the daily chartist

What's next for the upcoming week on the calendar 05.11 - 09.11

published 10 months ago

Soften start of the new week and month, but ended yet again in badly for the major indexes and stocks after the rumours that Trump ordered to the administration to draft a proposal on an eventual positive outcome of the talks between China were denied by the administration itself and after Apple told that they won't disclose anymore the number on iPhone sales. Apple stocks plunged with 6% on Friday. 

So here are the things that we need to have in mind when we set our trading set up for next week:

Monday we have GBP Service PMI 53.4/53.9 and CAD BOC Gov Poloz speaking before the US session. USD ISM Non-Manufacturing PMI follows after the opening.

On Tuesday we have German Factory Orders -0.4%/2% and German Final Services PMI to remain flat at 53.6/53.6. Euro PPI follows with a forecast of 0.4% vs 0.3%. CAD Building Permits is for the US session 0.3%/0.4%, US JOLTS Jo Openings with no current forecast, but at 7.14M previously. And of course, we have the Congressional Elections or the Midterm elections for a new Senate in the US!

Wednesday will offer us some data from German Industrial Production -0.1%/-0.3%, Euro Retail Sales -0.1%/0.7 and on the US side we have Crude Oil Inventories with no current forecast, but the last time the report showed there is a build of 3.2M barrels. 

Thursday we have German Trade Balance with a forecast of 21.2B vs 18.3B and the Euro Economic Bulletin and Economic Forecasts. Canada Housing Starts 195K vs previously 189K will be the prelude to the US opening and in the session itself, we are going to wait for the Unemployment Claims where previously they were 214K and the forecast is to remain at that number. Later we have FOMC statement, which is going to be without a press conference and the Funds rate, but there won't be a move on the rates as it is expected to be done in December. 

With closing the week on Friday we have GBP GDP 0.1%/0%, Manufacturing Production 0.1%/-0.2% and Prelim GDP 0.4%/0.6%. On the US side, we have PPI 0.3%/0.2%.

That's it for the recap of the most important events that will drive the markets for the next week. Type them, have them in mind and good luck to everyone and have a successful trading week!

 

 

Crude Oil in trouble

published 10 months ago
WTI Daily

For Crude everything started with the bearish engulfing bar on 4 October. Fundamentals weighed in on the price with heavy pressure from the sellers. On Sunday Iranian sanctions are going to take an effect so we are going to see an interesting opening for WTI on Monday. I personally think that the market has already priced in the effects, bringing down the price below $70 pb.  Selling has been heavy indeed as the price quickly found its way below the 50 SMA, the first channel line of the uptrend, under 61.8 Fibo and under the 200 SMA. DeMarker also formed a selling signal around the time the engulfing bar was formed. 

First scenario: Price opens with a gap down and depending on how fast it is covered and how much we will have a confirmation that we can begin to short the Crude with a stop loss at $72. In this scenario, the price will go down towards the 200 SMA where we will need to see a final breach and test to confirm that the instrument is going into a Bear market. 

Second scenario: Everything has been priced in already, the sanctions are not a surprise and Oil goes up with a gap on Monday. Price is stabilising for a move up where the market will form a balance between supply and demand and our idea of shorting the commodity will break down.

 

Sterling shows resilience

published 10 months ago
GBP/USD Daily

Cable has played out the double top very well as it was sold under pressure as a result from disappointing news surrounding Brexit talks and the overall USD strength. Even with the recent gains because the news came out that London will remain Europe's financial Gateway, the currency pair is still in a downtrend. The Friday's close shows it as the bar failed to breach the upper line of the channel and the price also closed under the psychological 1.3000. Don't be fooled by DeMarker showing a turn above 0.3 in the oversold zone. This has occurred, because of the sharp impulse after the news. The dollar was also sold heavily on Thursday. The price will test the neckline for sure on its way down and it's going to be a key level. 

First scenario: Sell on Monday opening with a stop loss at 1.32500.

Second scenario: Wait for a test on the neckline and open a short after the breakout and the confirmation. 

Third scenario: Price moves up from the neckline, moving away from the down channel and towards a test for the 50 SMA and an eventual 200 SMA test for early indications that the price will continue on its correction course.

The Yen is again under pressure

published 10 months ago
USD/JPY Daily

For the pair, I am still observing an uptrend still in play as the price has returned inside of it after the test on the downtrend line on the 26 October. It was a pure stop hunting and the fake breakout is obvious. The price since then made a strong impulse towards the 50 SMA and closed above it. With breaching 78.6 Fibo on the next day the price made a confirmation for long positions. DeMarker also turned North above the 0.3 line showing that the pair was oversold. The price movement also has formed a double bottom which is currently in play. Unfortunately, on Friday the price did not close above the previous day's high so I think that the price may return a couple of pips down towards the 78.6 Fibo at least before continuing the move up as the dollar gains strength. 

First scenario: you can open long positions with the trend with a stop loss 110.500.

Second scenario: you can wait for the correction down towards a more cheaper level to get in.

Third scenario: The price manages to break through the 78.6 Fibo, the 50 SMA and the downtrend line for a move towards 200 SMA. 

Trading strategy using the DeMarker indicator

published 10 months ago
EUR/USD H4

What is the DeMarker Indicator?

The DeMarker indicator, also known as DeM, is a technical analysis tool that compares the most recent maximum and minimum prices to the previous period's equivalent price to measure the demand of the underlying asset. From this comparison, it aims to assess the directional bias of the market. It is a member of the oscillator family of technical indicators and based on principles promoted by technical analyst Thomas DeMark.

The DeMarker indicator helps traders determine when to enter a market, or when to buy or sell an asset, to capitalize on probable imminent price trends. It is considered a “leading” indicator because its signals forecast an imminent change in price trend. This indicator is often used in combination with other signals and is generally used to determine price exhaustion, identify market tops and bottoms and assess risk levels. Although the DeMarker indicator was originally created with daily price bars in mind, it can be applied to any time frame, since it is based on relative price data.

Unlike the Relative Strength Index (RSI), which is perhaps the best-known oscillator, the DeMarker indicator focuses on intra-period highs and lows rather than closing levels. One of its main benefits is that, like the RSI, it is less prone to distortions like those seen in indicators like the Rate of Change (ROC), in which erratic price movements at the start of the analysis window can cause sudden shifts in the momentum line, even if the current price has barely changed.

DeMarker Indicator Trading Strategy

The DeMarker indicator is composed of a single fluctuating curve and does not use smoothed data. The default time span for the calculation of the indicator is 14 periods, and as the number of periods increases, the indicator curve becomes smoother. Conversely, the curve becomes more responsive to smaller numbers of periods.

This oscillator is bounded between values of zero and one and has a base value of 0.5, although some variants of the indicator have a 100 to -100 scale. The indicator typically has lines drawn at both the 0.30 and 0.70 values as warning signals that a price turn is imminent. Values exceeding either boundary are considered riskier and more volatile, while values within are considered low risk. Generally, values above 0.60 are indicative of lower volatility and risk, while a reading below 0.40 is a sign that risk is increasing. Overbought and oversold conditions are likely to be imminent when the curve crosses beyond these boundary lines.

On the example here we have the EUR/USD pair on H4 chart. DeMarket is applied with the standard 14-period option. I know it looks like a mess, but I will try to explain. So first we have signal 1 which is a sell signal as we are following the DeMarker with no doubts. In this case, I am placing the stop between 30 and 40 pips as an appropriate level. As we have sold we can see that the price has pushed up in a choppy trade so our SL is hit for -47 pips. Then we have signals 2 and 3. We can catch them with two short positions down towards where we find signal 5 for a new buy one. We close the positions for rouglhy + 242 pips. We are buying, but the price moves down against us and our SL is hit against at -38 pips. We buy again on signal 6 with another SL hit on -31 pips. Signal 7 is a buy one again where we can close to the other signal for a profit of +137 pips. Signal 8 is a sell one, but our SL is hit at -31 pips. On point 9 we sell the pair and we close it at the next buying reversal for +97 pips. Signal 10 is an SL hit for -34 pips and the price goes down. Signal 11 is again an SL for -36 pips. Signal 12 a fresh buy signal where we can close the position on the next crossover for +77 pips. And we can open a sell one which is ongoing now for +42 pips and an SL 30 pips above.

Overall we have total SL for -217 pips and our profits are for 553 pips. Our net profit here is 336 pips which is not bad from the end of September until now with the live one on +42 pips profit at point 13. Depending on your leverage, money management and lot size, 336 pips can be a very, very good profit for a month and a half swing trading on the 4H chart.

The DeMarker is a good oscillator, but don't use it as standalone. I am encouraging you to try in different pairs, stocks, indexes and commodities as well, chart time frames and with different parameters as well and with combination with other indicators to filter out the fake ones and to search for confirmation. Try it!