Weekend Observations

Happy Weekend All,

I will be dealing with the Eminis and the USD in another post. Here I wanted to update the swing setups and scenarios I am following in Asia. The weekend is such a great time to get prepared for the upcoming week as well as analyzing previous trades and areas for improvement. I recommend it to anyone who is serious about stepping up their game.

The SPI closed at 4965 on Friday, above it's previous February highs. As I have been stressing for the past week, this is the area for position traders to be getting out of the market and looking for better risk/reward setups or focusing on the shorter term timeframes thus keeping risk minimal. No doubt the trend remains up and it is futile to fight this until we see a clear distribution pattern. However, this is a solid resistance area and we have to be prepared to get out and look for a clearer pattern whilst those around us panic into entering the market.

SPI Continuous Daily:
Momentum has made a new high and price has certainly been impulsive off the low. A pullback to the moving averages and support around 4800 would be a great area to get long once more for a bigger position trade. Short term SPI resistance levels are 4960 and then 5000.

SPI 15mins:
The market has been grinding higher in this megaphone like pattern for the past week. Look for breaks of this lower trendline and then 4900 to confirm a more meaningful top is in place.

The SPI night session closed at 4933 on Friday night thus there could be a 30 point gap down tomorrow right into that short term trendline shown. Day trading scenarios I am following on Monday:
i) Wait for the first 10mins of trading. Buy a 5min closing candle above the high of this opening range or short a 5min closing candle below the low of this opening range. Look to add to shorts if 4918/20 breaks.
ii) Look for a support play at 4900/4905 with tight stops. If this level breaks, expect a deeper pullback in the coming days.



The Nikkei had a strong rally on Friday retesting the 9800 resistance level. Certainly the price action did feel impulsive and the market put in a strong hammer low overnight on the 60mins timeframe. However, I am still short as my stop at 9855 was not lifted. If I see a gap down on Monday which holds, I will look to get out and reassess.

Nikkei June 60mins (night session included):

MSCI Singapore continues to grind higher with strong momentum. I still don't have a clear position trade here and am looking for a pullback to the moving averages to get long. There is a short term channel in place and if this breaks I would expect the deeper pullback to materialise.

MSCI Singapore Continuous Daily:

MSCI Taiwan showed an interesting bearish reversal candle on Friday right at previous resistance on the Daily and at the trendline resistance on the lower timeframe. Breaks of 3140 are short term bearish. There is an open gap at 3090/3100 and I will be looking for buy setups in this area to join the trend.

MSCI Taiwan Continous Daily:

MSCI Taiwan 15mins:

The strongest pattern in the region is Shanghai:http://swingtradersedge.blogspot.com/2011/03/asia-top-setups.html). I am looking to play this via the FTSE Xinhua China 50 futures. I see price beginning to breakout of a clear base pattern. 2 possible entry signals:
i) If price makes a new opening high on Monday, get long as price is making higher highs joining the momentum. This needs a wider stop but don't be afraid to buy a market as it is making new highs. This is a Jessie Livermore tried and tested technique (as well as most trend follower or momentum traders).
ii) Look for a flag or pullback to the 9900/9950 and get long on the lower timeframes on a strong bullish reversal.

FTSE Xinhua China A 50 Continuous Daily:

The Nifty has corrected in a clear ABC type pattern since hitting the 61.8 retrace level and downward trendline. The breakout from the base pattern has been strong with momentum making a new high. I think this is a clear flag pattern and will be buying if price can recapture 5900, adding above 5950.

Nifty Continuous Daily: 

Nifty Continuous 15mins: 

In sum, the best buy setups I have in the region are in Shanghai Composite and the Nifty. Australia has rallied right into its February highs and I believe it is best to focus on the shorter term timeframes up here and tighten up open exposure significantly.

Asian Morning Thoughts

Morning All,

The US markets closed relatively flat but with some wild intraday swings testing the recent range. The market remains in a clear short term range right at decent resistance levels. However, unless the low end of this range breaks in the next 2 sessions, I believe we may see a strong breakout to the upside. I have seen these kind of setups time and time again over the last 2 years and more often than not, it has paid to follow the higher degree bullish Daily trend. Often I have been on the sidelines waiting for a bearish break that doesn't materialise. Breadth and momentum have clearly been waning but this market is consolidating in time rather than price. As ever, wait for confirmation from price and trade accordingly.

Emini June 15mins:
Key supports are 1323/1324 and then a major pivot at 1320. Resistance remains 1334/1335

The SPI is indicated at 4933. Yesterday we saw an interesting gap up and failure right at the previous Feb highs. Similar to US markets, we remain in a clear short term range right at significant resistance levels (i.e. the February highs). I have been advising caution for position traders at these levels and I don't see any evidence to change this stance yet. The Materials Sector made a new high but there has been no follow through yet, setting up a possible bull trap. The Financials sector closed with a Doji star yesterday at the top end of the range. These are warning signals and not short signals. I do believe the strongest play is to wait for a deeper pullback to the Daily moving averages for buy setups.

Day trading scenarios I am following today:
i) Look for a retest of 4945 to 4950. Short if there is a clear reversal candle out of these levels, stops above 4952.
ii) Buy support at 4902 with very tight stops. If this level breaks, short for a longer term swing lower


Materials Sector Daily:

Financials Sector Daily:

I remain short the Nikkei for the reasons posted here several days ago: http://swingtradersedge.blogspot.com/2011/04/nikkei-june-short.html. Given last nights earthquake, there were some wild swings in the futures down to 9405 but price has recovered to 9550. We will see how today plays out when the cash market opens. Resistance levels remain 9680/9700 with support at 9400/9350.


Ill have more later in the day
Thanks
Austin

(UPDATE) EURUSD

EURUSD sold off right into my target box last night at 1.4250 and held. This was a great support play and shows the importance of following new momentum highs. This level now must hold to keep the bullish scenario intact. In the short term I am looking for a retest of the previous highs at 1.435

EURUSD 60mins:

EURUSD- whats the trade?

There are lots of opinions flying around in the build up to the ECB announcement shortly. As ever, let price and the charts be our guide. I have 3 charts here which are very simple and show the significance of these current levels:

EURUSD Weekly:
Price has rallied right into a significant weekly trendline.

EURUSD Daily:
Price is trying to break the previous highs at 1.43. This is still a potential Double Top trade/ Bull trap if we see price  reverse here and take out yesterdays lows. Furthermore, momentum is clearly waning here and price is trading in a potential ending wedge pattern

EURUSD 60mins: 
Yesterday we saw a strong breakout of the recent range with strong momentum. Thus, our trade should be to buy the first pullback against this breakout level. Price is correcting back to this 1.425 level currently. Thus, short term traders could be looking to get long here with stops below 1.4230. I would prefer to wait for the announcement and see a bullish reversal to confirm. Any close back below 1.42 is BEARISH and would trigger the Daily Double Top pattern.

Thus in conclusion, we are at a significant juncture. The bigger picture is indicating some real resistance at this levels and a potential bull trap/double top. However, price has clearly broken out on the lower time frame and as long as 1.4220/1.4250 holds, the short term trend remains bullish. Thus, focus on the price action and use these setups to guide your trade. I am looking to buy around 1.4250/1.4230 for the support play and will be shorting below 1.42 for a bigger picture short.

Thanks
Austin

Eurostoxx Bearish Setup

Coming into the European open, I am monitoring a potential bearish setup in the Eurostoxx. This market is trading in a clear wedge pattern with momentum waning. Yesterdays lows at 2858 once again managed to hold at the upward trendline. I am looking to short below this level targeting 2750 and possibly lower.  These patterns imply a sharp break lower and thus if there is no follow through, look to tighten up stops quickly.

Eurostoxx 15mins:

Eurostoxx 60mins:

Asian Morning Thoughts

Morning All,

US markets tried to breakout last night but failed at their previous highs and gave up almost all gains. The Nasdaq 100 once again underperformed. We continue to build a short term range right at previous resistance levels with deteriorating breadth and weakening momentum. It appears to me that this trend is tiring and I am looking for a deeper pullback in the next 2/3 days. I cannot rule out a breakout and I will be prepared to join should price continue to correct in time rather than price over the ensuing days.

I wanted to update on the underlying breadth figures. The number of advancing issues continues to deteriorate despite price making new highs. Last night the NYSE advancing issues hit a high of 1948 but closed at 1658. Once again we have seen another lower close:

21/3/11: 2473 NYSE advancing issues
30/3/11: 2212 NYSE advancing issues
5/4/11: 1658 NYSE advancing issues

The divergences in these readings with price is often a lead indicator. Indeed, I saw the same divergences on the lows that helped me identify a possible turning point: http://swingtradersedge.blogspot.com/2011/03/us-market-summary_16.html.  

Eminis 60mins: 
There was a small reversal out of the resistance zone. Use breaks of the upward trendline or the moving averages for potential short opportunities.

Dow Cash 60mins:

The Dow is still trading at the top end of it's range and a potential Double Top trade is still very much in play

Thus to Asia. There is no strong overnight lead for early trade. The SPI is indicated at 4922 just below yesterdays highs. The key short term range is 4902/4900 to 4930. As stressed yesterday, I do not have a clear swing trade up here as we are coming right into the February highs. For my day trading, I think today could be another range day. I am looking for breaks of 4930 to target 4945/4950 and I am also looking to buy supports. The ASX200 Cash high is 4944 and this appears to be the "obvious" target.

SPI June 15mins:
Look at this chart. Often the best trades are just the simple ones- look at how price has respected the moving averages continuously. For now, there is no need to fight this until we see a clear reversal or distribution process. 4900 is the key short term support

SPI June 5mins:
This is the short term range

I am still short the Nikkei for all the reasons posted yesterday. We are indicated slightly higher and will be retesting yesterdays breakdown level (see target box). Short term resistance levels are 9670/9700 then 9750. Any more strength above these levels, then I will consider covering.

Nikkei June 5mins:

MSCI Singapore showed an interesting exhaustion candle right at the 61.8 retrace level yesterday. It is still early days but I am looking for a pullback into the Daily moving averages over the next few days to get long once more for a larger swing trade. 3700/3720 are the short term resistance levels

MSCI Singapore Continuous Daily:

In sum, I do think this trend off the low is tiring with momentum and breadth deteriorating. However, as ever, there is no need to short until we see either breaks of support, a clear reversal candle, or a turn in the moving averages. Look for these signals. This market could continue to correct in price rather than time thus we must continue to respect the underlying price action.
Thanks
Austin

(UPDATE) Emini S&P 15min wedge

I see a clear consolidation building here in the S&P Eminis. We are possibly finishing off the "e" leg of a triangle which implies a breakout coming into the contract highs in the 40s. Wait for price to thrust out of this support level before getting long. However, like every pattern, we must be prepared for these classic setups to fail as these are often stronger signals. Breaks of 1324/1325 to the downside are bearish and get short. Note that yesterday was an Inside Day on the cash market. Expect a break either way tonight.


Emini S&P June 15mins:

(UPDATE) I thought I would follow up on the outcome of the Emini pattern shown last night. I think this is a great example of failed patterns and how a trader needs to be completely flexbile to be successful.

We saw a breakdown of the low end of the pattern during European trade. There was no follow through to the downside and thus immeadiatly we should be looking to get long if price regains support. Failed patterns are often very strong signals as the crowd has traded on the perceived breakdown, and are then forced to cover their postions adding fuel to the subsequent rally. Personally, I never trade the Eminis BEFORE the Cash market open. This pattern here is a clear illustration of why- there are many false breaks and moves prior to the US opening.

We did see a thrust out of the 1324/1325 support level when the US stepped in and this was the initial signal to get long. Look for a strong 5min or 15min candle. There was an opportunity to add another postion when price broke above the downward trendline. However, there was no strong follow through and price failed right at the previous highs at the 1333/1334 res level. Nimble traders could have made a small profit but all in all this was rather a volatile session.

Emini 15mins:

Emini 5mins:

Nikkei June Short

I thought I would show a  trade I just executed in the Nikkei June futures. This is not a reccomendation to trade but just an illustration of my thinking. 

I have been following a potential short setup for some while in the Nikkei: http://swingtradersedge.blogspot.com/2011/03/nikkei-vs-s-flash-crash.html. Price did rally into the 9750/9800 target level I cited some days ago i.e. the open gap and 61.8 retrace level. In the last 3 days, this market has traded in a clear distribution range and has failed to move higher. I got short on a breakdown of the recent range (see 5min chart). Inital targets are 9350 with stops above 9770.


Nikkei June 5mins:
Got short at 9640 on the retest of this mornings breakdown level.

Nikkei 15mins:
 

Nikkei 60mins:
Price has rallied right into the open gap. Momentum divergences are appearing. The moving averages are still positive on this timeframe and thus we must be wary if there is no follow through to the downside. Note that the Daily trend is down and we are shorting the market into the moving averages.

I will keep you posted on how this plays out.
Austin

Asian Morning Thoughts

Morning All,

The SPI futures have opened at 4918 just short of yesterdays highs at 4922. Once again, I must stress that I don't have a clear trade here. I believe we are at the top end of the range and I am happy to be out of the market at these levels. Certainly yesterday's price action did feel tired but there is no clear distribution pattern yet. Patience is a key quality of a successful trader I believe and until I see a solid risk/reward setup, I will not risk my capital. Loner term, I am looking for a deeper pullback into the Daily moving averages to get long once more but here I advise caution.

I think today could be a range type day. Scenarios I am following
i) Potentially fade at 4922/4925 targeting 4905. If this res level lifts, look for potential breakout trades targeting 4940+ (target the ASX200 February high)
ii) Buy support at 4902/4900. Look to play a potential range. This level is a key marker for the short term bullish scenario.

The Australian sector indices are trading right into meaningful resistance levels. I am not calling a top here as the underlying momentum is strong, but I do believe we are certainly at the top end of the range. Always think risk/reward. Ask yourself, does it make sense to be long the market coming into these levels as a trader?

Energy Sector Daily:
This is a potential Double Top pattern in the making. Needs a bearish reversal candle to confirm. Either way, we are at solid resistance and this is NOT a breakout trade given the lack of consolidation.

Financials Sector Daily:
The Financials are now retesting the top end of this broad range. The last breakout was strongly rejected.

Materials Sector 60mins:
The materials sector is now right back to its previous highs. This is resistance

Therefore, I advise caution here in Australia. We are trading at resistance levels and we must respect this as traders. Look for either short term topping patterns to get short or wait for longer term consolidation patterns to join this trend for a new swing up. Sentiment is once again getting very bullish and I can see a number of bullish recommendations flying around. Be careful in these situations.


The Nikkei is trading at the key 9700 support. Price has failed at 9800 right at the open gap. The Daily chart has left 2 consecutive indecision candles right at the downward moving averages. I am looking to get short on breaks of this range. I outlined this trade here several days ago:http://swingtradersedge.blogspot.com/2011/03/asia-top-setups.html AND http://swingtradersedge.blogspot.com/2011/03/nikkei-vs-s-flash-crash.html

Nikkei 15mins June:

The Nifty continues to move higher from the strong base pattern. Yesterday we saw a strong close above the 61.8 retrace level. A small downward trendline comes in at 6000 and this looks like a short term target. I believe traders should continue to look for setups to join this strong trend.

Nifty Continuous Daily:

 

The Hang Seng closed solidly above the downward trendline I have been monitoring. Note the strength we have seen since that failed breakdown of horizontal support. In the short term, the market seems a bit overextended and I would be wary of jumping in here despite yesterdays close.

Hang Seng Daily:

SPI Continous Daily

I highlighted the SPI Continuous previous high at 4922 in my morning post. Today we hit a high of 4924 and are finally selling off. Early days but this is the area for position traders to be getting out of the market/tightening up risk.

SPI Continous Daily:

ASX200/SPI Morning thoughts

The ASX has come along way since I called for a swing low on March the 18th: http://swingtradersedge.blogspot.com/2011/03/asx200-swing-low-is-in.html. No doubt I have missed chunks of this move higher as this has been a rapid recovery with only small pullbacks. Ultimately, this thrust has shown the importance of following the trend, of having a clearly defined method for trailing profit stops, and waiting for price to confirm resistance levels rather than pre-empting. Trends will often move higher and for longer than we can comprehend. Such events are important learning lessons and I believe we must go back and study the charts to gain insight as to how we can improve ourselves going forth.


I don't have a clear pattern/setup in early trade. The obvious targets for this move are the previous highs at 4958 on the June contract and 4922 on the continuous contract. For position traders who caught large chunks of this move, I would now recommend getting out of long positions or tightening up risk significantly. We have gone from one emotional extreme to the other and we must always think about the risk/reward. I do believe the bigger picture is bullish but holding onto our open profits is very important. I think now is the time to look for shorter term trades/intraday trades until we see more consolidation or a deeper pullback.


Scenarios I am following today:


i) Look for a retest of Fridays highs at 4902. If we see a clear rejection of 4900/4910, fade the move with very tight stops, look for a 15 point gain or 4875
ii) If there is no strong sell off in the first 30mins, look to buy breakouts from consolidation or buy above the intraday high, targeting the contract highs at 4922.


Res: 4900/4910, then 4922/30
Support: 4875/70, 4855


SPI 2mins:

Weekend Observations

Happy Weekend All,

The Eminis hit my 1330 target zone on Friday night post the jobs number and showed an interesting reversal late into the session. The cash market gapped up on the open but couldn't hold onto its gains, closing just off the lows for the day. I believe this is all evidence of a tiring trend at key resistance levels. Note that this reversal in price came about despite "good" fundamental news. I believe we will see a pullback next week into good supports offering a great longer term buying opportunity.

Emini 60mins:
Price continues to wedge into overhead resistance with momentum clearly waning.

S&P 500 Cash 5mins:
Price gapped up on the open, trended higher for the first few hours but was unable to hold onto gains.

Dow Jones Industrial Average 60mins:
The double top pattern is still in play. An aggressive entry for this pattern is on a break of the upward trendline or Thursdays lows.

The scenarios I am following next week:
i) Look for the June Eminis to retest 1330/1333. Get short on a bearish reversal candle out of these levels. This is an aggressive fade trade against the trend thus must use tight stops
ii) Buy support at 1319/1320. Use a 4 point stop and if price cannot hold, look to join momentum to the downside targeting 1305/1300
iii) Look to buy deeper pullbacks into key support area at 1300/1295.

Note that if there is no sell off or meaningful move lower, we must look for consolidation patterns to get into the trend.


Interestingly, Copper is once again testing key support. I believe these levels have to hold to keep the bullish scenario intact. If we see a strong bearish closing candle, this is a possible Head and Shoulders pattern and get short. This market has been well called by Jack at:  http://channelsandpatterns.blogspot.com/

Copper Daily Continuous:

In currencies, the USD futures rejected the 77 level. Only breaks above 77 trigger the double bottom pattern I have been following on the June contract. This was a bearish rejection candle and if we see momentum increasing to the downside next week, follow this trend lower. EUR hit the top end of the range I have been talking about, albeit in a very volatile fashion. Breaks of 1.4250 and 1.430 are bullish indeed but for now we are still at the top end of the recent range.

DXY June Daily:

AUD is one of the strongest patterns I have on my radar currently. Price has spent some 5/6 months consolidating at its previous highs. We have now seen a strong breakout with momentum increasing and a possible completed "flat" in Elliott speak. There are 2 possible trades here:
i) Look for short term consolidation patterns (15min or 60min) to join this breakout and follow the momentum higher. This market may not retrace for a long while thus we have to be prepared to follow the trend.
i) Buy a pullback to the 1.03/1.025 level. This is a key support level and a great buying level for those who missed the intial breakout.

AUDUSD Daily:
A strong breakout from overhead resistance. Ranges lead to price expansions. This has been a big range and thus anticipate an equally big range expansion.

AUDUSD Weekly:
Price has consolidated ABOVE previous resistance for many months now. This is a bullish pattern. We just had a weekly closing candle out of this consolidation pattern.

In sum, I believe the short term trend in US market is tiring and thus look for a possible retracement next week. Short term resistance is 1330/1335 in the June Eminis with support at 1320. The DXY futures failed at the 77 level and if momentum increases to the downside next week, join the downward trend. Equally, AUD is breaking out and look to either join with wide stops or look for a pullback to 1.03 spot

Thanks and I will have the Asian run down later
Austin

How to trade divergences

I often talk about momentum divergences and then waiting for price confirmation for entry. As ever, Corey Rosenbloom at Afraid to Trade summarises this very well in a recent post: http://blog.afraidtotrade.com/lesson-in-divergences-plus-trendline-breaks-in-dollar-march-31/

Please read

US Market Summary

Good Morning All,

US markets were relatively flat overnight and consolidated recent gains. It is non-farms tonight so it is really important to remain flexible and follow the price action. We are coming into some significant resistance areas after the Eminis nailed the 1300 support level cited here two days ago. I have a few interesting setups lining up which now need price action to confirm.

One of my concerns currently is the weakening breadth figures despite price making higher highs. This is a warning flag. Since the March lows, we have seen the following closing readings:

21/3/11: 2473 NYSE advancing issues
25/3/11: 2265 NYSE advancing issues
30/3/11: 2212 NYSE advancing issues
31/3/11: 1761 NYSE advancing issues

Thus despite the S&P trading from 1260 to 1330 during this time span, the number of closing advancing issues is declining and not following through. This is not a short signal, but certainly this is a warning flag.

S&P 500 June Eminis 60mins:
The June Eminis are trading into my 1328/1330 target. There is a potential 3 Indians ending pattern lining up here into this zone. This setup was made famous by Linda Bradford Raschke in her book Street Smarts. Bottom line, price has made 3 higher highs yet the momentum indicator has made 3 lower lows- a strong bearish divergence. The entry for this trade is a bearish 15min or 60min reversal candle out of the resistance zone.

Dow Jones Cash 60mins:
The Dow Industrial and Transports have rallied right into their previous highs. This setups up a potential double top trade. Price has come along way since I recommended the double bottom trades in the middle of March: http://swingtradersedge.blogspot.com/2011/03/double-bottom-trades.html and http://swingtradersedge.blogspot.com/2011/03/double-bottom-trades-follow-up.html. The key to understand as ever is Risk/Reward. As traders, we need to be selling/getting flat into these levels and then reassessing. If there is no reversal, than we move on and look for breakout trades in the coming days after consolidation.

Industrials:

Transports:

Eurostoxx June 60mins:
The Eurostoxx is also showing a possible 3 Indians ending pattern. Last night we filled an open gap and closed right on a minor trendline. Any further weakness below 2835 should trigger a potential short entry with tight stops.

EUR broke out of the Flag pattern I have been monitoring which now targets 1.4250. I still think we are in a broader range from 1.40 to 1.4250/1.43 and thus we need to trade the range until a clear breakout ensues. The DXY double bottom trade is still in play but we need to see a strong close above 77 on the June futures for a strong entry signal in that contract.

EURUSD 60mins:

DXY Futures June Daily:

In conclusion, the trend remains up but we are coming into clear resistance levels with underlying breadth weakening on a non-farms night. As traders, I think stepping to the sidelines makes sense and look for bearish reversal candles to potentially short with tight stops. The bigger picture trend remains up and we will continue to look for buy setups should price come off or if consolidation patterns ensue.
Thanks
Austin

SPI/ASX200 Morning thoughts

The SPI is indicated to open at 4867 this morning which is around yesterday's closing highs. I think today is likely to be a consolidation type day with the possibility of some weakness/"profit taking" should 4845 break to the downside. Note it is a non-farms Friday and thus activity may be subdued.

I must stress once again that the trend is up on all time frames and we must continue to buy breakouts above resistance. Thus if we break 4870/75 on good volume, look for a move up to 4900.


Scenarios I am following today:
i) Look to buy support at 4835. Use tight stops and if this level breaks, get short targeting 4800. This target may need a few days to play out
ii) If we continue to consolidate between 4840 to 4870, look to buy a breakout of this range later in the afternoon targeting 4900

I always keep the ASX200 cash chart on my screens. Key resistance levels today are 4847/4850 which is the 78.6 retrace level and a previous major high. 4864 was the high prior to the major sell off

Good luck. I will update throughout the day
Austin