen within a wedge as of late, setting an important lower high in early March. With Friday’s bounce off of 140, the pair is now testing 142, just below the descending slope. If the pair breaks above, it will most likely target 145, the December 2013 high; however, a break below 140 will most likely lead a much deeper correction and target the 134/136 levels, which are previous resistance and support zones respectively. Until a close above the descending slope mentioned earlier and a close above 144, I expect a longer term bearish outlook more worthwhile from a risk/reward point of view.

GBP/JPY - click to enlargeGBP/JPY – also trading within an ascending channel during the past year and a half, the pair has begun to consolidate and correct lower over the past four months. Currently, enjoying momentum to the upside following a break of consolidation, the pair is aiming for the highs of 173.70 set in January and matched in March. While I expect the pair to trade lower than 175, which is December and January’s highs, a break above this figure could lead to another leg higher. Until this break, I expect further consolidation between 170 and 175 before a break below 168 leads to a deeper correction that should reach to prior resistance of the 160 level.

Conclusion

The yen mostly responds to risk-on/risk-off strategies due to its carry trade and safe haven status. All three are within a specified mid-term range or a wedge formation, attempting to break out to the top. If successful, technical all point to continuation to the upside; however, if we see another bout of risk-off selling, this could be seen as a failed attempt and a much deeper correction could be in the works. Considering the big gains during the last 18 months and consolidation taking place across different markets, I am looking for current momentum to wane and support levels broken in the next few weeks.

Trade Leader Or Kahana presents technical analysis of the USD/JPY.

USDJPY daily chart painted a bullish flag. Flag is a technical pattern indicating a resumption of the trend. A bullish flag is created when there is a large upward price movement (that's the flag "pole"- marked in purple on the left picture) followed by sideways activity (three or more candles, marked in the light blue rectangle on the left picture) at the top of the flag pole, which do not cover most of the candlestick and are almost the same length.

USD/JPY chart - click to enlarge

The logic behind this pattern is that if after a healthy move its correction will be in a smaller range (sideways), the technical correction is weak and we should expect the trend of the flag pole to continue.

When entering this pattern it is better to examine other indicators to strengthen the entry point. Usually I am waiting for a candle that closes significantly (the amount of pips depends on the time frame of the flag) above the flag's resistance, but in this case I am using Woodie's CCI for improved entries. Woodie's CCI helps me to avoid minor or moderate corrections. I am observing the hourly chart looking for a zero line reject (ZLR) to join the uptrend. In the hourly chart, I marked in yellow, on the right picture, every ZLR that was created from the beginning of the flag (from 20.03.2014). Each of them gave a profit of approximately 10 to 20 pips. I will continue monitoring the hourly chart in order to take the next ZLR.

How does a bullish ZLR form?

First, a bullish ZLR must come after the first/s green bar/s. When the 50CCI (in black) is in the Zero line (ZL) region and rebounds sharply in a V-shape simultaneously to the 6TCCI (in light blue) which turns up in a V-shaped recovery below the ZL, close to -200. The pattern will be stronger if the V in both the 50CCI 6TCCI is big and very clear.

If a ZLR forms when the 50CCI is in the +100 region and the 6TCCI is in -100, it may not be the perfect ZLR. On those occasions, the established trend may temporarily resume and the 50CCI will swiftly return to the ZL in order to make a better ZLR.

In a previous post, I explained the nuances of the Zero Line Reject.

Alex Kazmarck of Trade Leader SpotEuro presents analysis of the EUR/USD.

The euro’s lack of momentum above the 1.39 level has left a lot of traders consolidating their positions. There remain a lot of uncertainties that could put pressure on risk-on strategies and ECB President Draghi’s comments on Tuesday that the ECB is paying close attention to the exchange rate level drove the EUR/USD pair to test the 1.3750 level.  Draghi also mentioned that the exchange rate plays an important role in inflation figures while at the same time saying that the rate isn’t a policy target. Perhaps this confused some traders as the pair bounced back following a 50 pip plunge and almost recovered to its opening price of 1.3840. Comments from Bundesbank President Weidmann also put downside pressure on the euro as he, along with other officials, have raised concerns over the worryingly low level of inflation in the euro zone, which increased the prospect of a large-scale asset purchases as Weidmann said that such an option is not ruled out. Currently down 33 pips, trading at 1.3793 early Wednesday in NY.

EUR/USD daily chart - click to enlarge

Technicals

Not much has changed in my technical analysis. The fact that the EUR/USD pair is trading below 1.3800, which is the top of the left shoulder in the “Head/Shoulders formation”, a break below 1.3700 should confirm downwards movement and I expect momentum to pick up and lead price to test 1.3600 in the coming days. As mentioned in the last update, the break below the upwards sloping channel from January to March remains valid and supports further downside euro weakness. Two important levels remain for the euro at this time, if it has any chance of reaching and breaking 1.40: the 1.3876 pivot high on the 21st of March and 1.3967 high on the 13th of March.

Guidance

While the euro remains within a reliable 500 pip range, between 1.3500 and 1.4000 for the last five months, a break of either top or bottom figure will most likely be sustained in the coming months. As mentioned earlier, there still remains a lot of uncertainty. Yesterday, President Draghi said that the Euro-area crisis is not over and I believe him. Europe is much more intertwined with Russia than America and while sanctions will hurt both economies, instability within Ukraine could prove more harmful to Europe than Russia. Expect more of the same for the time being: uncertainty and volatility.

Short term resistance – 1.3850-1.3900/1.4000

Short term support – 1.3750-1.3650