Like I wrote in the last post on the Yen, the trendline break was something to watch for a potential short, given the major supply signals behind (distribution). Watching the H4 timeframe for entry timing, short after there was a trendline break with good volume (red bar). There was demand at this area but this comes mostly from the prices hitting stop-losses of retail traders, which is something that also happens in most, if not all, supports break-outs.
Closed half order near the support, though could have closed it entirely due to the massive shake-out that took placed, market by a green (major demand) dot. Closed the rest of the trade on the 2nd strong signal, that together with the earlier shake-out, means there is now professional support of the market and the trend may come to an halt.
For some time now that I’ve been looking closely at the Yen’s daily movements. Prices are swinging around a resistance made back in 2007, and it’s interesting to note that so far there has been a rejection of new highs. Every time the prices went above it, there was supply and the prices came falling down, which is what’s happening right now. In the beginning of July there was some demand coming in near the up trendline, which sustained the prices, but it may not be enough. The market will next test the trendline, and if decisively broken, we can expect lower prices; if it’s maintained, we should trade according to the action on the resistance, and either wait for a break-out and a test for a long, or a false break-out with more supply signals for a short position.
In the H4 the recent action can be seen more clearly, with supply and really high volumes above the resistance, and where the background had already turned to weak.
AUDUSD has shown several weak signals approaching the down trendline, which was a confirmation that the downtrend was to continue. After some strength on the end of the US Session at 15/July (blue dot), the market reversed and it rallied to the trendline once again. Upon reaching near it, the market tested for demand in the market, by marking up the prices and waiting for activity to show up. The volume was relatively low, below the average, and the prices failed to rally, which means the No-Demand test marked by the pink bar, failed, and there was lack of demand in the market.
Shortly after there was an alert on a trendline nearby, and the price hit the first target already, which guarantees we’re not losing anything in this trade. Before the downtrend continued, there was a 2nd similar alert. For a future short entry prices must come up near the trendline again, to guarantee a good Risk:Reward. Also look out for strong signals in this price area, because of the 15/July strength, which could turn the trend.
Gold (XAU/USD) and Silver (XAG/USD) are naturally, two very correlated commodities, and the recent action is no exception.
Gold is near a support and a previous broken trendline. There was recent strength (blue signal) with moderate volumes, in an area of previous strength, which could be the first signal the support is holding, but so far the market doesn’t show signs of stabilizing – it keeps making new lows, and the background is still weak.
Silver is too near a support, and in the mid of a down trending channel. Given the price range silver showed today, and the fact it broke a previous support at 15.8, it was expected that the recent strength has higher volumes than in gold, since more traders and stop-losses were ‘shook-out’. Like gold, it’s making lower lows, and the background is still weak mostly due to the downtrend. I would like to see a rally to finally break the downtrend and confirm the recent strength was in fact accumulation; if the downtrend is to continue, it’s probably going to test the demand at 1162 in gold, which occured in early June. In the case the market rallies and it gives an opportunity to enter, I’d be more inclined to invest in silver rather than in gold, or at least to have a larger position in silver, as XAU/XAG (Gold/Silver ratio, tradable in some brokers) is showing major selling, which it’s preventing it to break a key resistance.
Euro/Pound has seen massive buying around 714 price level, seen by the green signals and very high (red) volumes that accompanied them. The trendline is coming from 10th June, and has been recently broken. The prices also went below the 61.8% Fibo, levels used by retail traders that are usually shook-out for stop-losses on long positions by the smart money. The volumes on the up bars, however, are low (yellow in histogram), which doesn’t seem to be strength after such an heavy professional support that there was before. Perhaps the smart money isn’t interested in higher prices right now, and they either need to buy more to support an uptrend, or they need to see there isn’t significant supply (by a bullish test at a lower price), or it’s just a temporary weakness. I’m therefore looking for the prices to go lower and test the supply there, or waiting for more strong (demand) signals. If they go up on high volumes (above average) that would also be a confirmation that the trend is changing.
This pair has been showing significant supply at 1.25 and up, with no previous resistance, which means it isn’t overhead supply (which is usually not something to worry about). The most significant resistance is at 1.25369, which is the high of the previous supply bars. There is a trendline coming from almost the beginning of this rally, since 12th May, which is the level to watch for an eventual short trade.
There is a high chance there will be a fake break-out, in order to get more longs trapped and to catch the stop-losses of shorts, which would confirm that this is in fact distribution. This would be a break-out with either low volume, or a break-out with supply signal right above the resistance after it was broken. To the downside, a break-out of the trendline with good volume would be a trend change signal, if the background keeps at being weak, and given the weakness behind. At the moment the pair is making successive higher lows, which means that for now the prices are being supported, and the dynamic trend is giving the same indication as it’s still up.
Brent crude oil, which is related to the Canadian Dollar, as Canada is a big oil exporter, is on the lower part of the trend channel, and recently showed a demand signal, at a previous strength area. It’s not showing the sideways movement as USDCAD is though, so I’m waiting for prices to stabilize at this level or to make a higher low, and for the background to change to strong.
