Could NZDCAD be January's big short?

As the cross pair NZDCAD teeters on a multi-year high unbroken since 2008, this could present bounce traders with a golden opportunity to sell for the long term.

Not only is the resistance level synonymous with supply sentiment, as investors who are buying the Kiwi and selling the Canadian Dollar will inevitably want to realise profits and exit their position based on the logic that the bounce is 70% more likely than the break, but  other technical factors line up to support our decision to sell.

We also have an overlap of two Fibonacci extensions (1.272 and the 2.0 Fibonacci extension levels), which has given us a ‘Fibonacci extension cluster. We also have RSI divergence, giving us the extra clue that the strength between buyers and sellers is starting to tilt in favour of the bears.

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Trade idea: Long on horse meat anyone?

While UK Supermarket giant, Tesco, yesterday squirmed amid shock revelations that its beef burgers were contaminated with horse meat (of all things!), it’s share price took a tumble, after gapping down. However, it later recovered to unveil a rather interesting price action set up.

As we trade what we see off the chart, regardless of how vulgar the prospect of horse meat is in your burger – the current technical set-up could very well be of interest to you...but only if you trade UK stocks.

In favour of a long of the break of yesterday’s high:

Bullish pin bar reversal

The previous swing high acting as support

Rejecting a previously tested 20ema (blue line)

Rejecting a trendline (3^rd test)

Good momentum driving cyclicity; higher swing highs and higher lows

A Fibonacci cluster: 0.382 rejection and 0.618 over lapping

Forex Trading Gangnam Style

This is so jokes!!

7 Reasons why I'm going to sell CADCHF on Monday

Here we go - 7 reasons why CADCHF looks nice for a sell.

1. Friday’s bearish pin bar reversal off the 9396 level 

2. It is testing the 0.618 Fibonacci Retracement (which overlaps near perfectly to the 9396 level (taken from the swing high of the 10^th December to the most recent swing low of the 28^th December). 

3. The 9396 level corresponds also with the 0.386 Fibonacci Retracement level (taken from the swing high of the 7^th September to the most recent swing low of the 28^th December) 

4. The 0.50 Fibonacci Retracement level too overlaps with the level when drawn from the swing high of 7^th November to the December swing low. 

5. An overlap of three Fibonacci Retracement levels on our horizontal level is a rare treat known as a ‘Fibonacci Cluster’.

6.   As the close on Friday for USDCHF was a high test bar off a the previously tested 50ema (looking bearish)...

7... while the USDCAD gives the appearance of being infinitely more range-bound – this gives us an extra clue that The Swiss Franc stands a far greater change of strengthening against the US Dollar than the US Dollar has of weakening against the Canadian Dollar so that corresponds nicely with our interpretation of the chart for a CADCHF sell.

I shall trade this by placing a sell entry and the break of Friday’s low (minus the spread) with our stoploss above Friday’s high (plus spread) with a target just in advance of the December swing low – for a higher probability/lower reward outcome. 

Gold long, anyone?

Gold. It's something apparently we should keep buying in this present age of fiat currencies but as technical traders we simply trade what we see - not what we think...with gay abandon!

We have a good technical set-up for a long: a low test bar off a trendline bounce and a technical level at 1639 which also correlates with seasonality (gold traditionally very bullish this time of year) and a 0.618 Fibonacci retracement. To top it all, we also have a reversal pattern on the hourly, so a good heads up that the shorter term buyers and sellers are 'playing ball' with the higher timeframe pundits.

Is SGDJPY finally ready to tilt south?

While our previous trade idea: NZDJPY thankfully invalidated itself (on the 7^th Dec) before we entered the trade, the SGDJPY, in our opinion, is looking good for a long-term sell – even if it is going against the seasonality....after all, nothing works the whole time and seasonality too has proven that.

Damned if we use the seasonals as a reason not to get into a trade and it goes in our favour – damned if we use it and it supports a trade decision which goes against us. 

Either way, Wednesday’s bearish pin bar reversal on the daily of SGDJPY rejecting the 69.40 level has not seen this price extremity since May 2010, where it last met and rejected sharply, signifying this is a strong zone of supply where bears will be creeping back into the market. Price action has not been above this level since 2008 so technically we can call it a ‘hard level’.

So, we took the break of Wednesday’s low with a stoploss above the high. The reward to risk makes sense to, with a target at 64.47 – three quarters to the bottom of the range. 

Trading the bounce short in this instance will be more lucrative than trading the breakout long.

Is NZDJPY finally ready to short?

So today is the day I’ve been waiting for...for quite some time! Regardless of the onset of the Santa Claus rally and that old temptress, NZDJPY has reared its head against a rather immense level of resistance, just shy of the 69.00 level. This level has remained intact for two years.

As the bounce is 70% more likely than the breakout, and the reward/risk profile infinitely more....well, infinite, it makes sense to short this bad boy before the such an opportunity – one we have been waiting for since March this year – is lost forever. 

We are blessed with a doji bar (reflecting indecision at the top which demonstrates to us that the balance of power between buyers and sellers in the market is tilting in favour of the bears. We also have divergence (for those of you who bother to look at such things)...and, the makings of a head and shoulders formation on the hourly timeframe. 

While I would prefer a high test at such a level, I shall place my order below Friday’s low, safe in the knowledge that I will only be filled if the neckline of the head and shoulders on the hourly is broken...and, thus, is confirmed as a reversal pattern perpetuating a move on the higher timeframes.

The reward to risk on this trade is epic, with a target at: 60.83 – giving it a reward/risk of: 16:1 risking 1%...or 32:2 (risking 2%)

 Above: NZDJPY (on the Daily)