The Week Ahead According To 10cents

The title of this post is just my attempt at some humour because I really don’t have a clue what awaits in the week ahead. All I have is ideas for set-ups, some probabilities, and how I will trade them.

[click on charts to open in new tabs if you wish]

It is widely believed that USD/CAD “leads” the other USD pairs. I don’t follow this pair all that much so I don’t know if that’s true or not. What it shows is USD strength late on Friday, much more than other USD pairs. Maybe it was just a result of weak Canadian economic data. Of greater interest to me though are the clear tradeable levels and the hourly RSI clearly in bear-zone. Any serious move by RSI above 70 could be a trend changer.

Above are both the 1hr and Daily charts for EUR/JPY. We had a big 350pip move to end the week, significantly breaking out above previous daily highs. RSI on both timeframes is in the “strength” zone above 70 which indicates to me that the move is strong and will continue so buying dips would be encouraged. We know nothing goes in a straight line and I’d be looking for at least a 100pip retrace if the little double top on the hourly holds. There is also a sweet correlation that a 38.2% retrace move is almost exactly the previous daily high. If hourly RSI goes well below 30 then my bullish view may change.

GBP/JPY – ditto.

I’ve opted for the Daily and Weekly charts of AUD/USD. Friday’s candle was a shooting star at a previous high. I love shooting stars and definitely expect some kind of reversal. I’ve included the weekly chart on the right to show what could happen if there is no reversal or if it is a short-lived reversal. A break above the daily double top would see me a super AUD bull to look for a major double top on the weekly. 106.20 is a BIG line in the sand.

I wasn’t going to cover EUR/USD, it’s been done to death all over twitter and elsewhere but bugger it, here it is. The daily chart on the left shows how huge this move has been – a 1,126 pip move in only 38 trading days. And that 38.2% number has reared its head again. The gap has been filled and a trendline on RSI is inviting itself to be broken. The weekly chart on right only shows a rough channel that could look different depending on points used – a very rough visual guide only. I admit to trying to pick this top a couple times on Friday. I failed and stepped aside. If it fails at 1.3150 again then the choice to short again will be easier.

10c

Advertisements

NASDAQ – Monthly Weekly Daily Hourly

The Nasdaq has been on fire lately so let’s see where it’s at. I just want to point out some features – make up your own minds.

On the monthly chart the obvious stand out is the perfect double top exactly at the 50% level. That’s big.

The double top on the weekly chart looks terribly like a mirror image of the double bottom of 2009.

Take your pick of the indicators on the daily chart. All giving the same message. The 200day SMA coincides with the uptrend line as first major test of defence.

And finally the hourly chart is hanging on for dear life at 2750 to remain in or above the bullish colour zone.

10c

AUD/USD Top Down Charts

Been a while since I’ve looked at a pair top-down style, going through the time frames. Here we go.

AUD/USD monthly chart shows two distinct and well defined price moves – a range of approx. 3000 pips and another of approx. 5000 pips. The recent all time high (post float) completed both these ranges.

A week ago I pointed out a very bearish candle pattern on the weekly called an evening star. This has been followed by a lower weekly close with a candle that could also be considered bearish.

A channel on the daily chart has been broken together with RSI moving below 50, as it did in March.

The hourly chart above points to a trend change – bearish MAs, bearish colour zone, break down of uptrend channel, a new low, and more moves below 30 than over 70 on hourly RSI since the high.

There are many indications that we’ve seen a high on AUD/USD. A 100pip move up from current levels could easily happen and would not change the above analysis. 200pips and I’d have to re-think. 🙂

10c

USD/JPY EUR/JPY GBP/JPY

Whenever I write a new blog post I always set out to write more words than usual, to add some commentary to the charts, a bit of humour and some general banter about the world. And nearly always I’m confronted with writer’s block. Today is no different so to hell with lots of words and let’s get stuck in to the charts.

PS. You will notice references to the RSI indicator today. I’ve always dabbled with indicators, never really serious with them, preferring straight lines, but lately I’ve been studying RSI and looking at it in a different way. I’m very happy with the way I’m reading it and the signals it’s providing – so confident enough to share. 🙂

First up is the chart I always look to first – USD/JPY. I rarely trade this pair but it provides me with bias for trading other xxx/JPY crosses. The DAILY chart above shows three clear levels with current price possibly making a higher low above the 78.00 level. I’d like to view this as bullish for xxx/JPY but it’s a bit too simple so let’s look deeper and check out the hourly.

The hourly chart above shows another clear barrier at 78.75 that would need to be overcome – sooner rather than later. And keep an eye on the hourly RSI – the first time it crosses 70 is not overbought but a sign of strength and it’s often just the beginning of a nice move. So no clear long signal yet. The recent dip below 30 may be the beginning of weakness. Now on to the other pairs that I’ll actually trade.

In the EUR/JPY Daily above I’ve identified three common UP moves over the past 12 months. You’ll see it has recently completed the small move represented by the black arrows. If a bigger move were to occur it’s very possible that, like in Jan-Feb and Oct last year, a pause may take place after the completion of the black range before continuing up. The daily RSI is suggestive of higher levels to come with its positive divergence and a clear line in the sand just above the 50 line.

EUR/JPY hourly might look a bit messy but the MAs, colour zone, uptrend channel and higher ranging hourly RSI all point to an uptrend – an uptrend that looks to be continuing. The first warning sign will be an RSI out of the red box below 30 to show weakness rather than oversold, just as in late July the move over 70 signalled new strength and a shift in range. So this is a buy I’d rather buy than sell, but I’d need a lower level to get in.

GBP/JPY daily has also completed its small range at prior resistance. It has a few bigger moves up its sleeve but it does love the aqua coloured down moves too. RSI is at similar level to the black moves in Oct and Jan after which price continued up.

On the GBP/JPY hourly we see higher lows and a break, backtest and hold of 124, a green colour zone and a higher ranging hourly RSI. I’ve omitted MAs because they haven’t been useful for the past few monts. At current levels this may be the first BUY for the week with 124 your risk level.

10c

Average Ranges

A conversation on twitter the other day made me realise that the concept of Average Ranges isn’t widely followed. Not to be confused with repeating ranges (measured moves) or ATR (Average True Range), Average Range is simply the value of an instrument’s high minus its low (H-L) for any given period (Day, Week, Month) and then averaged by a chosen number of periods.

Below is a daily chart of AUD/USD with the (custom) indicators I use for Average Range.

[click on chart to open in new tab]

The black indicator at the bottom shows the average range for the past 20 periods. We see that the current average daily range (ADR) for AUD/USD is 93. What does that mean? It means that on average, in any daily period, the difference between the high and the low will be 93 pips. It means that on average, in any daily period, there will be a 93 pip move from low to high or from high to low. But that is only an average: sometimes it moves more, sometimes it moves less, so lets look further. The red indicator shows the single period % of average range. This tells us what percentage of the average range the instrument has moved in the past. A quick glance at the chart above shows us that AUD/USD completes at least 50% of its average daily range nearly every day, often more. This is powerful stuff. We can be almost certain that price will move at least 46 pips nearly every day. (A notable exception is the period between Xmas and New Year). For those statistically minded, very useful information can be extrapolated from this simple data: eg, 70% of average range gets completed 4 out of 5 days; 100% completions occur half the time, etc. The blue indicator simply shows the actual range of any one period. The whole concept is based on nothing but price and the movement of price. No other TA required – no momentum, no relative strength, no trend, no divergence, no moving average. Nothing but price and the knowledge that it will move.

The idea is the same for weekly, monthly, quarterly, yearly or whatever period you wish (AWR, AMR, AQR, AYR). In any give period price can be expected to move a certain amount with a good degree of certainty. There are a number of ways an actual trading plan can be based around average ranges but that will have to be in another post.

(I couldn’t publish this without acknowledging the role of Rob @RobTTTrade in introducing the concept of average ranges to me. Videos of how Rob applies average ranges to trading can be found here here here & here.)

10c