GOLD, WEEKLY 

TECHNICAL ANALYSIS

SUPPORT AND RESISTANCE LEVELS

From our previous daily gold analysis here, the price movement was technically beautiful. Being a 4th touch on the daily trendline in our previous article, the trendline break was likely as it fell into the weekly support channel.

Currently we can see a clear congestion zone on the weekly chart, held by horizontal lines R and S. The momentum in the channel is still strong either way, meaning that keeping the trading within the congestion zone now is most logical. 

Whats within the congestion?

Break of that blue trendline to retest the lower weekly support showed some bearish bias. This bias can only be maintained if the price fails to close above the blue horizontal resistance around 1264.8 and falls back strongly back to S or otherwise we will still see indecision. But the momentum too of the bounce off S for the last 2 weeks doesnt agree so much to above statement, it still shows chances of going higher to retest R getting back to the indecision mode.

After congestion...

Depending on the reaction and momentum in the R and S zones holding the congestion, weekly candle close above R may lead to retest of the larger resistance zone marked R1 around 1375.00 which corresponds to the larger monthly congestion resistance.  

Weekly candle close below S may lead to retest of the previous lows support zone around 1129.00 marked S1

GBPNZD DAILY

SUPPORT AND RESISTANCE

TECHNICAL ANALYSIS

The price is now into a congestion held horizontal support S and red trendline R. 

Close below S may lead to first test of major support trendline T before it can fall  S1 support zone around 1.72571. Close below S1 zone may to retest of previous lows suppot zone marked S2. 

On the other hand, Close above R can lead to test of first major daily resistance around 1.82314 marked R1. Close above R1 zone may lead to retest of the previous high zones around 1.85891 marked R2

NB: On each zone, price has been pausing for a minimum of 5 days before it breaks to new levels. Keep that in mind to avoid false break outs and early/late entries

Is a Robust Position sizing Model achievable and will it prevent us from being stopped out by whipsaws?

For the past few days that I haven't been actively trading or probing charts, my belief about position sizing has been completely shattered. All along, my position sizing model has been based on rigid rules that gave me the illusion of being in control yet I was not. It is quite surprising when all of a sudden you realize that you have unknowingly been deceiving yourself by thinking that you are all about the process of trading and not the money making aspect of it only to find out that some aspects when it comes to not being too concerned about the P&L, have gradually been achieved but not all. my recent discovery has made me introspect further and therefore cast more doubt in my mind. a mind full of thoughts which are merely deceptive illusions and nothing more. What a terrible derangement!

Position sizing to a beginner, (I can't talk about pros since I haven't interrogated them on position sizing ) is all about ensuring that your risk amount is in accordance with the percentage amount of Capital that one wants to allocate to a single trade, whether it's a buy or a sell. No folks, position sizing shouldn't be exclusively about the money. In fact when position sizing I would prefer a model that does not make money the first priority. I shall explain why.

To me a good position sizing model and a possibly robust one for that matter, (it has to be aggressively tested in order to conclusively determine it's robustness. But for now, I would suggest that a system's expectancy is a good indicator of the model's robustness ) should fundamentally assess risk from a psychological point of view. And by psychological I mean market psychology (primarily greed and fear) premised on one's Technical analysis method and market sentiment. in short, one ought to first ask themselves; at what point will the market prove that my hypothesis is wrong? But this is often not the case, we Amatures size our positions from an emotional point of view. we assess risk as a form of pain threshold. 

We ask ourselves how much pain do I have to endure (moneywise) before my stop loss is hit? and further delude ourselves by thinking,"...well, as long as my loss is within my  accepted margin (whether as a percentage or Cash), it's okay" I have news for you: YOU ARE NOT FOCUSSING ON THE TRADING PROCESS  fellow Amateur, so your emotions, and in this instance pain, weakens the percentage of objectivity in your technical analysis method (yes technical analysis is not 100% objective. No form of analysis is thus far). Pain is an emotion. Unknowingly, you have just mixed your trading with an emotion but deceiving your mind that you are in full control of your bottom line! hence setting yourself to fail in the long-run.  I can confidently assume that it is impossible to become a successful trader if one has not managed to control his or her emotions (I can only assume because I don't know every successful trader out there maybe there are some who are uncontrollably emotional in their trading and are successful ).

I am not a risk analyst, neither am I a pro trader but I  find this paragraph in Taleb's book Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets vindicating my opinion on position sizing as a tool for determining risk;

"... it is a fact that that our brain tends to go for superficial clues when it comes to risk and probability, these clues being largely determined by what emotions they elicit or the ease with which they come to mind. In addition to such problems with the perception of risk, it is also a scientific fact, and a shocking one, that both risk detection and risk avoidance are not mediated in the 'thinking part' of the Brain but largely in the emotional one (the 'risk as feelings' theory). The consequences are not trivial: it means that rational thinking has little, very little, to do with risk avoidance. Much of what rational thinking seems to do is to rationalize one's actions by fitting some logic to them..." (The mental delusions we found ourselves in when we justify our positions sizing model that has totally been anchored on emotion).

To me a good position sizing model should be able to combine Probability and Risk. I say probability because the market is inherently uncertain and therefore prone to improbable price movements hence triggering the question; At what point will the market invalidate my analysis? and Risk coz with Risk we can calculate the odds of winning or losing (remember Mark Douglas's self-evident lesson: There is a random distribution between wins and losses, all you have to do is to play the odds in your favor by having an edge? If you have not read Mark Douglas's work and fully grasped concepts therein, stop that nonsense you are participating in called 'learning a strategy or system').

If you actively trade, you have experienced situations in which your perfect 2% rule following stop loss has been hit only for the market to later turn around (and often aggressively) and play out as you had anticipated in your analysis, but by then it is too late and if you are not careful you end up chasing price and getting burned.

Therefore, a  robust position sizing model should dictate where you put stops and the model should be based on analysis that answers the fundamental question; at what point will the market prove my analysis is wrong?. The next challenge is to merge this approach with the concept of risk to reward ratio. Interesting.

How I will Trade this week's volatility. My GOLD, AUD, USD, EUR and GBP intraday plays

Gold began a parabolic decline in October 2016 but bounced back late in the same year leading to a parabolic rally for the Two Quarters of 2017 ending last week. One can safely say that this rally has been a Powerful pullback that blew up major ceilings(38% and 50% Fib levels ) and now Gold is at a critical point. why critical? if you plot the Fibonacci tool  the rally that begun in early 2017, price is now resting at the 38% level. This cluster (of a level  that was  previously a fib support now turned resistance and the 38% support level) forms a very strong floor and to add more concrete to it, currently the 200 day moving average acts as support too. That said, the rally has really propped up the Aussie for the last 2 quarters This Technical uptrend has also been supported by good data coming out of Australia (Latest GDP data -Dec Qtr 2016 to Mar Qtr 2017 up to 0.3% from a previous 0.2%), precipitated a booming mining sector and China. But despite the impeccable performance of the Aussie and the Australian Economy in general  the RBA has seen no need to hike interest Rates since inflation is well within its targeted levels (2.5%-3.5%). The market also does not expect it to do so tomorrow. But we'll find out.

Despite the interest rate hikes by the FED that have tried to at least prop up the US10yr bond yield but not yet trading above the 200day MA, the Dollar has been depreciating. Seems to me that few investors have appetite for the bond yields and preferring to invest in US Equities which have been performing quite well as per the S&P 500. Adding onto this, the recent hawkish comments by key ECB Officials doesn't make things better for the dollar because investors will further be attracted to the high yielding European Bonds.

*Kindly read the rules at the end of this post before proceeding 

GLD- I'll be looking to go long after a confirmed break of resistance at  1260.00 on a 4hr setup , above both the 200MA and 100MA. In my rule book, I look for trends that are above these MA's  on the the long term chart and the Short term Timeframes as a confirmation of the trend and also as a way of finding a reasonable price to place my stop loss. Preferably below one MA or both.

4hrAUDUSD- the parabolic rally seems to be pulling back as we head toward s NY open. I will watching key support levels in anticipation of tomorrow’s economic releases and after the releases in order to find good risk reward levels. watch for breakouts after the releases and the support levels. bad data might further drive the pair down but if support at 0.7602 if broken and the break confirmed my short-term bias will change. 

 

4hr EURUSD the pair is currently pulling back. Also, be on the lookout for those support levels and resistance level breakouts after the barrage of US Data is released. A confirmed breakdown below 1.1200 invalidates my short-term bias.

 4hr USDX(Dollar Index). will upcoming Data give us pullbacks or will they change the short-term trend. I will be keeping an eye on the resistance levels, confirmed Breakouts above the 200ma will invalidate my short-term bias.

4hrGBPUSD the pound is pulling back after the parabolic rallies last week. The BOE governor has a lot of speaking engagements this week. The pair might react because this since traders are anticipating on how hawkish he'll be regarding a rate hike given that UK's inflation data has so far made a case for a hike. Good data from the US might  precipitate nice  pullbacks. For now, looks like the bullish pennant has failed and we might see a further pullback .

 

4hrGBPJPY- expecting a good pull back here for a long setup. breakout below 144.36 will change my bias.

1hrGBPCHF- This pair has a good risk reward setup as I write this. A confirmed break  of 1.2477 should justify a long.

 

 P.s

Kindly take notice of this Blog's Disclaimer.

-Thick horizontal Lines represent weekly Resisitance,Extra thick-Monthly and Thin, the Daily 

- Anticipated Trades are in the direction of the short-term and long-term Trend

- Trades are taken In accordance with the order of the two moving averages.If price falls between the two Moving Averages setups become invalid

AUDCAD  WEEKLY AND INTRA-DAY TRADING

TECHNICAL ANALYSIS

WEEKLY CHART

The price already shows strong signs of bearishness as it is being held by support zone marked T. Confirmation of fall of the price will be close of the weekly candle below support zone marked by red horizontal line marked T around 0.99164. This may lead lead price into a larger pivotal support zone marked S around 0.97464.

As we wait for weekly candle confirmation, lets us see what we can be playing intra-day.

HOURLY CHART

Intra-day trading on the hourly chart is more logical to be done between the zone marked by the red horizontal lines R and T shown on the chart below, as we wait for larger timeframe confirmations. 

Currently price is held in a congestion marked by small yellow trendlines r and t. Close above r can lead price to retest the R resistance zone and close above t can lead price to retest the previous lows support zone marked T which is the same zone on the weekly chart above.

Since momentum on the downside looks strong and there was just a break of a blue trendline support P, a break below t is highly probable for a downside continuation. But nevertheless, wait for confirmations either way.