Gold 10.14.2019 – Sell zone on the Gold

Gold is still trading in the channel that we defined days ago. I still expect more downside and potential test of 1,460. Most recently, I found bearish flag in creation on the 4H time-frame.

analytics5da4790f08706.jpg

Yellow rectangle – Important support level

Down parallel line – Downward channel

Purple falling line – Expected path

Watch for potential selling opportunities if you see the breakout of the bear flag. MACD is still in the negative territory and there is potential for new momentum down on the oscillator. Selling opportunities are preferable with the target at 1.460. Resistance level is found at the price of 1.497. As long as the Gold is trading inside of the downward channel, I would watch for selling opportunities.

The material has been provided by InstaForex Company – www.instaforex.com

Trading recommendations for the EURUSD currency pair – placement of trade orders (October 14)

At the end of the last trading week, the EUR/USD currency pair showed high volatility of 61 points, the quotation resumed the upward movement and followed towards the next control point. From technical analysis, we see that after the breakdown of the psychological level of 1.1000, the well-known trading pattern “Breakdown/Rollback” was formed, which in this case played 100%, forming a rebound from the level of 1.1000. We saw a momentum move, returning buyers to the market, where a little more – and the peak of the previous correction of 1.1109 would have been reached, which reflects a range level of 1.1080/1.1110.

Analyzing the hourly Friday day, we see that the main movement came for the period 12:00-14:00 (time on the trading terminal), where the quote found a point of resistance in the face of the value of 1.1062 and then the recovery process began until the end of the day.

As discussed in the previous review, traders were actively working on the purchase at the time of working out the pattern “Breakdown/Rollback”, where, in principle, enough profit was taken, and waiting for further progress is extremely risky due to the location of key coordinates.

Considering the trading chart in general terms (daily period), we see a real risk of the formation of the so-called oblong correction, if the range level (1.1080/1.1110), representing the peak of the previous correction, falls under the pressure of buyers. In the case of such a scenario, the main downward trend may be delayed for more than one month.

Friday’s news background had no worthwhile statistics on Europe and the United States, but no one was upset, as all attention was focused on the information background.

The main event at the end of the week can rightly be called Brexit. The hope for a bright future in this protracted process was stirred by the statement that not all is lost and Britain and Ireland still have a solution. The pound flew first, and we described its results in a separate article. The euro, with a slight delay, also rushed up, not so actively, but nevertheless, the average daily indicator was broken. The incentive for further growth was the accompanying statement by the head of the European Council, Donald Tusk, who was optimistic about the negotiations and believes that there is still little chance of reaching an agreement between Britain and the EU. At this, the hysterical behavior of the market ends and a rollback occurs. During the partial recovery and the weekend, the information background did not stop and continued to produce quite interesting noises.

The meeting of Brexit negotiators Michel Barnier (EU) and Steve Barclay (UK) ended, in principle, nothing. Barnier said that the British Prime Minister’s proposal could jeopardize the European market, as it does not contain specifics.

In turn, German Chancellor Angela Merkel believes that the EU and the UK are in a crucial phase of the exit process. At the same time, Merkel added that the French and German sides will once again agree on their positions on Brexit.

Let’s move a little away from the trailed Brexit process and take a look at the West, and so, there the Federal Reserve decided to launch a printing press with a monthly redemption of Treasury bonds worth $ 60 billion. About 510 billion dollars will be printed in such a maneuver, but the Fed does not consider this to be the launch of the new QE series.

In turn, US President Donald Trump once again did not ignore the Fed, calling to lower the interest rate and noting that the economy is excellent.

“The Fed should lower the rate regardless of how good the deal with China will be. We have a great economy, but we have the Fed, which does not keep up with the rest of the world. I think they should keep up with the rest of the world, despite the deal with China. The deal with China is much more important than the interest rate,” Donald Trump spoke to reporters following two-day US-China talks.

analytics5da46ed29e93a.jpg

Today, in terms of the economic calendar, we had data on industrial production in Europe, where we were waiting for a deepening recession from -2.1% to -2.5%, and got an even worse picture, a decline to -2.8%. The reaction of the single currency to what is happening is surprisingly no, even a small local growth is possible on monthly data on industrial production volumes, which increased by 0.4%, but this is nothing compared to annual indicators.

Further development

Analyzing the current trading chart, we see a sluggish recovery process, where the quote froze in the area of 1.1030, forming versatile Doji candles. In turn, speculators are trying to work on the recovery stage, where the maximum target is the level of 1.1000.

It is likely to assume that the fluctuation within the available values will remain, but if the recovery process continues, we may be lowered again to the psychological level of 1.1000. Further actions are already considered depending on the points of price-fixing.

analytics5da46ee630112.png

Based on the above information, we derive trading recommendations:

  • Buying positions, if considered, in case of price-fixing is higher than 1.1062, with the prospect of a move to 1.1080 – 1.1105.
  • Sales positions are considered in terms of the recovery process in the direction of the level of 1.1000.

Indicator analysis

Analyzing different sector timeframes (TF), we see that the indicators in the short term signal a recovery process, which cannot be said about the intraday and medium-term period, where the interest of recent impulses is maintained.

analytics5da47dde55220.jpg

Volatility per week / Measurement of volatility: Month; Quarter; Year

Measurement of volatility reflects the average daily fluctuation, calculated for the Month / Quarter / Year.

(October 14 was built taking into account the time of publication of the article)

The volatility of the current time is 29 points, which is quite small for this period. It is likely to assume that in the case of a slowdown within the available coordinates, volatility will remain within the daily average.

analytics5da47e02e6331.jpg

Key levels

Resistance zones: 1.1100**; 1.1180*; 1.1300**; 1.1450; 1.1550; 1.1650*; 1.1720**; 1.1850**; 1.2100

Support zones: 1.1000***; 1.0900/1.0950**; 1.0850**; 1.0500***; 1.0350**; 1.0000***.

* Periodic level

** Range level

*** Psychological level

**** The article is based on the principle of conducting transactions, with daily adjustments.

The material has been provided by InstaForex Company – www.instaforex.com

EUR/USD for October 14,2019 – Broken upward channel whithin larger upward channel

EUR/USD has been trading sideways at the price of 1.1025. I do expect downside and potential test of the support at 1.1007. Watch for potential selling opportunities.

analytics5da4757459f67.jpg

Yellow rectangle – Important support levels

Upper parallel line – Upward trend channels

Purple falling line – Expected path

I see that there is potential for down move and potential test of the 1.1000 level. The overall trend is still bullish but there is chance for downward correction first. Important resistance is set at the price of 1.1062. My advice is to watch for selling opportunities with the target 1.1000.

The material has been provided by InstaForex Company – www.instaforex.com

BTC 10.14.2019 – Sell zone for Bitcoin, bearish flag in play

BTC has been trading lower exactly what I expected last week. I still expect that BTC trades more downside towards our down targets at 8,052 and 7,742.

analytics5da471fd70aa4.jpg

Red rectangle – Important resistance levels

Green rectangle – Important support and objective

Purple falling line – Expected path

I see that watching the larger structure, BTC potentially finished ABC expanded flat upward correction. I found series of the lower lows and lower highs in recent 2 days, which his sign that sellers are in control. Important support levels are set at 8,052 and 7,742. Resistance levels is found at 8,362.

The material has been provided by InstaForex Company – www.instaforex.com

GBP/USD: plan for the American session on October 14th. The downward correction on the pound approached important support

To open long positions on GBP/USD, you need:

Almost half of Friday’s growth of the pound is already blocked by a downward correction. However, it is too early for buyers to worry. On the contrary, if we take a large two-day growth of the pair, the first real support is now seen in the area of 1.2530, just below which there is another good level of 1.2480, from where you can open long positions immediately on the rebound. Another task for the bulls will be the return of GBP/USD to the resistance of 1.2585, consolidation above which can lead to stronger demand and further growth of the pair to the highs of 1.2639 and 1.2673, where I recommend taking the profits. However, given that today is Columbus Day in the US and many markets are closed, volatility is unlikely to be high.

To open short positions on GBP/USD, you need:

I do not recommend selling the pound at current levels. The optimal scenario will be a re-return and update of resistance in the area of 1.2639 and 1.2673, where you can see the first short positions. However, the more important task of the bears will be to break the support of 1.2530 and close the day below this level, which should push the pair to a minimum of 1.2480, where I recommend taking the profits. Any positive news related to Brexit will immediately bring back new buyers of the pound, so do not forget about stop orders in such a volatile market.

Indicator signals:

Moving Averages

Trading is conducted around the 30 and 50 daily averages, which indicates the possible completion of a downward correction in the pound.

Bollinger Bands

The pound is supported by the lower border of the indicator in the area of 1.2520, but the growth in the second half of the day will be limited to the average level in the area of 1.2590.

analytics5da46bbfd5d90.png

Description of indicators

  • MA (moving average) 50 days – yellow
  • MA (moving average) 30 days – green
  • MACD: fast EMA 12, slow EMA 26, SMA 9
  • Bollinger Bands 20

The material has been provided by InstaForex Company – www.instaforex.com

GBP/USD: plan for the American session on October 14th. The downward correction on the pound approached important support

To open long positions on GBP/USD, you need:

Almost half of Friday’s growth of the pound is already blocked by a downward correction. However, it is too early for buyers to worry. On the contrary, if we take a large two-day growth of the pair, the first real support is now seen in the area of 1.2530, just below which there is another good level of 1.2480, from where you can open long positions immediately on the rebound. Another task for the bulls will be the return of GBP/USD to the resistance of 1.2585, consolidation above which can lead to stronger demand and further growth of the pair to the highs of 1.2639 and 1.2673, where I recommend taking the profits. However, given that today is Columbus Day in the US and many markets are closed, volatility is unlikely to be high.

To open short positions on GBP/USD, you need:

I do not recommend selling the pound at current levels. The optimal scenario will be a re-return and update of resistance in the area of 1.2639 and 1.2673, where you can see the first short positions. However, the more important task of the bears will be to break the support of 1.2530 and close the day below this level, which should push the pair to a minimum of 1.2480, where I recommend taking the profits. Any positive news related to Brexit will immediately bring back new buyers of the pound, so do not forget about stop orders in such a volatile market.

Indicator signals:

Moving Averages

Trading is conducted around the 30 and 50 daily averages, which indicates the possible completion of a downward correction in the pound.

Bollinger Bands

The pound is supported by the lower border of the indicator in the area of 1.2520, but the growth in the second half of the day will be limited to the average level in the area of 1.2590.

analytics5da46bbfd5d90.png

Description of indicators

  • MA (moving average) 50 days – yellow
  • MA (moving average) 30 days – green
  • MACD: fast EMA 12, slow EMA 26, SMA 9
  • Bollinger Bands 20

The material has been provided by InstaForex Company – www.instaforex.com

EUR/USD: plan for the American session on October 14th. Volatility will remain low in the second half of the day

To open long positions on EURUSD, you need:

From a technical point of view, the situation has not changed compared to the morning forecast after a failed attempt to increase the euro on the background of a good report on the volume of industrial production in the eurozone. Today is Columbus Day in the US, so volatility will be very low in the afternoon. It is best to open long positions in EUR/USD after a downward correction to the support of 1.1008, or immediately on the rebound from the larger minimum of 1.0975. However, the main task of the bulls will be to return to the resistance of 1.1033, which was not possible to do in the first half of the day. Only above this level, the bulls will try to update the highs of last week in the area of 1.1061, where I recommend taking the profit. However, given the day off in many markets, it is possible to trade around the level of 1.1033.

To open short positions on EURUSD, you need:

The main task of the bears will be the return of EUR/USD to the support of 1.1008 and the breakdown of this level, which will provide the euro with new pressure that can push it to a minimum of 1.0975, where I recommend taking the profits. In the first half of the day, an unsuccessful consolidation above the resistance of 1.1033, after the release of a good report on industrial production in the eurozone, returned sellers to the market, which are now aimed at a minimum of 1.0975. If the bulls try again to regain the level of 1.1033, it is possible to open short positions immediately on the rebound from the maximum of 1.1061, but the direction in the pair will depend on further negotiations between the US and China.

Indicator signals:

Moving Averages

Trading is conducted around 30 and 50 moving averages, which indicates further market uncertainty.

Bollinger Bands

In the case of a decline in the euro, support will be provided by the lower line of the indicator in the area of 1.1015, and sales are best viewed after the upper boundary test in the area of 1.1050.

analytics5da46b4a92ddc.png

Description of indicators

  • MA (moving average) 50 days – yellow
  • MA (moving average) 30 days – green
  • MACD: fast EMA 12, slow EMA 26, SMA 9
  • Bollinger Bands 20

The material has been provided by InstaForex Company – www.instaforex.com

EUR/USD: plan for the American session on October 14th. Volatility will remain low in the second half of the day

To open long positions on EURUSD, you need:

From a technical point of view, the situation has not changed compared to the morning forecast after a failed attempt to increase the euro on the background of a good report on the volume of industrial production in the eurozone. Today is Columbus Day in the US, so volatility will be very low in the afternoon. It is best to open long positions in EUR/USD after a downward correction to the support of 1.1008, or immediately on the rebound from the larger minimum of 1.0975. However, the main task of the bulls will be to return to the resistance of 1.1033, which was not possible to do in the first half of the day. Only above this level, the bulls will try to update the highs of last week in the area of 1.1061, where I recommend taking the profit. However, given the day off in many markets, it is possible to trade around the level of 1.1033.

To open short positions on EURUSD, you need:

The main task of the bears will be the return of EUR/USD to the support of 1.1008 and the breakdown of this level, which will provide the euro with new pressure that can push it to a minimum of 1.0975, where I recommend taking the profits. In the first half of the day, an unsuccessful consolidation above the resistance of 1.1033, after the release of a good report on industrial production in the eurozone, returned sellers to the market, which are now aimed at a minimum of 1.0975. If the bulls try again to regain the level of 1.1033, it is possible to open short positions immediately on the rebound from the maximum of 1.1061, but the direction in the pair will depend on further negotiations between the US and China.

Indicator signals:

Moving Averages

Trading is conducted around 30 and 50 moving averages, which indicates further market uncertainty.

Bollinger Bands

In the case of a decline in the euro, support will be provided by the lower line of the indicator in the area of 1.1015, and sales are best viewed after the upper boundary test in the area of 1.1050.

analytics5da46b4a92ddc.png

Description of indicators

  • MA (moving average) 50 days – yellow
  • MA (moving average) 30 days – green
  • MACD: fast EMA 12, slow EMA 26, SMA 9
  • Bollinger Bands 20

The material has been provided by InstaForex Company – www.instaforex.com

Gold is growing

Good afternoon, dear traders! I present to your attention a trading idea for gold.

At the last review on Friday, I recommended careful buying on the false breakdown of 1485 and further track the dynamics of the US session. As you can see, the Americans closed higher. This pattern is called a V-shaped buy-off and is a standard model in the world of trading.

analytics5da45f0a08aee.jpg

The market reaction to this buy-off also showed a positive direction in the European session. Now, it remains to wait for confirmation in the market, and if the opportunity presents itself – to continue to gain a logical position with a great goal and profit-taking at the level of 1519. The fundamental background is also favorable – the probability of lowering the interest rate on the USD is growing every day, and in this case, work on the weakening of the dollar in gold – as they say.

Good luck with trading and see you at the evening review!

The material has been provided by InstaForex Company – www.instaforex.com

Technical analysis of EUR/USD for October 14, 2019

On the other hand, stop loss should always be in account, consequently, it will be of wholesome to set the stop loss below the support 1 at the price of 1.0934.The material has been provided by InstaForex Company – www.instaforex.com

Trading recommendations for the GBPUSD currency pair – placement of trade orders (October 14)

By the end of the last trading week, the pound/dollar currency pair showed even greater volatility of 294 points than the day before, resulting in an almost vertical movement. From technical analysis, we see a stunning upward move, where on average for two trading days, the quote flew almost 500 points. All the price levels on the way fell, including the correction peak of 1.2580. Parsing hourly Friday, we see that the inertial course came in the period 11:00 – 17:00 (time on the trading terminal), where all the movement of the day (294 points) was created. After that, there was a partial recovery process in the form of a small rollback of 66 points.

As discussed in the previous review, speculators could not get enough of such an intensive course for the second day in a row, where one of the most difficult tasks was in terms of fixing previously received profits. The expected resistance levels broke through under the onslaught of the inertial move, where most traders switched to the sliding stop method.

Considering the trading chart in general terms (daily period), we see that the height of the oblong correction is even greater, having from the pivot point (1.1957), already more than 700 points. The quote reached the second correction in order (1.2770 – 25.06.19), wherein the case of a move higher, the conversation could have started about a trend change, but this did not happen and the quotation started a reversal in advance. In the analysis of price behavior, it is worth taking into account such a moment that the past two days were strongly prone to panic on the background of the information flow, which in some sense could locally make a failure in the clock process of the trend.

Friday’s news background did not include statistics on the UK and the United States, and they were not needed when there was such a strong information background.

So what led the quote to such a strong upward move? I hope for a bright future.

The main round of hope was born on Thursday, when at the meeting of the two leaders of Britain and Ireland, hopes of agreeing appeared. At this stage, the pound began its growth, and it is more on the emotions, but on Friday began to receive subsequent hopes. The head of the European Council Donald Tusk noted positive signals from Irish Prime Minister Leo Varadkar, against this background, the pound accelerated even more. Then came the more technical pullback as this information background is not over. Protracted negotiations between Brexit envoys Michel Barnier and Steve Barclay, in principle, have not yielded results, the EU side said that the latest proposals of Johnson could jeopardize the European market, as they do not have specifics.

In turn, British Prime Minister Boris Johnson during a government meeting on Sunday expressed hope for a deal with the European Union in the deadline set for October 31. Simultaneously with Johnson, there was news from Europe, where German Chancellor Angela Merkel during talks with French President Emmanuel Macron said: “We are in a decisive phase in the issue of Britain’s exit from the European Union.” At the same time, politicians stressed that Germany and France have yet to agree on their positions.

That’s the stormy background that kept us going last week, but I think that’s just the beginning.

analytics5da4420f5324a.jpg

Today, in terms of the economic calendar, we do not have statistics, and in the United States, the day off. In terms of information background, further outbursts regarding Brexit are possible, also today Queen Elizabeth II will open a new session of the British Parliament with a throne speech.

Further development

Analyzing the current trading chart, we see that the market is sluggish but still started the recovery process, going down just below the maximum of 1.2580. We see a significant overheating of long positions, which occurred due to the surge of Thursday and Friday last week. Technical correction/rollback/recovery, in this case, is necessary, unless, of course, a massive information background comes again. Detailing the beginning of the day hourly, we see that it all started with a small gap, after which a gradual downward course began, without sharp fluctuations.

In turn, speculators rolled so hard on these impulses that even sitting on the fence, in this case, is a good task, but not for everyone. The recovery process was expected by many, and, obviously, it can be earned, since the recovery in the area of 35%-50% relative to the two-day momentum is a frequent picture in this scenario.

It is likely to assume that in this case the first pivot point has already been reached, it is a peak of 1.2580, at this stage, there will be a statement of the price, perhaps in the form of a small stagnation. After that, it is worth watching the behavior of the quote and fixing points, as further recovery is possible in the direction of 1.2500 – 1.2450.

analytics5da4427e5ef56.png

Based on the above information, we concretize trading recommendations:

  • We consider purchase positions in terms of analysis, since overheating of long positions already exists. The points of possible support that are worth a closer look are 1.2580 – 1.2500 – 1.2400. It is also worth carefully monitoring the news feed, as we have already seen from the experience of last week that the information background works wonders.
  • Some speculators already have selling positions in the recovery phase, you can also now look at the price fluctuations within 1.2580 since fixations lower than 1.2550 can give strength in the direction of 1.2500.

Indicator analysis

Analyzing different sector timeframes (TF), we see that indicators in the intraday and medium-term areas signal purchases due to the earlier inertial course. The short-term gap signals a recovery process that is happening at the moment.

analytics5da457d39e1e2.jpg

Volatility per week / Measurement of volatility: Month; Quarter; Year

Measurement of volatility reflects the average daily fluctuation, calculated for the Month / Quarter / Year.

(October 14 was built taking into account the time of publication of the article)

The volatility of the current time is 89 points, which is already quite good for this period. It is likely to assume that in the event of a continuation of the recovery process and a drop of background and emotions, volatility may continue to rise.

analytics5da457e67a89e.jpg

Key levels

Resistance zones: 1.2620; 1.2770**; 1.2880 (1.2865 – 1.2880)**.

Support zones: 1.2580*; 1.2500**; 1.2350**; 1.2205(+/-10p.)*; 1.2150**; 1.2000***; 1.1700; 1.1475**.

* Periodic level

** Range level

*** The article is based on the principle of conducting transactions, with daily adjustments.

The material has been provided by InstaForex Company – www.instaforex.com

Trading strategy for EUR/USD on October 14th. US-China talks. What do they give the US dollar?

EUR/USD – 4H.

analytics5da43951efe63.png

As seen on the 4-hour chart, the EUR/USD pair performed a consolidation above the correction level of 127.2% (1.1029), but the bearish divergence formed a little later at the CCI indicator worked in favor of the US dollar. As a result, the euro/dollar pair slipped back to the Fibo level of 127.2%. The downward trend channel no longer holds the pair’s quotes inside itself, thus, the conclusion about the upward mood of traders for the euro/dollar pair arises. However, the information background still does not allow us to choose between currencies unambiguously in favor of the euro currency.

By and large, now several topics are extremely important for the euro/dollar pair. These include China-US trade negotiations, a possible US-EU trade war, and changes in EU and US monetary policies. Each of these topics is important in itself, but this is not the case when each news is reflected in the chart with strong movements. Rather, all these topics create some kind of background for the pair to move in one direction or another. Last Friday, negotiations were held between Donald Trump and Vice Premier of the State Council of the PRC Liu He. According to Trump, the parties have made significant progress in the negotiations in the “first phase.” So much so that the contract of this very “first phase” can be concluded shortly, after which the parties will proceed to discuss the “second phase”. From the good news for both sides, one can single out the cancellation of the increase in duties from 25% to 30% for goods with a total amount of about $ 250 billion, which was scheduled for October 15. Trump also said that China has already begun to purchase agricultural products in America, following the agreements. All this testifies to the de-escalation of the trade conflict.

This is good news for the US dollar. Not the least role in reducing key US economic indicators was played by the trade war with China. Accordingly, the sooner it is completed, the faster the parties will move towards each other, the faster America’s economic performance will return to normal. Well, for the EUR/USD pair, this will mean that the US currency may rush down again, as the demand for the US dollar may rise again. Of course, this is too hasty a conclusion. China and America first need to agree. Further, much will depend on what policy the Fed will adhere to in the event of a trade agreement. If rates no longer drop, this is again a favorable factor for the US currency.

In general, I can say that so far no positive conclusions should be drawn from the next round of negotiations. Tomorrow, Trump may again accuse China of failing to comply with agreements and impose a new portion of duties, as it has been more than once. It will be necessary to rejoice when the parties sign the agreement and announce it. Then it will be possible to consider that Beijing and Washington are on the way to peace and mutual agreement.

What to expect from the euro/dollar currency pair today?

On October 14, traders returned the euro/dollar pair to the correction level of 127.2%. The rebound of quotations from the Fibo level of 127.2% will allow traders to count on the resumption of growth in the direction of the correctional level of 100.0% (1.1106). The report on industrial production in the European Union for August is expected to further worsen the situation. At best, traders will not pay enough attention to it.

The Fibo grid is based on the extremes of May 23, 2019, and June 25, 2019.

Forecast for EUR/USD and trading recommendations:

I recommend selling the pair today with a target of 1.0802 if the close below 1.0918 is executed. A stop-loss order above the level of 1.0927.

It will be possible to buy the pair in case of a rebound from the correction level of 127.2% with the target of 1.1106 and the stop-loss level at 1.1024.

The material has been provided by InstaForex Company – www.instaforex.com

Trading strategy for GBP/USD on October 14th. Boris Johnson needs to do the impossible in time to reach an agreement with

GBP/USD – 4H.

analytics5da438f1f0aa6.png

As seen on the 4-hour chart, the GBP/USD pair made another impressive leap up to the correctional level of 50.0% (1.2668). The pair’s rebound from this level worked in favor of the US currency and began to fall in the direction of the correction level of 38.2% (1.2501). The growing divergence on October 14 is not observed. The pound/dollar pair is starting to frankly storm as the new Judgment Day for the pound and the whole of Great Britain is approaching.

The information background for the pound/dollar pair remains neutral. It is neutral, despite the rise of the British currency at the end of last week by 500 points. No reports are confirming the progress in the negotiations announced by the Prime Ministers of Great Britain Boris Johnson and Prime Ministers of Ireland Leo Varadkar. That is, not a single message from the European Union, not a single comment from representatives of the European Parliament, the European Council, the European Commission. Thus, I believe that the pound has collected all kinds of advances from traders, which now need to be worked out. If there is no encouraging information confirming that London and Brussels can indeed agree and it will happen at the summit on October 17-18, then the pound will begin to move back to the zone from which the unprecedented growth began.

I don’t see any factors that would increase the likelihood of implementing Brexit “With Deal” in the past week. Both Brussels and London do not voice any details in the negotiation process. Officials of the EU and the Kingdom only regularly state in the press about the results of one or another stage of negotiations. Ordinary traders do not know any details. Thus, it is impossible to exclude the possibility that the parties are close to signing the deal. But we will learn about this only after the EU summit. If we assess only the facts and verified information, the picture remains unflattering, and everything goes to the fact that we will witness another postponement of Brexit and additional 3-4 months of negotiations.

The outlook for the pound is now completely through the prism of “Brexit”, but to be honest, I believe that last week’s growth of the pound has already completely played out all the most optimistic scenarios. He can leave his current position even higher if the deal is concluded on October 17-18, and it is approved by the British Parliament on October 19, which may also cause problems. Theresa May at one time also managed to negotiate with the European Union but failed to negotiate with the deputies of her own Parliament. Thus, the story may repeat itself with Boris Johnson. And Johnson has more opponents in Parliament than opponents of Theresa May. Thus, his deal will be particularly picky.

What to expect from the pound/dollar currency pair today?

The pound/dollar pair rebounded from the correction level of 50.0% (1.2668). Thus, I expect a fall to the level of 1.2501 today, and a close below this level will allow us to expect a further decline in the direction of the Fibo level of 23.6% (1.2293), which I believe is the most likely scenario for the coming days.

The Fibo grid is based on the extremes of March 13, 2019, and September 3, 2019.

Forecast for GBP/USD and trading recommendations:

I recommend buying the pair with a target of 1.2836 if the consolidation is performed above the Fibo level of 50.0% with the stop-loss order below the level of 1.2668.

I recommend considering selling the pair with a target of 1.2501 today since a rebound from the level of 50.0% was made.

The material has been provided by InstaForex Company – www.instaforex.com

Measuring Market Sentiment

Successful investors and traders alike usually have a rule-based strategy that provides them a financial advantage or edge. A combination of OTA’s core strategy (institutional supply and demand),  fundamental and technical analysis are typical components. Another analysis we can add to the recipe is investor mood, commonly called sentiment. In other words, do market participants feel bullish, bearish or neutral about the future?

Traders should keep an eye on the world markets.

While each region and country has a unique economy, given the volume of international trade, those individual economies are part of a larger global economy. The U.S. economy is the largest in the world but, more importantly for this analysis, it is also the last market traded on the daily clock. This allows U.S. investors a glimpse at how the Asian and European markets are trading before the U.S. stock market opens.

Free Trading WorkshopBy the time the U.S. market opens, Asian markets are closed and European markets are heading into their afternoon session. Watching the results of these markets can frequently give us a clue as to how the U.S. market will trade. Is the world Bullish? Bearish? Neutral? There is empirical evidence that world investor sentiment can influence the U.S market. And being the world’s largest economy, the U.S market in turn has influence on the open of those world markets the next trading day.

Each region tends to influence the next region trading on the world clock. Catalysts (economic data, for example) within each region help determine the local sentiment. These catalysts can change or reinforce the direction of investor sentiment. Imagine sentiment as a relay race with catalysts being the baton that is passed.

Strategy for Assessing World Sentiment

Many years ago, I developed a simple filter for world sentiment, which I call the World Index. The foundation of off the World Index is the daily cash market percentage change of the major Asian and European indices along with the U.S. futures percentage change of the S&P 500 index leading into the U.S market open.

The formula for the World Index is simple and provides a variable yet clear indication of market sentiment. The output of the formula is an oscillator that ranges from -100 (extreme bearishness) to +100 (extreme bullishness). A reading of zero signifies neutral sentiment. Therefore, the higher above zero the more bullish, the lower below zero the more bearish.

The World Index is easily determined using a calculator or spreadsheet. Here are the input value rules:

% Change of IndexInput ValueSentiment
-0.1% to +0.1%0Neutral
+0.1% to +0.99%1Bullish
+1.0% and greater2Extreme Bullishness
-0.1% to -0.99%-1Bearish
-1.0% and lower-2Extreme Bearishness

The input values are captured for each major world market, summed, divided by 12 (the maximum input value sum) and multiplied by 100 resulting in the oscillator value ranging between -100 and +100. A more elegant formula would to combine the sum and divide functions resulting in a divisor of 0.12 (12 / 100).

Here’s a recent example suggesting a very bullish sentiment:

Index PercentageChange PercentageValue
China – CSI 300+1.29%2
Hong Kong – HSI+2.27%2
Japan – Nikkei 225+1.20%1
London – FTSE 100+0.59%1
Germany – DAX+0.77%1
S&P Futures (Globex)+0.88%1
World Index75

I’ve found these markets to be reliable, however, the formula could be customized to include additional indexes. If additional indexes are added, the divisor in the formula would be altered to reflect those additions. For example, for each one added, you would increase the divisor by 0.02. So, if adding one index you would calculate the ultimate World Index value by summing and dividing by 0.14, if adding two markets you would use 0.16, etc.

As a day trader of the S&P Futures contract I’ve used this as a guide for determining directional edge for the coming market day in the U.S. Having captured the World Index daily for several years over thousands of trades, I now have a data set which can be analyzed for a potential edge in trading. Keep in mind that this information is just as useful for stock, ETF and options traders, as the S&P 500 is comprised of the 500 largest publicly traded companies.

No indicator or filter is infallible, so this edge is used to start the trading day with a directional bias. However, live market action and any catalysts that are changing the directional edge take precedence as the current day unfolds.

Let’s get you started with some empirical evidence taken from over 3000 S&P futures trades:

World Index ValueDirection Favored
+76 to +100Strong SHORT Edge
+51 to +75Strong LONG Edge
+26 to +50Modest LONG Edge
1 to 25Modest LONG Edge
0Modest LONG Edge
-1 to -25Modest SHORT Edge
-26 to -50Strong LONG Edge
-51 to -75Modest SHORT Edge
-76 to -100Strong LONG Edge

The most notable outcomes are the extreme readings of the World Index. Extreme bullishness has the potential to offer shorting opportunities. As well, extreme bearishness has the potential to offer long opportunities. Though this is not a decision making tool, when used in combination with supply and demand strategies, it can offer additional insights into the movement of the markets.

Read Full Article

Some Candlestick Bias

Hello traders! This week’s newsletter will be a short lesson on candlestick stock charts and how to use them for hints on your trades.

First of all, Japanese candlesticks were first invented in Japan hundreds of years ago to try and predict the future price of rice. The interpretation of candlesticks is very fast and efficient, which is why they have remained so popular even in this day and age. There are dozens and dozens of different patterns that exist in the world of candlesticks. I plan on giving you an easy way to interpret the very basics of them to help with your trading.

Free Trading WorkshopEvery candlestick shows us four data points, the open (first trade in the time period), the high (highest trade in the time period), low (lowest trade in the time period and the close (last trade in the time period).  Of these four data points, each is important in its own way, but for this technique we are more interested in the close.

In the following image, you can see that I’ve marked two different candles with blue arrows, One and Two. I’ve also broken down these candles into five equal parts – quintiles. I look at where the candle closes within this range of quintiles to give me a bias of, from very bearish to very bullish.

If the candle closes in the highest quintile, that is very bullish (meaning a strong bias to higher prices).

If the candle closes in the next lower quintile, that is bullish (meaning a bias to higher prices).

If the candle closes in the middle quintile, the bias is neutral.

If the candle closes in the next lower quintile, that is bearish (meaning a bias to lower prices).

If the candle closes in the lowest quintile, that is very bearish (meaning a strong bias to lower prices).

Candlestick chart of USDCAD

So, on the candle labeled One, it closed in the top quintile giving a very bullish bias/hint for what will happen in the next candle. Lo and behold, the next went up as well! As you look at each of the following green bodied candles, you can see that bullish bias held until the move was nearly complete.

On the candle labeled Two, it closed in the lowest quintile, giving a very bearish bias/hint for what will happen in the next candle. Lo and behold, the next candle went down as well!

Notice the following large red candle closed near the very bottom of its range as well, but the next candle obviously didn’t continue down. Location on the chart is more important than the shape of the candle. What this means is that a very bearish candle after a long move down is much less important than after a long move up! On the other side of the coin, a very bullish candle after a long move up is much less important than after a long move down!

So how can we use this information? On the following image, I have put on two charts of the USDCAD. The chart on the left is a daily chart with the very bearish candle from September 3 marked in.

Candlestick chart showing examples of a bearish and bullish move in USDCAD.

Notice we already had a move up from about 1.3020 to 1.3380 over a period of six weeks or so. The upward trend seems to be getting tired, the Sept 2 and 3 closing prices are indicating a bearish bias. On Sept 4, price traded below the Sept 3 low, indicating the bears are finally taking over. The plan would be to then go short in a smaller time frame supply zone.

The breakdown is, look for a bearish close after a move up into supply, drill down to a smaller time frame to find a supply zone for a short entry. Look for a bullish close after a move down into demand, drill down to a smaller time frame to find a demand zone for a long entry.

Until next time,

Rick Wright

Read Full Article

Understanding In-the-Money Covered Calls

Recently I received a question from a reader who had heard about an option strategy known as in-the-money (ITM) covered calls. This is a variation on the more common out-of-the-money covered call, and it has some interesting uses.

What Is an In-the-Money Covered Call?

The ITM covered call can be used as a device to sell an appreciated stock at a price that is somewhat above the market price. It can also be used as a cash-flow generation strategy and tuned to be almost as conservative as treasury bills, or as aggressive as a biotech stock or anywhere in between.

How to Use an In-the-Money Covered Call

The mechanics are simple. You buy (or already own) 100 shares of a stock or exchange-traded fund. You then sell a call option, with a strike price that is quite far below the current stock price. You are selling someone the option to buy your stock from you at a price that is far below market. The amount of money you will be paid for selling the call is equal to the discount to market value you are offering, plus a little bit more. That little bit more is your profit.

Example of an In-the-Money Covered Call Trade

Below is a list of options on the exchange-traded fund called GLD, which follows the price of gold. The selected options were set to expire 15 days after the date of this screenshot, on October 18, 2019:

SPDR Gold Trust options prices

 

The price of the GLD shares at that time was $141.90.

The Strike column shows the various options that could be sold. For example, look at the row where the Strike is 137.

If you decided to use this call as an ITM covered call, you would take these steps:

  1. Buy 100 shares of GLD at $141.90, for a total of $14,190
  2. Sell 1 of the calls at the 137 strike, for $5.2425 per share (between the Bid of $5.20 and the Ask of $5.30) This would bring in cash of $524.25 for the option contract.
  3. Your net out-of-pocket cost is now $14,190 less $524.25, or $13,665.75. This is your investment.
  4. Wait 15 days for the options to expire. At that time, if GLD is still at any price above $137 per share, the option would be assigned.

This means that the GLD shares will be taken away from you and you will be paid $137 per share, a total of $13,700.

Your receipts at that time of $13,700, less your original investment of $13,665.75, would leave you with a $34.25 profit in 15 days. This could be multiplied by as many times as you have increments of $14,000 to invest.

The return may not sound like a lot, but as an annualized rate of return it is not bad.

The calculation of the return for an in-the-money covered call is Return / Amount Invested, in this case $34.25/$13,665.75 or about ¼ of 1% in 15 days. This works out to an annualized return of around 5.51% per year, and that is the amount shown in the table above, in the column labeled Cov(Covered call profit %).

In this ITM covered call scenario, you are not looking to profit from any appreciation on the stock. You are committed to selling it at $137 no matter how high its price might go. The purpose of the ITM covered call is to harvest the cash flow.

If upon expiration you do not want to have the shares taken away (so that you can do another ITM or OTM covered call the next month), then instead of taking no action and allowing the shares to be called away at that time, you would buy to close the calls on expiration day. The price you would pay for the calls at that time would be such that your profit would be the same as if you did let the stock be called away. Any profit made on the stock would be lost on the calls, except for $34.25 which is yours to keep.

Free Trading WorkshopFinally, note that if GLD should be below $137 per share at expiration, you will retain the shares of GLD and you will also retain the entire $524.25 received for the calls. In that case your net cost per share would be the $141.90 originally paid, less the $5.2425 received for the call, for a net of $136.66. In other words, your cost basis in the GLD shares will be reduced by the premium received.  If the stock is at your adjusted cost of $136.66 or above at expiration, you still have a profit. If below, you will have a loss.

Note the column labeled Pro… in the list above. This is Probability of being ITM at expiration. For the 137 call, this figure is 88.09%. That means that based on current option pricing it is estimated that there is about an 88% chance that you will in fact end up with your 5.51% profit. There is a small chance that you will not. If you don’t, it means that you will then be the proud owner of 100 shares of GLD, with which you can do whatever you please.

Notice the Cov… and Pro… columns for other strike prices. As you can see, if you were willing to take a bigger chance that the indicated profit would not be made on a particular call (smaller numbers of Pro…), then the profit when you do make it (Cov…) is higher. This is what I meant above when I said that the strategy can be tuned to be as aggressive or conservative as you like.

I hope this has stimulated your thinking about options. They are indeed a versatile and useful trading and investing medium.

Read Full Article

Simplified wave analysis for October 14th. GBP/USD: the time of the bulls is running out?; USD/JPY: a pullback before a higher

GBP/USD

Analysis:

The upward wave of the British pound on July 30 is close to its end. The spurt of the end of last week by 5 price figures led the pair’s quotes to the lower border of a powerful reversal zone of a large TF. The wave structure looks complete. The current decline on the small scale of the chart has a reversal potential.

Forecast:

The most likely scenario of the movement today will be the price shift in the box plane. In the first half of the day, a decline in the support zone is expected. After that, you can count on a turn and a second attempt to climb.

Potential reversal zones

Resistance:

– 1.2650/1.2680

Support:

– 1.2580/1.2550

Recommendations:

Sales of the pair today are unpromising. Until a clear reversal signal appears, it is recommended to focus on buying the instrument.

analytics5da41a3c4b1f8.jpg

USD/JPY

Analysis:

The current bullish wave since August 5 comes at the end of a larger upward model of the Japanese yen. This calculation allows you to wait for the rise of at least 2 more figures to the minimum target level. In the structure of the wave on October 3, the final part (C) started.

Forecast:

“Sideways” is expected in the next sessions. A short-term decline is not excluded, no further than the settlement support. A return to the dominant rate is either likely at the end of the day or tomorrow.

Potential reversal zones

Resistance:

– 108.50/108.80

Support:

– 107.90/107.60

Recommendations:

The pair’s sales are risky today. It is recommended to refrain from trading on the pair market during the pullback. At its end, it is suggested to look for signals to buy the pair.

analytics5da41a5201f23.jpg

Explanations: In the simplified wave analysis (UVA), the waves consist of 3 parts (A-B-C). The last unfinished wave is analyzed. The solid background of the arrows shows the formed structure, dotted – the expected movement.

Attention: The wave algorithm does not take into account the length of time the tool moves!

The material has been provided by InstaForex Company – www.instaforex.com

Trading plan EURUSD 10/14/2019

analytics5da4154620314.jpg

Markets in general and European currencies grew last week on optimism factors: Trump-China trade negotiations yielded positive results; there was a chance for an EU-Britain deal.

Nevertheless, the growth impulse begins to fade, and a halt is possible.

The next few days will show whether the euro growth was only a corrective rebound – or a change of direction.

EURUSD: We keep purchases from 1.0945 and 1.1005.

Possible purchases from kickbacks.

In the case of a downward turn, we sell from 1.0940.

The material has been provided by InstaForex Company – www.instaforex.com