Investors and traders around the world are yet again assessing the probability of Greek default and how serious the impact on markets is likely to be.
One approach to this difficult issue is to look to price charts for guidance on how serious the sell off is. Are we just involved in something that looks like a correction of the recent rally or have we begun a major selloff?
Some of the major index charts may provide a useful guide
The sell set up I posted on Monday was triggered today when the market broke below both the trend line and the 200 day moving average.
The charts below outline one approach to profit objectives and an initial stop loss level
The German 30 index rallied 44.7% between September last year and March this year. Given that Europe is central to so many market concerns, this can be viewed as an amazing performance. With the situation deteriorating rapidly, selling the German 30 may be the best trade.
Europe is once again dominating the headlines. The possibility that a new Greek government may reject the reform program required for financial support requires markets to increase the risk premium in prices – selling all risk assets. Is this likely to continue? Is the risk now fully reflected in prices? Copper tells the tale.
On Friday I discussed the distributive pattern that the US30 index had been trading in. With the weakness overnight we have seen the support level broken which leaves us with a setup for the day ahead. As I have marked on the chart, you can see that the price broke its most recent uptrend prior to entering into this period of consolidation. The alternative way that a trader could look at this setup is as a double-top. In either case though the profit targets will be the same.
Dave Land and I will be hosting a series of live webinars this week. You can register for any of these via the link below:
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Reviewing the major index charts this morning, the Australia 200 CFD looks one of the more interestingly placed.
The daily chart managed to bounce off the bottom of an established trend channel on Wednesday. However, the longer term chart and the positioning of the US 30 (see Dave Land’s Friday post) favour a sell set up in this chart.
One typical approach to strategy would be to sell if price breaks below the channel support on the daily chart.
Shorter term charts may also give a set up for an earlier entry depending on how things pan out at the beginning of the week.
The US 30 index has now formed a very consistent looking rectangle formation. This shows the trader a number of things. Firstly, it can be a very good setup in its own right which I will come back to in a moment. The second thing is that it shows the market in a period of consolidation. This means that the breakout may form the beginning of a new trending move after it occurs.
I posted some thoughts on trading the triangle formation in the daily EUR: USD chart on 2nd May with a follow up on 3rd May discussing profit objectives and placement of the initial stop loss.
The strategy involved selling when price rejected the triangle resistance line. This would have seen a sell entry around 1.3158.
The Euro has now broken below the triangle support which provides an opportunity to move the stop loss and take some risk off the table.
Today I am running a live session on Pyramid Trading Strategies at 1PM AEST.
Put simply, pyramid trading is the process of using profit generated from an existing position to acquire additional positions. Many traders claim it allows them to make exponential gains, but getting it right takes practice. So how does it work? Join us as we examine how you can grow your trade size in safer ways, figuring out appropriate pyramiding sizes for your portfolio and identifying ideal timing methods.
To join the session simply click on:
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