Wednesday, 30 March 2011

Climatic buying?

I just wanted to put out a quick post given the late surge we saw in Asian markets today. As I stressed this morning in my ASX200 post, we should not fight uptrends until we see a clear distribution process. This is either:
i) A strong reversal candle out of a Fibonacci level/clear resistance level
ii) A double top pattern
iii) A breakdown of a clear range

This is not in place yet. However, just as we saw climatic selling some week backs, I am beginning to see some signs of climatic exhaustion buying. This does not mean a top is in and it does not mean we should be shorting. However, it is a word of caution to tighten up open positions, look for bull flags and other setups back into the trend rather than blindly piling into the market. Always think about risk/reward.

Charts of interest
ASX 200 Daily:
Has rallied right back into the previous trendline. There is a long wick left on today's candle but this is not a bearish reversal candle in itself.

ASX 15mins:
Price has rallied right into an upward sloping resistance line

MSCI Singapore March 60mins:
Has rallied right into the previous breakdown level and my target zone. Small divergences appearing

Nikkei 225 June 60mins:
I posted earlier today about a potential breakout play and a confluence of resistance at 9750 area. This is potentially playing out. Needs a reversal candle as we are in the midst of a strong breakout in the short term

AUDUSD 15mins:
Despite the bullish equities move, AUD is failing to break the 1.03 level for now. This actually looks like a possible rejection in the short term.

I do think the Eminis are in a strong uptrend and the targets are higher for now in that market. However, I wanted to show these setups here in Asia. It could all mean nothing and we blow these levels out of the water- so be it. However, as ever we have to be prepared to sell it when everyone wants it, much the same way we have to be prepared to buy it when no one wants it.

Wait for confirmation.
Best of Luck

Asia Top Setups

I thought I would give a quick run down of the top setups I am following in Asia.

i) Nifty Index Breakout (SGX futures)
The Nifty has formed a great base pattern under the 5600 level throughout February and March. Note that despite many global markets selling off strongly on the back of the Japanese earthquake and concerns in the Middle East, this market consolidated. This is a bullish lead indicator. We have seen a strong closing candle out of this base pattern and follow through on the Daily. Position traders should be long and riding this new trend up. There is short term resistance at 5800 but I feel this will be broken in the ensuing days.

Nifty Daily Continous Futures:

Nifty March 60mins:
 The 60mins chart shows the recent breakout from the range (ignore the spike candle as this is a data error). There are 2 possible trading setups here:
i) Buy as the market breaks 5800 and join the trend and momentum higher. This needs a wider stop
ii) Look for a bull flag back to 5600/5650 and the moving averages to get long, stops back in the basing region

ii) Nikkei Breakout and Reversal Trade
I posted an interesting setup I was witnessing in the Nikkei a few weeks back:

This scenario is still very much in play. In the short term, the Nikkei has been trading in a tight range between 9300/9350 and 9500/9550. I don't know in which direction this market will breakout and we have to just wait for a clear signal. In the bigger picture, if a breakout to the upside ensues, I have targets to 9700/9750 which is the 61.8 fib retrace, an open gap, and a potential A=C thus a strong confluence. Up here I will be looking for strong bearish reversal candles to get short with tight stops. This is a great risk/reward trade.

Nikkei June 15mins (Day Session):

Nikkei June 60mins (Day Session):

iii)Shanghai Triangle Breakout
The Shanghai Daily has been trading in a broad range for over a year. I believe we have put in an "E" leg of a triangle pattern and thus we are on the cusp of a MAJOR breakout. The signal for longer term position traders is a strong close above the downward trendline around 3100. I think short term traders should be getting long above 3000 and then adding above the Daily downtrend line.

For a related scenario and pattern, see the Hang Seng setup in 2010 posted here:

Shanghai Composite Daily:

Shanghai Composite 60mins:
As can be seen, the market has broken out from a strong basing pattern under 2950. There was an initial false breakout that has completely recovered. A break of the recent highs at 3000 is needed for confirmation.

Thus, in sum these are the top swing trades I am monitoring currently- 2 bullish setups and 1 bearish setup. Obviously, it is unlikely that the bearish Nikkei scenario will play out if a strong breakout does ensue across Asia. However, the key is to be prepared for anything and anticipate. We do not know what the future holds and thus have a gameplan and wait for price to confirm.



ASX200/SPI Morning thoughts

I must stress from the outset that the SPI remains in a strong uptrend since breaking the 4600 level last week. We should not fight this until we see a clear distribution process. This is either:
i) A strong reversal candle out of a fibonacci level/clear resistance level
ii) A double top pattern
iii) A breakoutdown of a clear range

None of these scenarios have occured or been in place thus those looking to short need to wait for these signs.

US Market Summary

The S&P 500 had a very positive session, opening on the lows and closing on the highs. The June Eminis bottomed right into the support area I posted yesterday hitting a low of 1300. Have a look at the 15min chart and the clear bullish reversal candle out of this support level- these are the kind of candles that should trigger our entry. I anticipate a lot more momentum to the upside in the coming days  if we can hold above this 1315 level.