Bitcoin (BTCUSD) Consolidated In A Symmetrical Triangle

We haven’t touched the Bitcoin subject for a while now, this instrument that became of interest for speculators after the incident with Cyprus seems to react something like a safe heaven.

When the markets are undecided or the risk aversion takes its place in trading the Bitcoin is bought.

btcusd symmetrical triangle resize

Chart: BTCUSD, H4

From the beginning of July the price for Bitcoin in dollars has moved in a pretty clear up trend. In September the line of the trend was breached and a channel has formed. The price started to consolidate, inside the up channel, in a Symmetrical Triangle with a middle price of 1374 per a Bitcoin.

If the price will fall and close on a 4 hours chart under the lower line of the triangle we can expect for the drop to continue to 130.00, where it will find the trend line, or even lower to 120.00 where it will find the 7th September low (the full target for the downside sits around 110.45$/Bitcoin).

On the other hand a breach above the upper line of the pattern could mean that speculators are willing to buy this digital currency, so the price might break above the 148.64 resistance and rally to 162.20, where it will find the trend line.

The volatility for this currency pair could rise tomorrow during the FOMC meeting and press conference.


Tomorrow FOMC Will Decide QE3′s Fate

Tomorrow FOMC Will Decide QE3′s Fate

Tomorrow is the much awaited day, when chairman Ben Bernanke will expose his decision concerning the evolution of the third Quantitative Easing program that has been implemented for one year, so far. Everybody’s eyes will be on Fed’s chairman and for sure the markets will be highly sensitive to each word delivered.

The big question is: will the QE3 be reduced now? Or later this year?

Most of the investors, and also most of the surveys conducted by Reuters and Bloomberg are pointing towards a contraction of $10 billion that will be announced tomorrow, but the amount may vary between $5 and $25 billion. Tomorrow are expected forecasts about the American economy for 2016 and it will be interested to follow the way they will treat the fact that in January 2014 Ben Bernanke will no longer lead the Federal Banks of the United States. Janet Yellen is the favorite so far, but we have to be careful to any possible surprises.

Even if economists believe that Yellen’s approach will be almost the same as the one of Bernanke and another chairman will make radical changes, we cannot expect this scenario to happen. Giving the size and importance of the QE, no matter the chairman, decisions will be taken in the best interest of the American economy. Thus, tapering will happen gradually and further changes will be made according to data coming from the labor and housing sectors, in particular. Anyhow, the difficult part of the process of strengthening the economy just now is coming, and the next chairman will have to be able to control the situation in a proper way.

Both gold an silver’s futures dropped in anticipation of the decision that is coming tomorrow, investors preferring to wait. As it concerns the price of gold, it is expected to further decline until the end of this year. Same for the emerging markets, which are already feeling the effects of the “absence of QE” due to the considerable decrease of inflows of money.


The Quantitative Easing Program Remains In Force

The Quantitative Easing Program Remains In Force

The FOMC decided to wait and hold the QE3 in place at a pace of $85 billion per month. Apparently, the economy of the United States is not ready to quit the stimulus, decided the FOMC members by a 1-to-9 vote. Indeed, the data below expectations coming from the labour market influenced the decision took today and Ben Bernanke gave assurances that the progress of the economy is basically deciding whether or not the QE3 will continue to run or not.

Likewise, the interest rate is going to remain at low levels with no changes on the long-term. The “no tapering” indicated an economy still fragile, then add the fact that the Fed is revising down its economic growth forecasts, seeing growth between 2% and 2.3% this year, down from 2.3% to 2.6%. Even if the program is being maintained, it doesn’t mean that it failed to deliver results, just that a better recovery of the economy is needed. As an example, since September 2012 when the QE3 started, the jobless rate fall from 8.3% to 7.3%, a substantial improvement but still above the targeted percentage. As there are no worries about inflation which this year is expected to vary between 1.2% and 1.3%, the Quantitative Easing program will continue to support the American economy as long as needed.

The Prime Event Of The Weekend: Elections In Germany

Elections In Germany

Sunday, 22nd of September, will be held the elections for the position of Federal Chancellor of the Federal Republic of Germany, known as the head of government, the third most important person in the state which also has the most responsibility of all the first mentioned. Since 2005, this position was managed by Angela Merkel who now is ending her second mandate. The current Chancellor of Germany is leading the CDU/CSU (Christian Democratic Union/ Christian Social Union) grouping knows as the Union.

The main opponent of Angela Merkel is Peer Steinbrück, the Social Democratic challenger. Even if he is known as an expert in finance with potential for this position, statistics say that Angela Merkel is the favourite. Peer Steinbrück’s proposals were to raise taxes for rich people and ensure that women are fairly treated in the labour market, targeting an improvement in the percentage of women working. With respect to his potential party ally, he is rather choosing the Greens than the party of Angela Merkel.

Concerning the main challenges that the two candidates were confronted with, we heard questions about how additional funds for Greece will be obtain and which are the next steps needed in order to make progress in the banking union process, as it is one of the top priorities of the leaders of the European Union. Also, there were raised questions about situations as the worrying unemployment rate in the Euro zone, the fragile situation of the economy of Spain, the way that Portugal will face the terms imposed by the bailout and the situation of Slovenia which is struggling not to become a country which need additional aid. Why are we mentioning these facts? Because Germany is known as the engine of the Euro zone and it has the decision-making power concerning the matters related to the European continent.

Expectations are indicating that Angela Merkel will begin a third mandate and will continue to lead the country for the next 4 years as it did so far. Considering that Germany maintained its position as the second largest exporter in the world and the biggest economy in Europe, Angela Merkel is considered to be the most appropriate person to lead Germany in the following years. The future promises to be tough, as the Euro zone needs to completely overcome the financial crisis and strength its economy.


How To Reduce Your Forex Trading Risk With Options Hedging

How To Reduce Your Forex Trading Risk With Options Hedging

The Forex market has got a pretty bad reputation during the past several years. In my opinion this has happened because of the less transparent brokerage houses (saying it short scammers) and because the traders that get into this train believe that it is a short journey to becoming rich.

To become profitable on the Forex market you need first to study it. Learn what are the factors that move the market, how the price is made, find yourself a strategy, get some discipline and start practicing with a risk as low as possible. It can become a full time job, but if you think you will get yourself rich after a day, a week or even a year with risking too much and no discipline, you will find yourself thrown out of a running train.

Traders should try to risk as less as possible and leave the market to run in their favor as much as possible. It is easier said than done, because while trading with real money emotions like fear and greed tend to appear. When the trader is surrounded by these emotions he tends to do stupid things. We will tell you in the next paragraphs a method that will help you reduce your risk while trading on the Forex market, but no one can show you how to manage your emotions, and for this you need to practice, practice and practice.

A good strategy to diminish the risk on the trades made on FX is to buy different types of options on the same instrument. You could ask: why buy and sell on the same type of instrument? Well, it would be pretty difficult to get out of that hedge with a profit on a way or another.

A trader can use different types of options depending on the strategy that he uses and especially on the time that he expects to keep the trade opened. Let’s take some simple examples:

If a trader uses a scalping strategy and he would at some point try to catch a bigger move on a very short time interval (best example would be what happened yesterday, 18 September 2013, on the FOMC meeting), he could use a very fast binary option on the other direction. This way if the price would not go in his direction could catch a profit on the option evolution.

Let’s say that the strategy used is not a very short term strategy, is rather a system that offers signals for trades that could last up to several days. In this case the trader could use European Digital options (Above/Bellow a specific level or Inside/Outside a range) and set up an expiry date for the option close to the day that he estimates he will close the trade.

If the trader is a position trader then he would need to hedge his trades on a longer term. In this case it is recommended to be used the Vanilla type options (Call/Put options). This way he will be able to win if the trade would go against his direction.

One important aspect that should always be taken into consideration is the money management. The premium paid for the option should be less than the potential profit made on trading, let’s say the CFD. The payout for the option should be equal or bigger than the stop loss set on the CFD.


Gold Is Reacting To News About QE3

Gold Is Reacting To News About QE3

As Wednesday Fed decided to maintain the Quantitative Easing Program in place, we could see the American dollar dropping but indices as DAX, Standard & Poor’s 500, Nasdaq and Dow Jones Industrial Average reaching historical highs. This decision was felt and integrated in the price of gold. Since Ben Bernanke announced a possible change of the stimulus program, we saw the price of gold increasing at a steady pace.

Since the beginning of 2013, gold lost nearly 20% anticipating a reduction in the stimulus program but starting with June, when the possible tapper was announced, gold start climbing, like it encapsulate the uncertainty and lack of trust of the investors, and clearly indicating the continuity of the QE3. Also, Lawrence Summers’s withdrew as a candidate to head the Federal Reserve made the gold climbing as a proof that Janet Yellen has now more chances to assume Ben Bernanke’s responsabilities and to continue the unconventional monetary policy.

If Fed will cut the stimulus, gold is expected to get on an increasing trend, reaching $1400 per ounce while if the stimulus is maintained, gold will oscillate at lower values, most probably respecting the boundaries of a range. Even if by the end of the year the FOMC will meet again, there are poor chances to see the QE3 tapered. Most probably, the decision will be taken by the new chairman of Fed which will integrate the decision in a new strategy to run the American economy.

As St. Louis Fed’s Bullard delivered a speech later today, he expressed his view regarding the stimulus program which is effective and benefic for the economy. He doesn’t see any problem in having Yellen as head of Fed. Also, the fact that the QE3 wasn’t tapered at the last meeting isn’t a surprise for him who doesn’t expect this decision to be taken by the end of this year. Even if they would have decided to taper, $10 billion would have made a difference, in his opinion.


Euro Area Strengthens, Merkel Remains A Major Player

Euro Area Strengthens, Merkel Remains A Major Player

The most awaited news for the Euro zone was the result of the German elections. As everybody was expecting, Angela Merkel’s Conservative Party won with 41.4% of the vote while her Liberal partner failed to make it into the Parliament. The result of the election pleased central banks as urgent matters concerning their activity need the involvement of the chancellor who now is finally established.

Today were released the PMIs for the services and manufacturing sectors for French, Germany and the Euro zone. Read one of my previous article, you can understand better what a PMI means. Thus, the PMIs in the services sector beat all expectations, reflecting a propulsion of 1.8 points for French, 1.6 points for Germany and 1.4 points for the Euro zone. Is encouraging to see that the French services sector overcame the 50 points threshold, showing that the field is expanding for the first time since January 2012.

Today Mario Draghi gave another speech. He maintained his positive thinking about the slow recovery of the Euro zone, while keeping the low interest rates for an extended period of time. A refinancing operation may be needed for the European banking system and Draghi is ready to use any tool required in order to improve the results of the economy. The next concerning matter is again Greece which is currently asking for another tranche of funding worth 1 billion euro. Regarding the latest decision on the United State’s territory, the chairman of the European Central Bank expressed his approval for the decision to continue with the Quantitative Easing program as long as needed.

For the moment the Euro zone is going through a period of silence as Angela Merkel remained the Chancellor of Germany and will continue to approach the European crisis as before. On the other side, the European economy keeps giving positive signals, even if they are less significant, they are considered steps towards a sustainable growth.


Three Stocks You Should Keep An Eye On For Next Month

Three Stocks You Should Keep An Eye On For Next Month

Browsing my ‘to watch’ list for some interesting opportunities, I have found three stocks that you might also find interesting.

First stock is BIDU (Baidu Inc.). From the first days of July the price of this company started an uptrend and in less than three months it has gained 75%, raising 67$. From the beginning of August the price started to draw a Rising Wedge. Today the price rallied to a new high, above 154$, but dropped pretty fast back to 150$ per share. If the day will close around the current level we can say that the breakout above the upper line was a false one. Taking into consideration also the negative divergence from the 28 days RSI we could say that a drop might occur.

The confirmation will be a drop and a close under the lower line of the pattern. In this case the price target for the Wedge is situated at 116.78 dollars.

baidu rising wedge

Chart: BIDU, Daily

Second in my list is Google Inc. which seems to be in a pretty stable up trend. After 845$ level was breached the price started to consolidate and seem to have drawn a reversal pattern. The Head and Shoulders is not yet complete. The base of the pattern is at 846$ per share, but the second shoulder is not yet finalized.

If the price of the shares will drop under 879$, the local support, then the probability for the shares to complete the H&S will rise. If the price will then fall under the pattern’s base line it might go all the way to 770$ per share.

google head and shoulders
Chart: GOOG, Daily

My last, but not least, stock for you is J P Morgan. The chart of this stock it is beautiful from the technical point of view. After the price has broken the uptrend line, came back and retested it, forming this way the right shoulder for the Head and Shoulders pattern. The base line of this pattern is at a round level, 50$. A daily close under this support will confirm the pattern.

The first target for a drop would be the key support level at 46$ per share. The full target of the price pattern sits at 43$ per share, meaning a 14% drop.

jp morgan head and shoulders

Chart: JPM, Daily

The charts look incredible and the current signals could be confirmed in the near future. But each trader should take the ideas and personalize them. Use their personal trading style, their own money management and position management to get as much profit out of these setups as they can.


Is Tesla’s Engine Still Going?

Is Tesla’s Engine Still Going

In May, this year, Tesla Motors got a boost of power and the price of its stocks started to rise at an alert pace. In less than 5 months the stocks gained 230%. Today it has reached another high at 189.69, getting one step closer to reaching 200$ per share.

The engine that pushed the price that far from the April levels gives now some bad signals. The trend continued to rise fast, but the volumes started to drop. Dropping volumes on a move usually means that the move might turn around in the near future. Another signal would be the negative divergence that appeared on the 28 days RSI.

Chart: TSLA, Daily

We are expecting the price to keep on rising, targeting 200$ per share or even slightly above. This growth could be followed by a drop back to 160$ per share, an ex-resistance. The fall could occur right before or during the earning reports period.

Tesla Motors is expected to report an estimated earnings of 0.12$ per share. If it will surprise the markets like it did in the second quarter, than our setup could be invalidated and the price might break 200 level. On the other hand not meeting these expectations we might see a steeper drop.


Three Aspects You Should Know About The Euro Zone

First of all, Greece is now feeling the peace before the storm as in November is going to be decided if it needs an additional bailout from the European countries. Since this would be the third substantial loan required, the minister of finance Evangelos Venizelos is trying to persuade the International Monetary Fund and the European Union that Greece may not need another bailout because it is capable to sustain its expenditure. The healthiest support would be the reintegration in the bond market by next year as it is so vital to the ongoing operation of the public and private sector. The European countries do not need to be burdened anymore since they have already bore costs of about 240 billion euros with Greece.

Secondly, it is worth to pay attention to another worrying aspect of the European zone which is Cyprus. The country is currently bearing the effects of the austerity measures which strongly affects the unemployment rate that increased with 40%. Since the dramatic episode of March when Cypriots’ bank accounts were required to contribute to help fund a restructuring of the financial sector, austerity measures have been implemented and the effects have appeared immediately. The forecast for 2014 is dark, assuming a 13% shrinking of the economy.

Thirdly, the European banking system is currently redesigning. Thus, the European Banking Authority (EBA) decided:

- To modify the shortage for the top 42 banks in the European Union (following to be applied for all banks in the E.U.) and cut it by 29.1 billion euros, compared with six months ago.

- The core capital buffer that banks must hold increased, consisting of at least 7 percent of their assets on a risk-weighted basis.

- Separate reserves of cash and government debt by 2019.

- A leverage ratio set at 3 percent from 2018 (banks are required to hold capital of at least 3% of their total non risk-weighted assets).

These regulations are part of the new global Basel III.