Category Archives: Commodities

Flavours for 2015

Evening traders/investors,

Apologies for the inactivity during the last few months. It seems to me that I trade less, and have less to say as a blogger too – probably all due to the more patient and relaxed trend-following approach I have been making a transition to over the last year or so. Belated Christmas and New Year greetings to all of you. As market participants, it is best to wish one another a better year ahead! Every year the word “volatile” is used to sum up the markets but it is inevitable that markets will fluctuate and throw up some surprises somewhere inside a whole calendar year. 2014, however, was not so exciting as compared to other years. The local bourse certainly did not give me that many trend opportunities; so much so that I had to look at some other equity markets for the first time. The USD’s languid state in the first two-thirds of the year did not present any concrete trend set-ups too. There were a few set-ups in certain markets, and those set-ups are still valid over the turn of the year.

The first flavour I have for the new year is the possible divergence between Europe and US. I first discussed this view in this post https://technicalanalysistalk.wordpress.com/2014/11/05/end-of-europes-uptrend-while-america-advances/ . It seemed difficult to envision an inversely proportional divergence between those two markets; so I concluded that it probably means general sideways movement in Europe while American equities continued the charge north. For now, the picture is the same to me: nothing has changed in the broad sense for those two markets.

The local bourse- the STI, still does not look that bullish to me even with a decent 6% showing last year. I think this is because I do not see that many bullish set-ups in the constituent counters. The banks did well for the STI last year, and they look set to hold the gains this year, though this will require analysis in the months ahead. SIA also surged suddenly late last year so I will see what is up with the national carrier. The “Jardines” jumped a little in the second half of last year but do not look to improve much from here on. The “agris” are tanking quite badly, and as a trend-follower, I will look for further downside. (Exclude Olam from this list; Olam is an example of what happens when some people interfere. Of course, I do not know what goes on behind their curtains and that of other places, but the way I see it, Olam was saved from utter embarrassment “unnaturally”.)

Funnily, most if not all of the counters in the STI with the word Singapore in the company name have bearish-looking charts. The general stance I am taking on the local equity market is a bearish one for the blue-chips. However, I think there may be better rish-reward opportunities outside the STI, therefore, I will look at the second- and third-tiers more closely. Judging from the last few months of last year, I do not have many interesting charts to share, hence what I mentioned in the first paragraph, “The local bourse certainly did not give me that many trend opportunities; so much so that I had to look at some other equity markets…”. Oil and gas and shipping sectors are looking quite horrible, and property counters do not look promising too (I would have said outright bearish if not for the performance of one or two big players).

I will continue to watch Gold quite closely. The glittery metal seems to be on the verge of a continuation of a major downtrend. Somewhere last year, I was alerted to a break of major support. Gold managed to hold on after the slight violation of support but time will tell if gold can find favour or if investors will ditch gold for other asset classes.

gold1

 

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

What is so good about gold?

Good day all,

Highlight of the past week for traders: turmoil in Ukraine gives the stock market jitters; while gold boasts its allure since the start of the year. (Of course, positive payroll figures on Friday is also quite significant). Equities have officially recovered from the slump at the end of January since prices have either breached highs – a full recovery – or climbed up near to levels seen in early January.

Gold has been making a stealthy ascent after a bearish showing last year. Last month’s trading saw gold edge into 1,300 territory – this level previously seen in November, 2013. In the chart below, you will see a few small to medium-sized patterns. The first pattern is a descending triangle. It is not the best triangle “on paper” since it has large spaces inside the triangle; however, you can identify where the bottom of the triangle – support – is at, and there are arguably three clear, lower highs. After a catastrophic collapse (if 10% does not warrant such a description, think about leveraged accounts), gold rose steadily to a high of just above 1,400. Then, the upward parallel channel was violated downwards, and gold formed a head and shoulders pattern. The right shoulder of the classic pattern is just outside the parallel channel. I have noticed such price action that links a channel with a head and shoulders pattern. After seeing many of such formations, my conclusion is that half the time the head and shoulders fails after a downward breakout – as in gold here; and the other half of the time the head and shoulders proves right and price continues further down after a breakout. This formation is difficult to trade because of the high chance of a whipsaw after the head and shoulders, but I still like to keep in mind how such formations pan out.

Gold2

All that is not so relevant to gold now; what is relevant is that gold just came out of an inverted head and shoulders and has made tracks northward. News of unrest in Ukraine triggered old prospects of gold heading much higher in the year ahead. I see no reason for gold to put on “glittery shades of 1,700 an ounce”. Gold declined significantly for the whole of last year, and it is now in a range. Simply put, gold is consolidating after a huge move. Until there is concrete sign of a bottom established in gold, I see a lacklustre year ahead for this commodity. Clear-cut resistance is at 1,400, where a previous mid-term high is at.

In the chart below, I included Fibonacci retracement levels taking the high as gold’s own all-time record at 1,900 (not exact in the chart), and the low as 1,000. I have had these levels on my chart of gold for several years. It is interesting to see that gold has been reactive to the 38.2% and 61.8% retracement levels. Currently, gold is consolidating in the region between 61.8% and 78.6%. The 78.6% level is not a popular level but my experience tells me that it is significant enough to be used.

Gold

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

Swing set-ups

Good evening one and all,

I have a short post for today. Without explanation, I will show you all two charts I am monitoring for intermediate-term swing set-ups. For those who do not know what swing trading is: swing trading is between day-trading and buy-and-hold long-term strategies in terms of holding period. With regards to market movement, my idea of a typical swing set-up is to first identify a trend, then buy on a pull-back, or buying on a correction from a breakout. (Vice versa for the short side). Of course, there are other strategies that other traders use.

GBPSGD:

gbp

Gold:

gol

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

 

Gold’s big move

Evening all,

The biggest financial headline over the last couple of days has to be Gold’s more than 10% drop in three days. This is a very significant move because Gold had a very clear support level in the region of 1,550. Even in whole-number pschology, 1,500 was taken out easily. Gold was – and probably still is – a 50-50 case. There is the bullish camp championing Gold’s advantage being a hard, physical commodity compared to the many different “paper securities” nowadays; at the same time, there is a bearish camp that believes Gold is overvalued by a lot. Obviously there are many fundamental factors at play, but it is not my job to delve into them.

One thing I can say confidently is that I am not bullish on Gold’s mid-term prospects. Gold was already in a downtrend since the latter months of 2012. Nevermind what some central banks are doing with their Gold reserves, the latest decline is just an exaggeration of the current trend. However, in the next few days or weeks, it will not be surprising to find Gold in a volatile range where it is now. After such a sharp move, it is quite likely that the market will take a breather instead of diving further. I will look for set-ups to sell rallies. The upper 1,450s is a good region to catch another wave of selling.

Let us see how this pans out.

gold

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

 

Watch for bounce in Gold

Good evening trader,

Ever since my last post on Gold, Gold has been dropping like a stone. 1,600 was taken out very easily, then Gold rebounded at 1,560. 3 more days of selling puts Gold at the close of 1,576.

Gold’s relatively low price makes it interesting to watch in the weeks ahead. There is a clear support zone between 1,540 and 1,560. I take what I see presently, so I have to respect this strong support zone. I will look for some buying pressure to push Gold out of this area. Indicators are coming out of oversold territory, but other than that, there is no real pattern to work with. I see a potential set-up to the upside. Major support should bring in spurts of buying waves even though the general trend is down. The 1,630 region acts as a good target where the mid-term moving averages are at.

gold

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

 

Gold consolidating tightly

Evening everyone,

Short post for today: gold consolidating in a tight range. After volatile swings in the second half of last year and the earlier half of this year, gold has recently been trading tightly around $1,600. What I once identified as an upward parallel channel has morphed into a possible ascending triangle. Basically, we have strong resistance at $1,630, and gold’s lows have been higher and higher. Markets can only do two things at the very basic level: consolidate or trend. In this case, after a considerable time rangebound around $1,600, I will be expecting a strong move soon. I have a bollinger band (dark red) on the chart – parameters: 50-day MA and 1.5 standard deviations. You can see the bands getting very narrow. Generally, once the upper and lower bands constrict(converge), an explosive usually occurs.

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

Very interesting phenomenon in EURUSD and Gold

Good day all,

A few days ago, I noticed something very interesting on my chart station. I was looking at a chart of gold for trading set-ups. After a while, I moved to a chart of the EUR/USD currency pair. I looked at EURUSD using different time frames. Slowly, I felt a sense of familiarity – a sense of deja vu. A mammoth pattern of some sort seemed to appear on both the charts of EURUSD and gold. Take a look at the charts below.

 

Allow me to say this: both charts are more or less very similar-looking! Yes, the time frames for each instrument is different; apart from that, price action is very similar! Look at the first two charts. We see a long-term run-up in price for both securities. Then, we see 5 subsequent waves.

So what does this mean? Does it mean that gold and EURUSD share some kind of near perfect positive correlation? Of course not – the massive zig-zag pattern on each chart took different time frames to form. The inverse relationship shared between the US Dollar and gold is for a fact (except during certain periods of time). And since EURUSD possesses the US Dollar factor, we can conclude that there may be some form of correlation between EURUSD and gold (I would prefer to do more analysis before ascertaining this). Since the charts are of differing time periods, we should still be shocked or surprised to some extent!

Fundamentally, I am not suggesting anything between the two securities. Technically, I am very intrigued by this phenomenon because of how massive the patterns are. It is not the same as comparing two plates of rojak! The number of waves were the same, and this is following a huge run-up. Even though I am not suggesting any sort of trading opportunities whatsoever, I am going to monitor the two securities and see what happens. For me, I am looking at the possibility of some sort of  chart pattern that I can then trade on in future. In other words, “founding” a pattern. There is a chance it is actually some sort of Elliott Wave pattern. Look here for examples: http://thepatternsite.com/Elliott.html

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

Gold barely hanging on to support

Evening all,

I was getting ready a post on Friday regarding gold. I was making a case for continued downside in gold alongside equities and the Euro, when lo and behold, gold found buying pressure and ended the day 60 pips up! I immediately saved my post into drafts, and decided to look at the chart again. Is gold regaining its title as a safe haven in times of equity sell-offs? Did it ever hold such a title?

http://www.marketwatch.com/story/golds-having-an-identity-crisis-2012-06-01

Whatever the fundamentals may be driving gold price action, I have some words on the chart of gold.

A one-day move does not change any longer-term views; however, Friday’s  surge was large. When gold languished at the $1,550 area, I was preparing short set-ups to catch strong downward moves. Thank goodness I did not put in any market orders as gold found buyers all the way past the $1,600 level even. In the larger scope of things, gold simply did a technical rebound off major support just below $1,600. I drew a small black downward parallel channel to show that gold is still in a mid-term downtrend. Gold is also clearly below the 200-day MA. Finally, a red resistance line shows a support-turned-resistance level that is just above gold’s price now. These are obvious reasons to me to continue being a bear for the months ahead. And yes, I will lean towards the bearish side for the mid-term. In the days ahead, however, I will not be surprised by further upside. I have been keeping a very large downward parallel channel (in yellow below) on my gold chart. As of now, gold is around the middle of the channel, so based on this, we do not have any clear-cut bull/bear signals. In the next few days, if gold starts to exhibit a decisively inverse relationship with risky assets, I will bet on gold climbing to $1,700.

Zooming out, let us look at some important fibonacci retracement levels. I take the low as the psychologically important level of $1,000 and the high as the all-time highs. Fibonacci retracements study observation is only as good as the price action after the high point. So after the highs were clearly made at $1,900, I start to look for some “fibonacci magic”. True enough, the 23.6% and 38.2% levels played a part in recent price action. And, if you allow me – a chartist who practices a lot of give and take, I will use the $1,700 level as “proxy” for the 23.6% level (actual: $1,690). The 38.2% level comes in at $1,550 – which I have already established as a strong support zone. So with this 38.2% retracement level lending support to the case of gold holding above a crucial support zone, I will be strongly bearish if gold were to break below this level; but, wait a minute – will that not be the bottom of the parallel channel – $1,500 – that I have drawn? This is the dilemma I will face when gold does get to that region. I prefer to take things one at a time. So, until that happens, keep in mind: I am somewhat bullish in the short-term, and downright bearish further in time.

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

Gold breaking down

Evening all,

Gold finally broke the $1,600 level – and a convincing one even. Price went down to as low as $1,550 but it retraced back up to the $1,590 region. $1,600 was very strong support for me. So, my short-term view on gold is for more sell rallies. $1,550 becomes the next support level for short-term set-ups. Gold’s previous low at $1,550 last December making a case for the $1,550 support level. I have drawn a large downward parallel channel – though not a very good-looking one. Basically, Gold’s in a clear downtrend for quite a while already. Even though I am an long-term bull, the chart is not looking bullish in a any way at the moment. Carrying forward from my last post on Gold, continue to watch as Gold is trading below the 200-day MA.

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

Gold consolidating

Good evening traders,

Today, I have my all-time second post on Gold. The past few weeks Gold slid from above $1,700 to as low as the $1,640 region. Gold has been in this territory for quite a while after making all-time highs above $1,900. The consolidation gives us two important levels – $1,800 and $1,600, give and take several dollars. $1,700 has been sort of a “trigger level” for me the past months. When price got above that level, a short rally ensued (blue dotted lines below). I made some money off those small rallies. Now, price dropped quickly below $1,700 and now Gold is in a clear short-term downtrend. If I may suggest a reason for this, it is that money is coming out of this perceived safe haven and into the rallying equities. Given the support zone that is coming into play soon, I will be looking for short-term long opportunities. One thing that I do not like in the Gold chart – since I am a long-term (many years) bull – is that price is currently well below the 200-day MA. Nevertheless, I will be looking for short-term upside once Gold drops slightly further down closer to $1,600.

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.