• 556 days Will The ECB Continue To Hike Rates?
  • 556 days Forbes: Aramco Remains Largest Company In The Middle East
  • 558 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 958 days Could Crypto Overtake Traditional Investment?
  • 962 days Americans Still Quitting Jobs At Record Pace
  • 964 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 967 days Is The Dollar Too Strong?
  • 968 days Big Tech Disappoints Investors on Earnings Calls
  • 969 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 970 days China Is Quietly Trying To Distance Itself From Russia
  • 971 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 975 days Crypto Investors Won Big In 2021
  • 975 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 976 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 978 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 978 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 982 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 982 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 983 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 985 days Are NFTs About To Take Over Gaming?
  1. Home
  2. Markets
  3. Other

Finding A Trade - Australian Dollar

Monday Evening 6 May 2013

We recommended a long position in the Australian dollar this morning, 1.0205. Markets have a certain logic to them, and there are times when one can find a developing story that leads to a position.

There has been a protracted trading range, [TR], about 2 1/2 years. What preceded it was an uptrend, and that gives direction for how to view the developing TR. From the 2008 low to the 2011 high, price rallied 50 cents. A half-way retracement of that range is the 85 area. The developing TR has held well above that guide, above 2/3rds of the range, making the ability to hold the higher level even stronger.

This is the developing context for the logic applied in making a final determination.

Australian Dollar Weekly Chart
Larger Image

This is a closer look at the weekly chart. Most of the TR, captured by the two horizontal lines, has been toward the upper reached of the overall activity since July 2012. The clustering of closes and overlapping ranges reflects a balance in the battle between buyers and sellers. From balance come imbalance, once price leaves that area.

The lack of follow-through at 2, retesting the rally bar of 1, suggests support. Does the next lower time frame agree?

Australian Dollar Weekly Chart 2
Larger Image

The lines connecting the swing highs and lows eliminates the "noise" in between. We see a higher swing high and a higher swing low, the simplest definition of an uptrend.

After what appeared to be a potential rout by sellers, viewing the wide range bar lower on the highest volume, point 1, there was no downside follow-through. What happened to the sellers? Their absence, logically, can only be accounted by the fact that buyers are more in control than meets the eye.

The bar at 3 is wide range and lower, retesting area 2. The decision to buy was predicated on the intra day chart that follows.

Australian Dollar Daily Chart
Larger Image

Bars 1, 2, and 3 caught our attention, more for the increasing volume as price declined, but when combined with each price bar, the logic behind how the intra day decline unfolded was not what it seemed, i.e., just a sell-off.

The dashed horizontal line from the strong rally bar on 2 May is potential support. Price declined exactly to that level, this morning, and volume was the most at the low. The high effort at the low produced no result. From bar 1, down to the low at 3, told us that sellers were not as strong as would appear, if one did not have this story in the context presented.

The recommended long was made after the low at 3. It is where risk would be least, and so far, price has held. There is no guarantee in any trade. When the selection is based upon logic that places the odds more favorably on one side more than the other, that is all one can expect. Over a series of trade selections with increased odds, the results are almost a certainty for profitable trading.

Long from 1.0205 with an initial stop at 1.0148.

Australian Dollar 20-Minute Chart
Larger Image

 

Back to homepage

Leave a comment

Leave a comment