Weekly Snapshot | January 8 – 12

Happy 2018 Traders!

I want to you a very successful year ahead. The second-half of 2017 was one of the slowest patches I have ever personally experienced in the markets, but that isn’t some that that disheartens me – it’s just a reminder that we have to be flexible. Markets are like a drum beat; sometimes steady and slow, sometimes fast-paced and erratic, but they are also cyclical. All you need to do is haul up your own charts and see for yourself. Sometimes prices rocket off in a direction, and other times they do very little.

It’s the patient trader who recognises that there are periods where we make a lot, and other periods where we need to sit on our hands and does whatever is required in that period, who sees long-term success. There is no shortcut here.
You cannot will the market to do what you want.

In that light, I wanted to share a quote that was shared with me not too long ago that I have found very useful and sums up a lot of the ups and downs of trading.

The goal of life is not always to maximize your returns; sometimes, potential gains must be balanced against the possibility of losses. That’s why we need to occasionally consider minimizing regret.

-Barry Ritholtz

Looking ahead

Personally, I see 2018 having three major themes for myself.

  1. Keep on doing what we’ve been doing. Our managed products go into 2018 with 7 months of small, but consistent wins behind them. I think 2018 is finally going to see some nice breakouts in price and you can be sure that we’ll be riding those waves.
  2. Automation. I am automating a lot of my own trading. My goal isn’t for the ‘bots to take over. Instead, I am using the technology available to:
    • Aid me through statistical learning models in improving trading performance
    • Alert me to new setups
    • Manage open positions
  3. Cryptos. Yep, I’m going there. I think 2018 is going to be a very important year for crypto-currencies. If you’re an active member of our trade room, you’ll know that we often chat about crypto markets, for many reasons. Cryptos, and the technology behind them, are going to change the world (in some ways they already have).

Let’s look at a few pairs that look rather interesting this week.

GBPUSD

Cable finds itself in an interesting spot. Price is right up against the 2017 high at 1.36 and has broken above descending resistance (red trendline). With price squashed now above that trendline (as it acts as support) and resistance seen near the 2017 high (blue trendline) we’re sure to see a “pop” soon.

Nothing I have seen yet suggests that the uptrend is over – however, selling pressure just a bit higher up (1.3650’s, marked by the red circle) may give us the clue we finally need.

Trade idea: Although closing prices suggest that the important “decision” zone for GBPUSD is at 1.3600, price can’t make up it’s mind at this point. The solution will be a stab higher, or lower, to test out the market at those levels. Given the current structure, I think a move higher is likely. At 1.3650-1.3700, we’ll start to see if the buyers have any real conviction or if it’s time for USD strength and longs here are just a rather clever bull trap.

An upside break opens up 1.3850, while a move to the downside see’s 1.30 coming into focus. Both lovely opportunities to bag a nice big winner. This is a pair worth watching closely.

EURUSD

The EURUSD ended last week off with a bit of weakness, and has continued to drift lower today. It’s too early to sell.

I’ve purposefully zoomed this chart out a bit for some perspective – the bulls have been in charge for awhile, so any short trades need to be considered carefully. A pull back to horizontal support (1.1930, blue line) or even further to the red trendline doesn’t constitute a reversal on the pair. Both levels are likely to see buyers step in with the trend.

Trade idea: I want to see what price does when it reaches either the horizontal or dynamic (trendline) support. Should price fail to hold at those levels, we may see a major reversal on the cards. On the other hand, a bounce would target recent highs and potentially opens the way to 1.28. Another important pair at a very important level.

EURNZD and EURAUD

I’m combining these pairs into a single commentary because we’d trade them the same way, and they look very similar.

Charts first. EURNZD and then EURAUD:

We see price having convincingly broken through trendline support, and retesting it from below. We also have a head and shoulders pattern printing. Similarly on EURAUD:

Price has broken through the supporting trendline and is peeling lower. We have support coming in at 1.51, 1.48 and 1.47

The EURAUD and EURNZD are currently highly correlated. As such, a short on both is really the same position, twice (you’re betting on the same move). Either split your risk, trade only a single one of them, or accept that you are doubling up.

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