Search This Blog

Thursday, 29 March 2012

EURUSD - worth a short

Just went short with a small overnight position as I expect the price to touch the light blue line below before we cross the green line to hit the dark blue one. After that we will go for a deeper dive :) So the upside risk should be limited. Good night!

Wednesday, 28 March 2012

Sunday, 25 March 2012

EURUSD - what to expect in the short term

Since Merkel accepted an increase of the European bailout fund the EURUSD might open with an upside gap. We will see. But generally before we go higher the EURUSD will hit the 1.32 point. So I plan to go short with the opening tonight. We will see a touch of the above red line soon.

Thursday, 22 March 2012

How to trade the wedges

following rules only apply if a rising contracting wedge follows a falling contracting wedge or vice versa. In other cases (widening wedges, rising wedge followed by a rising wedge, falling wedge followed by a falling one slightly different rules of thumb apply):

1) the first point of contact often emerges from a break of another wedge. If you trade the break out work with tight stops or other indicators.
2) the second point of contact often emerges from a back-test of the break out. In such a case it is kind of easy to guess the point of reversal.
3) once the third point of reversal is fixed the fifth one is kind of easy to forecast. the third point itself is difficult to forecast. work with tight stops if you are involved.
4) similar story as for the third point: difficult to forecast, once fixed the final break out is kind of easy to forecast.
5) this one is actually the easiest to trade. you know kind of when to get out between 4 and 5 and you can enter the opposite position right away.

Obviously it is not always that easy. patterns are constantly changing.
- a point which was supposed to be one of the point of contacts might turn out to be nothing once a boundary line is broken.
- there is usually not only way to construct wedges, there are a lot more!
just to mention the two most important problems you might face.

good luck!

Monday, 19 March 2012

EURUSD - find the wedges and count to 5!

i will probably take a short as i'm expecting a break of the rising wedge... Wouldn't be surprised if this short term uptrend is over here for now and if we enter a flatter falling wedge. We'll see...

Sunday, 11 March 2012

SP500 - big rising wedge

I just saw a similar chart in a blog i follow ( However, my counting is a bit different. But I wouldn't exclude the scenario of another contact of the upper boundary.

EURUSD - tried a long in the 15 min chart

just went long at 1.3105 with a stop at 1.3090. If it works out we might see 1.33ish soon. Good risk/return ratio. Hourly chart gives more buying than selling signals. We shall soon find out... :)

Sunday, 4 March 2012

EURUSD - What to expect?

We have two clear technical patterns here: Firstly the longer term down trend which is still intact. However, we count 5 clear contacts with the boundaries already which indicates that a break of this down trend might come soon. Secondly we see a rising wedge which is about to break to the downside after 5 contacts. We had a similar pattern in gold recently where the shorter term rising wedge didn't work out. In the past 3.5 years long term trends always broke after 5 contacts with the boundaries (second chart).

What I expect: The rising wedge will break soon to the downside (downside limit: 1.26) then the long term trend will be left to the upside.

Possible strategy

I've slightly increased my short positions: added R and RHI in the last couple of weeks. Will hold these with a tighter stop. I additionally think about adding a long position in the VIX. After a correction (if it comes at all) i think about increasing my position in TBT.

Bond market - top formation

The bond market is forming a top in my opinion

SP500 - where's the volume gone?

Since the lows in 2009 volume is significantly decreasing. One might say that investors still don't trust the stock market since the 2008/2009 crash. There might be something true about that. But even if you only compare Jan/Feb 2011 volume with Jan/Feb 2012 volume you see a significant decrease again. The standard conclusion probably would be that the current rally is not supported by many investors and be cautious...maybe!! In my opinion still way too much money is stuck in the bond market. When this money comes back to the stock market it might boost these again. Personally the second conclusion is my favorite.  But still a significant correction would be healthy!! I hope for a correction of about 5%.

Saturday, 3 March 2012

SP500 - comes the correction with the break of the wedge?

Haven't posted for a while. Currently busy to set up an automated trading system in the FX market. You definitely learn a lot from that.

It's still tough to make a call on the direction of the stock market. Overall I'm still more on the bullish side. Many bloggers expect an top or at least a correction rather sooner than later. If you check the 'fear index' VIX or the put/call ratio they both tell you the same: The market sentiment is still on similar positive levels as a few weeks ago, maybe slightly more negative but the market continued to go higher. The S&P is currently in a rising wedge. In my opinion it will definitely not break the upper support line of this wedge before a correction will hit the market.

The good news for the bears thus is that - assuming that the correction comes with the break of the rising wedge - firstly the SP500 won't rise above 1420 before the correction and secondly that the correction must start before April arrives.

The more distribution days (days with lower closing price and higher trading volume compared to the previous candle) the more likely the formation of a top. So far we've only got one. We shall soon find out...