I would like to start this thread to detail my day to day analysis of all the markets I follow. I will post the trades I will enter too.
My background is in quantitative trading. I currently work at a prop shop where my focus is on designing high frequency strategies (market making and relative value arbitrage on global future market). Though my day job is very theoretical/objective, I tend to be much more discretionary when it comes to my longer term portfolio. (My colleagues do not know about this – they tend to make fun of people who utilize chart patterns to trade). I started 2 months ago on this endeavor and I hope to document my ups and downs to keep an record so I am responsible for.
I focus on all markets (Forex,stocks, commodities, bonds, etc). I apply classical chart patterns on the daily/weekly time frame. My philosophy is inspired by the teachings of Edward and Magee’s book “Technical Analysis of Stock Trends”. Patterns I focus heavily on include
Head and Shoulders, Ascending/Descending Triangles, Rectangles, Wedges, Rounding Top/Bottoms, Symmetric Triangles, to name just a few.
Additionally, I utilize seasonality in my trading. My best setups are ones where the seasonality and chart patterns all point in the same direction.
I will hopefully (if time permits) post my weekly watch list with commentary on my analysis. I encourage everyone to post their opinions too as I find comments that challenge my view to be very useful and constructive. Here and there I will post some commentary on fundamentals (even though I aim to not focus on those as the driving factor)
Thanks so much for reading.
For the last 2 consecutive weeks we saw many risk-off assets rallying for the first time since Trumps election. We’ve saw Gold, AUD/USD, NZD/USD, 10 Year Treasuries prices all gain across the board. Even given the risk off rally in safe haven assets, equities globally have maintained their bullishness. I do not see bullish mentality in global equities abating much though I’ll let price dictate my opinion.
This coming week I will be focusing on the following markets
CHF/USD: Bearish seasonality is very strong for this market. Below is a backtest of going long 1 contract every Janurary since the inception of the futures contract on CME
GBP/USD: Bearish seasonality is very strong for this market. Below is a backtest of going long 1 contract every Janurary since the inception of the futures contract on CME
EUR/NOK: Since completing the H&S top, this market has gone sideways. I am looking to short near the lows of the rectangle.
NZD/USD: I went short on the completion of the H&S pattern early December but broke even on my trade since the recent rally. I am looking to short again. Fridays hard red candle was nice, I missed the entry there.
CAD/CHF: I went long on the multi-year trend line breakout in early December but again was stopped out for a small loss when it decided ti retrace back down. I believe the multi year trend line is not going to be the main focus; rather the horizontal resistance around 0.7750 will be. I will keep my eye out to go long this pair if it breaches that level.
EUR/CAD: Potential multi-year trend line break down.
In additional to FX, I also focus on global equities and commmodities. My first criteria for selecting single stocks is initially looking at how its countries market indexes are doing. For example, right now my main area of focus is to find names to go long in Germany, France, US, and Switzerland. This is not a rule, but more of a guideline.
VOWD(Germany, Volkswagen ): Ascending triangle, weekly. Looking for bullish continuation if it breaks above 147.50.
EWG (US Germany ETF): Rectangle breakout. I missed this one last week and was hesitant to go in given that its a bit extended. Its been up 5 weeks in a row. We know that equities markets are prone for mean reversion. Nevertheless, I am keeping an eye for opportunities on daily chart.
SL. (England, Standard Life PLC ): H&S bottom. I almost pulled the trigger Thursday night but didn’t as I felt I wanted to see Fridays price action. It dropped hard on Friday which meant it wasn’t able to breakout on the weekly chart. I tend to put emphasis on aiming to wait till Friday to put on positions since the week end closing price is one of the most important one.
SMDS (England, Smiths ): Ascending Triangle. Looking for a strong weekly close above 428.
SGPL (England, Supergroup ) Ascending Triangle, Monthly. This is a very long pattern waiting to breakout to all time high. I am keep a close up on it for the next couple of months.
EEM (US, Emerging Markets ETF) Double bottom. Looking for a weekly close above 36.30 for continuation.
GREK (US Greece ETF): Symmetric Triangle. Looking for a weekly close above 8.30 for continuation.
PLND (US, Poland ETF): Symmetric Triangle, Weekly. Looking for a weekly close above 13.85 for continuation.
MIE (US, Energy Fund): Rectangle, weekly. This is an energies fund and I’ve been rather cautious about all things energies since OPEC last year. If you look at the Crude Oil futures complex, you will find it is having a hard time breakout out. I am bullish with price focus at 11.30.
EWD (US, Sweden ETF): Symmetric Triangle, Weekly. This chart looks very similar compared to PLND. I am bullish with price focus at 29.60.
EWW (US,Mexico ETF): Rectangle, weekly. I am not bullish at all on Mexico given Trumps protectionist mentality. I am bearish.
EWQ (US,France ETF): Similar to DAX, France has been rather bullish lately. The futures market already broke out (CAC40). Looking for bullish continuation above 25.00.
EWL/SMI (Swiss Market Index): I went long earlier December on the ETF as seasonality was also in my favor along with a rebound on multi-year trend line. Bullish.
ULVR (Unilever): Developing H&S top, weekly.
JJC: Developing small H&S top, daily. Small patterns like these require cautious. Lots of fake outs.
Wheat: 13 Week Rectangle with multi-year descending trend line.
Mid week update. A couple of patterns triggered since the start of the week. Below are the notable ones.
Initiate a short position on the 9th and exited today. I got out very luckily at the lows today before that huge spike up. There was a lot of volatility in the market because of Carney and Trump’s speeches. Although I made a profit in the trade, I made a few errors in trade management. My initial stop was changed because I felt I could give the market more room to move while my take profit was not adjusted. That effectively meant I reduced my risk/reward from 1.36 to 0.88. Though I did get to take off the position at a price better than my profit target (resulting in risk reward of 1.24), I still felt I could have followed my trading plan better.
VOMD / VLKAY:
Volkswagen broke out nicely on the 9th too. I didn’t initiate a position because I wasn’t set up to trade German stocks in my account (now am). Its US listed substitute, VLKAY didn’t show the same breakout so I hesitated. Today news came out on them reaching a settlement which propelled the stock higher. This is a instance where technicals and fundamentals aligned very nicely.
EEM also completed its double bottom. Edwards and Magee had a rule whereby a breakout is only valid if a stock goes up/down more than 3% pass the breakout price. Though I don’t adopt this rule stringently, I do use it as a guideline. My plan is to potentially enter ether it closes above the 1.5% of breakout price OR if Fridays weekly close is above the breakout day close (today). Have a plan, trade the plan.
Germany ETF also breakout from its horizontal channel. I didn’t enter this one. I felt there are some overhead resistance that could prevent further price continuation.
I was itchy to establish a long position in something energy for some time but the futures chart (Brent/Crude) wasn’t convincing enough. Since OPEC meeting in late November, Brent took the lead and broke out cleaner then Crude. The price action I wanted to see was a large green candle but not too large to factor in all information. But that didn’t happen. Instead there was a lot of volatility with little direction for 2-3 weeks. We can actually attribute this ugliness to speculators mainly since on the more physical dominant trading market, Middle East Crude, prices have risen nicely. According to a bloomberg article, heavy crude (cheaper ones) usually get production cut first. This means that the physical market is being re-prices now as oppose to Crude/Brent. My question is..does this mean its good to buy a on dips in Crude/Brent aiming to anticipate the time when OPEC starts to cut the light crude.
Thanks for reading
This weeks watchlist:
The most interesting price action I saw last week was within the Wheat futures complex. The bullish breakout of the Minneapolis wheat spilled to other wheat futures (KE and CBOT Wheat). Of all, the best looking chart in my opinon is CBOT wheat. As shown below, we have a smaller pattern within a larger pattern; something I always prefer. The way I would trade this would be to go long 430 area and anticipate the longer pattern (trend line) breakout. This allows me to take part.
Equity markets (especially in Europe) remains strong. Germany (EWG), France (EWQ), and Sweden (EWD) are all closely monitored by me. I have the most conviction on France, so hopefully that will play out. I want to see a strong mid week close above 25.30 to see potential continuation.
In terms of position, I went long Australia (EWA). I see both a Ascending Triangle and a Rising Wedge in this chart. Something to be aware of is that this trade equates to having an exposure to the long side of Gold and AUD/USD as their correlation is pretty high.
Short update this week. Am going to travel to NY.
Thanks for Reading
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