Thursday, 30 June 2011

GBP/USD Resumes Down Trend, Now What To Do?

As a trader, I like to take trade entry signals from the hourly chart, which align with the trend on the daily chart.

Of the seven markets which I regularly trade, and whose daily chart trends I reviewed earlier, only three are now showing clear daily chart trends - GBP/USD, Gold, and Silver.

Given the context of the daily chart down trend for the GBP/USD, let's look at the hourly chart.

I can see three possible short entry triggers on the chart... (1) when the market bounced down from the corrective channel trend line, (2) when the market broke back below the down trend line, signaling a false upside break, and (3) if/when the market breaks below the lower corrective channel trend line.

Which entry you take, or indeed whether you choose to act on any of the entry signals, would depend on your trading style. Largely it would depend upon whether you like to sell strength, or sell weakness.

Likewise, your risk management strategy following an entry would depend on your style as a trader. Some like taking profits at targets, others like to trail a stop. There are endless options.

So long as a trader cuts their losses, they'll probably do alright (or better). Personally, once I am in a position, I largely ignore the charts, and I trade money ie. I make exit decisions based upon the value of my open profit or loss. Perhaps I will attempt to explain this more in a future post.

To succeed as a trader, you need to find a set of trading rules that (1) work when back tested, and more importantly (2) suit your personality/psychology. There are many many systems that work when back tested, but there are probably very few such systems that suit your own personality.

ASX 200 Daily Candlestick Chart No Clear Trend

The ASX SPI 200 was very strong in Australian trading, breaking the down trend line and so far holding above the 40 day moving average, indicating that the Trend Is Down call of 11 hours ago (here and here) must be updated to a call of No Clear Trend. I have drawn a new up trend line, parallel to pre-existing lines, and touching previous market action.  The market is currently testing this line.

End Of June Review Of The Daily Candlestick Charts

As a trader I take entry signals from the hourly candlestick charts. I like to take signals on the hourly chart which align with the trend on the daily chart. 

Given the rally this week in stocks and indeed all the markets that I trade, it's a good time to take a step back and review the trends on the Daily Candlestick Charts.

I have just now posted charts and examined the trends for the markets that I most commonly trade. To my eye:

- S&P 500 no clear trend;
- ASX SPI 200 trend is down;
- EUR/USD no clear trend;
- AUD/USD no clear trend;
- GBP/USD trend is down;
- Gold trend is down; and
- Silver trend is down.

Silver Daily Candlestick Chart Trend Is Down

Market price relative to the moving averages and recently broken up trend line indicate that the trend is down. Full confidence in that view would require a close below support at 33.70.

Gold Daily Candlestick Chart Trend Is Down

Market price below the moving averages indicates that the trend is down, but within the context of a strong bull market at higher time frames. The market is testing the trend line formed from the May lows. 

GBP/USD Daily Candlestick Chart Trend Is Down

The moving averages and completed Head and Shoulders top indicate that the trend as down. To my eye, that view will not be threatened unless/until the market moves about the Head and Shoulders neckline.

AUD/USD Daily Candlestick Chart No Clear Trend

The moving averages still argue for a down trend to be declared, while the recent break of the down trend line argues otherwise. The strong rejection of the top line of the previous trading range argues for either a new up trend to develop, or at least continued trading above that line. To my eye, a test of the June highs just below 1.08 looks likely.

EUR/USD Daily Candlestick Chart No Clear Trend

Clearly, no clear trend... unless sideways is a trend. I usually only refer to up or down trends as trends.

ASX 200 Daily Candlestick Chart Trend Is Down

Trend for the ASX SPI 200 is clearly down, unless/until the market rises over 4600. 

S&P 500 Daily Candlestick Chart No Clear Trend

The moving averages and down trend line support the case for a down trend to be declared at this time frame.  The New York close above expected resistance at 1300 muddles the picture. So to my eye, no clear trend.