Category: Trading

Syria is the main subject at the current moment. United States are holding the Syrian government accountable for killing their own citizens with chemical weapons last week. Not only the United States, but also UK and France are blaming Assad for the killings in Ghouta and all of them are willing to intervene.

It didn’t take long for protestants to appear. The protests in Libya had a negative impact on oil production. A shortage in the oil offer brought higher prices for both WTI and Brent oils. But this is just the beginning. Syria itself produces around 164000 barrels a day, so it is not that important for the oil market. But if United States will intervene, here, to get rid of the Bashar al-Assad, the conflict will be ramified and the entire Middle East will be engulfed in a war.

While USA has allies like U.K. and France, the Syrians have their own allies. Iran is a longtime Syrian ally and they warned the US that they will back them up, and they are not alone because Russia is also backing up the Syrians. If only of these two allies would enter a war the price of oil would rally at a fast pace and could touch new highs.

Chart: Brent Oil, WTI Oil (Daily)

For the moment Brent Oil, lower part of the chart, has broken today the rejection line of an up channel and rallied almost 3 percent today, touching the highest level in the past 6 months at 114.42$ per barrel. If today the closing price will be around this level and the United States, U.K. and France would still want to intervene in Syria, we might see the Brent oil going towards 119$ per barrel, since there are no other visible resistance until there.

The WTI has broken the upper line of a symmetrical triangle, which was drawn during the last month. A close of the day above the upper line of the triangle as well as a continuation of this conflict could easily push its price towards the target of the triangle at 113.40$ per barrel.

The probability for the US to intervene in Syrian and to try to get rid of Assad is big. It matters now when and how they will do this.

 

For better understanding why nowadays trading is considered to be fast and easy to be done by anyone, we should have a look back in history.

For an individual to invest in the stock or the commodities market it was needed a big sum of money. First of all because there were no leverage and second the commissions paid for each investment or trade was big. To place a trade in the market the investor had to call his stockbroker and give him the order. The broker then entered the order in their system which was linked to trading floors and exchanges. For every operation made, the stockbroker had a commission. So, if an investor wanted to open a trade, he had to pay; if he wanted to close its position, this time again he had to pay.

Besides the fact that a lot of money were paid to the stock brokers as commissions, there was another problem: the time for the trade to get into the market was too long. The investor had to call his broker, from whom he got the quotation and approved it. After that, the broker sent the order into the market. With all these steps it would have been very difficult for someone to trade on a short term basis and make profits.

In August 1994, K. Aufhauser & Company (later known as TD Ameritrade) became the first online brokerage house. They offered their clients the possibility to trade online via WealthWEB. Since then the online investing has known an impressive growth. Now anyone can have a trading account with one or more online brokerage houses. The orders are placed almost instantaneously and the commissions are very low or sometimes nonexistent.

Another advantage of the online trading, beside the fact that the order is placed immediately with low or no commissions, is considered to be the trading platforms. Every online brokerage house is offering their clients a trading platform through which they can place and close orders, set Stop Losses and Take Profits, but this is not all. The platforms also offer to the user analytic tools for him to do his own analysis and take his own decisions.

 

The strategy that we propose it can be used for trading on the trend but also in the range. It doesn’t matter on which currency it is applied or time frame, but from our back testing it seems to be working better on the one hour charts.

The strategy uses a Stochastic Oscillator with 14, 3 and 3 periods. Beside the well-known levels of 80 and 20 that are used with this oscillator, must be added also 90 and 10. First step would be to identify the trend, this it can be used the price action (looking for the higher highs/higher lows or lower highs/lower lows) or a slow moving average.

In the next example we will use a down trend, but the strategy can be used for up trends and range, when the trend is down the trader should take into account only the selling signals. The signal is a crossover of the Stochastic above the (or touches) 90 level. The confirmation comes when the Stochastic falls back under 80.

The entry point for this strategy is on the next candle after the Stochastic dropped under 80. The Stop Loss is to be set above the high, made by the price. The first exit point of this strategy is when the Stochastic touches the 50 level and the second, and mostly use, when the Stochastic touches the 20 level. (On an ascending trend, everything is mirroring.)

 

Australia and China have the largest trading partnership as China is making important investments in the mining companies in Australia. Recently, those investments reduced considerably, leading to a poorer industrial and manufacturing activity in Australia and a slowdown of growth in China, as it produces and exports less.

The Reserve Bank of Australia left its benchmark interest rate unchanged to 2.5% as expected, maintaining the sentiment of “below trend” economic evolution. Concerning the Australian dollar, RBA still considers there is room for further depreciation (after 15% fall since April). This phenomenon of depreciation is considered beneficial in sustaining the recovery of the economy. The Australian economy is still expected to run below expectations, as the mining investments decreased considerably, leading to an alarming situation of the unemployment rate. Currently, the economy is struggling to make the transition towards non-mining growth, transition that puts preassure on the economy. As last reported in August, the business confidence sentiment continued to fall, remaining extremely poor. The same dissapointing situation is found in the case of retails sales which dropped to 0.1% while the current account was reported at -9.4 billion, under expectations.

Australia’s partner, China, seems to be pointing towards a positive horizon, but still we can’t be sure if this is the right moment. Thus, the manufacturing index indicated 50.1 points, overcoming the last 3 months of contraction. On the other hand, exports are still negatively impacted mainly because of the weak demand from Europe and U.S.. The same negative scenario is applicable to the unemployment rate level which kept dropping for the fifth successive month.

As it concerns the partnership between those two countries, it seems that it started loosing its power. As China is slowing down and is expected to recover and become the most powerful economy by 2025, Australia is visible damaged and is currently tring to modify the pillars on which its economy is based. Both economies are expected to slow down but on the long term they are expected to fully recover and become important parts of the global economy.

 

Technical analysis has been used for a long time. In the beginning traders were doing there analysis on paper and were only using price action and price patterns to spot opportunities. With the time passing by new ideas evolved, experiments and studies showed that mathematical concepts applied on the price movement could indicate reversals in the price action. This way, the technical indicators were born.

Depending on their applicability and the formula used to create the indicator, we can divide them in two very big categories: trend indicators and oscillators.

The trend indicators are usually used to see the speed of a move, to spot reversals of the trend or they are even used as mobile support and resistance. The Oscillators are indicators that usually move around a specific level or have a limited move between a lower and an upper level. These types of technical indicators are used to see when the market is becoming overbought or oversold. Some of them give very good signals when a divergence is drawn between the oscillator and the price action.

Beside these categories there are some other indicators like Pivot Points, Fibonacci, Pitchfork, etc. These have some special characteristics which give to the trader a better view over the support and resistance of the price action.

Let’s see some examples.

Trend Indicators: Bollinger bands (a range of price volatility); Channel (a pair of parallel trend lines); Ichimoku Kinko Hyo (a moving average-based system that factors in time and the average point between a candle’s high and low); Moving Average (the last n-bars of price divided by “n”—where “n” is the number of bars specified by the length of the average. A moving average can be thought of as a kind of dynamic trend-line); Parabolic SAR (Wilder’s trailing stop based on prices tending to stay within a parabolic curve during a strong trend).

Oscillators: MACD (moving average convergence/divergence); Momentum (the rate of price change); Relative strength index (RSI) (oscillator showing price strength); Relative Vigor Index (RVI) (oscillator measures the conviction of a recent price action and the likelihood that it will continue); Stochastic oscillator (close position within recent trading range).

And the list can go on, because we selected just the well-known examples. Beside the classic indicators there are thousands of other custom indicators made to satisfy the need of the trader. The trend indicators and oscillators are used in trading strategies. They are mostly used in the forex scalping strategies, but they are also found in medium to long term investments methods.

One of the biggest problems that traders have when using technical indicators is that they are using too many in the same time. Each indicator gives a specific trading signal, if a trader overlays more than 4 indicators on his chart; he will have over 4 trading signals. If the signals will not appear in the same time, the trader will become confused and take wrong entry points. Our recommendation is to try to limit the number of indicators at 4 or in exceptional situation 5 indicators.

One other big mistake is to use a bigger number of indicators from the same category. Having 4 trend indicators giving a trading signal at the same time doesn’t raise the probability for the trade to become profitable. Having a number of 4 indicators but of different types giving a signal in the same time the probability for the trade to be a winner will raise.

To be able to trade with one or more indicators, the trader has to know the specifications of the indicator. He must understand how the indicator is calculated, which are the signals gave by the indicator, the trader should do a back testing to learn how to fine tune the indicator to give quality signals.

As a short conclusion we can say that the technical indicators can help anyone create a profitable trading strategy that can be used on different type of markets and different time frames. But for indicators to work, the user should learn as much as possible about them and test them before trading on a real account.

President Barak Obama is visiting Sweden, place were is having a public conference together with the Prime Minister of Sweden John Fredrik Reinfeldt. The subject awaited by everyone was the issue that is being debated by the Congress, related to the situation in Syria.

The conference started with details about the swedish economy which is running under normal parameters, as it faces the European crisis with success. The Transatlantic Trade and Investment Patnership is one of the priorities as it would advantage both sides. Moreover, as Sweden’s 50% of GDP is based on exports, this partnership is considered to be truly beneficial.

As it concerns the situation of Syria, Sweden is strongly blaming the Assad regime which violated fundamental human rights, especially because now is strongly believed that letal weapons were used against the citizens. The Prime Minister of Sweden also considers than O.N.U. needs to take serious measures agains Syria, otherwise there is an increased risk to see this situation happening again.

President Barak Obama thinks that the Congress will agree to use the military force in Syria in order to avoid a global sentiment of unsecurity. If the President and the Congress will both agree on this matter, the decision will have stornger fundaments and the image of America, as a strong economy, will be underlined.

Considering that America is getting ready to intervene in Syria, this situation is thought to be an opportunity to take action in such a serious situation, rather than a risk to ruin America’s image of the country that won the Nobel Peace Prize “the moral thing to do is not to stand by and do nothing”. Russia is still on Syria’s side, not trusting the evidences about the letal weapons used against the citizens and judging a military intervention as an aggression.

 

Research In Motion Ltd. (Nasdaq: BBRY, changed from RIM) has managed to gain 185% from the 6.13 low touched in September last year. From the beginning of this year the price has consolidated into a symmetrical triangle with the highest point at 18.25 and the lowest at 11.50.

If the upper line of the triangle will be broken, we might see its target hit at 22 dollars per share. This scenarios doesn’t end here because if the price will break the highest point of the pattern, than an Inverted Head & Shoulders will be confirm and the full target of this reversal pattern sits at 29.71.

We consider this setup activated after a break over $17 per share. We can use the triangle’s target as first take profit for this setup and 29.70 the second target.

Confirmation Level: 17.07

Take Profit: 22.03 and 29.71

Stop Loss: 12.51

Have you looked on the monthly chart of WTI Crude Oil lately? From our point of view it looks bullish more than ever.

We can see that from April 2011 a symmetrical triangle was drawn. The triangle is limited by a support and a resistance zone. The inside lines are drawn on the closing prices while the outside lines were drawn on the shadows. One thing to note is the lower support zone which is thicker because of the longer shadows.

The volume has dropped, confirming the volume pattern of the triangle. The RSI 14 has broken the upper line of its triangle and consolidated under 53.90. We can also consider the distance between the 50 EMA (dotted) and the 100 EMA as a support area.

Its price has fallen pretty fast in the first part of this month, in the support area, and touched a low at 85.61. From that point, the price was rejected and now the WTI is traded over 90 bucks per barrel. A little higher, at 97.45, sits the 4 month resistance. If the price will break through this level we will not be surprised if it will easily break the resistance area and rally to the next highs around $110 per barrel.

If this month will end like this or maybe with a lower body and an even longer downside shadow, then another signal would appear. We will come back with an update and, why not, even a trade setup.

It is very important for you to know if you have time to invest in you learning process. Even though it will appear to you as a fast profit taking, it is not. You will have to understand the domain, understand the risk, invest money and time in your education and after that everything will be paid off 10, 20 100 times more.

In nowadays and with the current systems it is possible for you to invest a little sum of money and end up with a fortune overnight. But it will never be enough, for a human being! If you will not have the knowledge, you will not know how to manage your money and your time, you will end up losing everything. Try to understand, if you are a novice in this domain that it is very important to understand the domain and the risk. Invest some money and mostly time in your trading education. This way you will get to know the markets and create a trading strategy that you will use to earn money from the market.

I would like you to keep in mind what I have written earlier, but read the next story with an open mind:

A young painter met an older and famous painter.

Young Painter: - Sir, I am a very big fan of yours and I respect your work. I have, though, a question! I am working a day for a painting and try my ass off to sell it for one year, what is your secret?

Old Painter: Son, if you will spend a year in creating your painting, you will then sell it in one day!

This is a story from which we can learn a lot of things, but I would like to compare it with trading. It is very important for you to administrate your time when you are trading. A good trade comes after a very thorough analysis and when all your trading strategy’s conditions are met.

- What are you, a full time trader, or a part time trader?

- How much time can you invest in the full process in trading, keeping in sight also your private life and your family?

- Which part of the day is best for you to trade?

- How much time do your trading strategies need for analysis?

- How much time do you need to get in touch with the latest news?

- What are the best hours for trading?

Ask yourself these questions and you will end up with a pretty interesting answer. That will be the time you have for trading. Try to split it so you will end up with the best time management, for that you will find a solution in the story I have told you earlier.

The quality of the trade it is given by the time invested in its analysis!

 

Apparently, the case of the Republic of the United States of America becoming the largest oil producer in the world, overcoming Russia, is getting more attention because is adding more and more evidences.

On the strength of the shale revolution, the U.S. is now playing an important role among the OPEC countries. In the second half of 2014, the U.S. is estimating to become the largest non-OPEC oil producer, overcoming Russia, which now is constrained to make large investments in new pipelines. This fact may contribute to the stabilizing of the price of oil in the long term as the supply will definitely increase.

The International Energy Agency has been observing the fact that the production of oil among the non-OPEC countries has been steadily increasing while the OPEC countries are in danger to register a lower demand. Likewise, the disputes present on the Arabic territory lately are unbalancing the normal pace of the process of producing and exporting oil.

In its recent report, the IEA upgraded its demand growth forecast, especially when it comes about the Euro zone which is believed to have overcame the crises and register an increase in the demand of oil. Likewise, the main importer of the European area may become the U.S., disadvantaging Russia and the Arabic countries.

Apparently, oil prefers now a more calm and stable zone as the Middle East makes it a sensitive commodity.