Going public on predicting the stock market peak

I find more evidence from the close of last month than ever previously of the stock market having topped out in the US and elsewhere, however, I do believe that Hong Kong and China have energy left in them, even though they took a hit last week. Here is an article I have written and had published which puts my view online in another forum.

http://www.chinausfocus.com/finance-economy/tigers-of-the-east-and-bulls-of-the-westus-shares-have-peaked-will-china-follow

Coming soon... signals every day. Pepperstone Group Limited

Signals beta

Dear traders,

I will be starting to post various live signals to this blog. Some of these will be tradable, with some of them just giving information. All should be considered educational only.

Best regards,

Sam

Coming soon... signals every day. Pepperstone Group Limited

GBP trade failed, Aussie working out well

GBP failed to plug its gap last night, disappointingly, falling throughout the Asia session and most of the UK session, finding a bottom during the US morning at around 1.2120, bouncing back to about 1.2160 from the open of the week at around 1.2260, a 140 point gain for the greenback against the pound. Thanks to the 25 point stop loss, risk was contained to only 25 points.

Going back to the Australian US Dollar posted on Friday. Here is how that one is working out – a great trade to demonstrate here in fact and one that can be repeated often.

Firstly, the channels were drawn in and a plan was made to enter on a powerful re-entry into zone 3. This occured overnight and it is often worth waiting, as discussed here, for a pullback of 40%, 50% or 60% of an entry candle, to get a better price.

This occurred, with an entry at the 50% line (actually the market retraced a perfect 60% of the candle as can be seen. I normally take the 40% or 50% because they are more common – I would rather pay a bit more to actually get in on the trade. It is still a ‘bargain’ compared to buying at the close of the entry candle. See this post on gold trading strategy for another example of this kind of SIGNAL – PULLBACK – ENTRY setup.

The overnight Asia session trade offered the entry signal, the next four hourly candle the pullback (buy) and you can see a couple of extensions which are good to go for – the first of which has been hit – a repeat of the first move (the length of the entry candle) x 60%, the second target being 100% of that move, before we might reasonably expect another retrace and follow through type setup, provided we have not hit a very important resistance (note the most recent highs with the triple top are undoubtedly a place where short stops will have been placed.

Stops can follow each candle’s low, or even a few pips below the 60% retracement of each successful bullish candle if something tighter is desired.

Right now, the price is bouncing off the 100 day SMA, has already reached 60% of the entry candle, which actually offers a profit of 110% the length of the entry candle, because our actual entry was 50% BELOW the entry candle’s high. It has gone on to hit the 100% So a very satisfactory trade already, meeting the 1:1.5 risk reward target.

To reach the 100% extension line above, we had to contend with the triple top from last week. I would argue that some profit ought to be taken now for sure, perhaps as much as 1/2 or 2/3 of the position and the trade turned into risk free (move the stop above break even), allowing the rest to run. So I will turn the stop to around 10 pips below the triple top high.

It is hard to tell right now whether the momentum is sufficient to carry the trade through onto new highs in zone 1, but the trade is now a swing breakout as well, so it is looking auspicious indeed for the commodity curency.

Nice trade and caught nice and early, you’ll agree from the previous post on it.

Coming soon... signals every day. Pepperstone Group Limited

GBPUSD gap

Cable was expected to open with a gap today and has, after PM May interviewed with Sky news today (Sunday). The normal play is to trade the filling of the gap, so a purchase of pound against dollar, stop several pips below the open and due to the small size of the gap, it has to be for a 1:1 risk reward of about 15-20 pips risk for 15-20 pips profit, factoring in also a slightly wider spread due to thinner liquidity at these hours. Quite tight to do, but one has to trade what one sees, and the pattern of gaps filling is not generally one to trade against. If it does not fill overnight, it will probably fill some time next week, so a good target level to reach for any buy trades this week (1.2272 or so) if the market does trade lower and take out stops over night.

I have actually gone for a more ambitious play having seen that the gap only exists on lower timeframes like the M30, M5 and M1. I have actually gone for a 25 pip stop and a take profit of 115 pips, a play I will take again later if it doesn’t work out. Second or third time lucky is fine with such a high risk to reward.

Coming soon... signals every day. Pepperstone Group Limited

Investors bought gold for Christmas.

Buy gold?

Straight answer. In terms of Quantisi Funds’ books – yes – but this is educational and not investment advice, please note.

Daily gold chart

We have looked at the USD weighted currency basket index, some currency pairs like USDJPY and now let’s take our first look at the commodity gold, ever popular as a place of safety and growing value for investors.

My theory is as follows, and it could be completely wrong. This post does not constitute trading advice, investment advice or a recommendation. It is purely for educational purposes.

Based on what we have looked at so far, let’s look at the Daily chart for gold vs the US dollar over the last month or so, focusing in on what happened over Christmas week, and I will share my trade, before the result, and then we can see if I had the ‘Golden Finger’ on this one later.

Note that because of controlled risk management, it really does not matter a jot whether this trade works out, unless, e.g. a few billion tonnes of gold fall out the sky and the price of gold experiences such a terrific downfall that my stop order won’t get filled.

Why do I call long gold? The crystal ball bit first. Stocks have been rallying to all time highs since 2008 and particularly since Trump. Yet he is making diplomatic faux pas left, right and centre and suggesting policies that won’t be good for trade with China, a major trading partner for the US. Companies will suffer, so I am assuming some correction in stock markets in Q1 2017. This story supports my gold trade if economics and stock markets do follow this pattern as a bear market in stocks will see finance going into traditionally safer assets, like gold.

But for the most part this trade is technical and it is also strictly contrarian. Firstly, take a look at the chart above.

Clearly, since about September, gold has been in a strong downtrend. There was a spike up on US Election Day, but after Trump was elected, investors have continued to be selling gold (and buying stocks). We have now come to year end and clearly there has been some profit taking by speculators.

What I find particularly interesting is the fact that the last week (Christmas week) has been the strongest week in just over one month for gold.

Go all the way back to the spike and trade the price action forward and you won’t find a stronger series of days for gold than Monday to Thursday of last week.

There was also news out that a sizeable order (to the tune of around $3.5 billion) was placed at the close of play (10pm Eastern time) on Thursday.

It is quite likely that investors will have rushed in on that on Friday only to be disappointed by the lack of follow through on Friday.

Here is where patience could pay off – Quantisi Ltd placed a pending order at the 50% retracement of Thursdays candle.

If the price would have continued to run away, the trade would have been lost. In this instance, the market on Friday retraced almost to the tick, to 50% of Thursdays range.

The idea behind this trade is that there has undoubtedly been a strong move up. We’ve waited for a retrace but are expecting a continuation of thatĀ upmove, based mainly on the strength of the move last week, perhaps backed up by the very general crystal ball on stocks and the mysterious big order as well, but mainly the principle that the market tends to repeat itself and a move up may well be followed by another move up of a similar distance, for instance.

This is a contrarian trade, for sure though. All of the average lines on the chart pretty much are pointing down and the trend has clearly been down. But, crucially, the 8 simple moving average has certainly turned up it would appear and will undoubtedly offer support (the white line on the chart). The fact that recent price action has ‘turned this average up’ could well be a clue to a change in trend…

It is always risky ‘guessing bottoms’ on the other hand, but in some sense this guess is educated and one must take a risk in order to gain a reward.

Stop loss placement.

The first logical place to put a stop is below the low of Thursday’s candle, then Wednesday’s, etc.

I am confident of a follow through (else why take the trade) but not confident enough to risk more than is comfortable. At the same time I want to give the trade plenty of room, without giving it so much room as to absorb unnecessary losses when the idea has clearly failed.

I have therefore placed a stop below Monday’s low (the weekly low of last week) and am targeting 1.5 to 2 times the distance from my entry to that stop loss, to the upside, at least. I have had to scale down my position size accordingly.

If the trade really gathers steam though, I think with some volatility on the way up, it could see 1250.00 in an extended move, at least. For now though, I want a conservative 1:1.5 risk to reward to be hit and then I can consider options for scaling up, locking in profit, risk free trade and so on.

There is plenty of resistance above (pretty much all that spaghetti on the chart could act as resistance).

But, it is a New Year and last week has suggested renewed interest in the commodity. It should be interesting to see how this trade plays out, with any luck, highly profitably. To be continued…

An interesting article to go alongside this post is here:

link:

http://www.sputniknews.com/amp/business/201701021049196920-china-gold-market/

 

 

 

 

 

Coming soon... signals every day. Pepperstone Group Limited