2018.10.15 Forex Trade Plan

Legend

  • POTW: Plan of the Week
  • Red: High impact news
  • Orange: Medium impact news
  • OCO: One Cancels Other trade. More than one trade entered. First one to trigger cancels the others.

Calendar

News Schedule

Monday: 0830 USD, 1030 CAD
Tuesday: 0830 CAD
Wednesday: 1400 USD FOMC Minutes
Thursday: 0830 USD
Friday: 0830 CAD

Upcoming

  • Bank of Canada, Wednesday 10/24

Watch List

USD.CAD

Decade-long Cup & Handle formation
Weekly zoom in on handle
Daily showing breakout
4Hr showing entry point

Ignore the chart showing entry at 1.3040. I had to close and reopen the position from 1.2797. The position is up over 200 pips.

ACTION: Add to the position ahead of Wednesday FOMC Minutes.

USD.JPY

Monthly Cup & Handle
Weekly pullback to support
Daily entry point nearing

USD.JPY also shows a decade-long cup and handle formation, one of the most reliable trading patterns.

ACTION: Let the Daily settle and seek entry between 111 and 110 for a long term hold. Same strategy as USD.CAD.

GBP.JPY

High base formation
  • High/low base breakout is one of the highest probability trades.
  • I believe this is a bullish continuation pattern.

Trade:

  1. Limit entry at the bottom of the base with a tight stop below the breakout point.
  2. Sell stop OCO at the breakout point in case this runs bearish.
  3. Buy stop OCO entry at the bullish breakout point to double the position on breakout.

Analysis

Fundamental Bias: Strong USD

I believe that the Fed and Trump Administration are orchestrating a strong Dollar policy that will play out over the coming years at the expense of emerging markets worldwide. We can expect a restructuring of US healthcare and Social Security, the return of a strong middle class due to automotive, defense and high tech manufacturing especially including steel, aluminum and 3D printing.

Technical Bias: Strong USD

The charts show strength in the USD against both CAD and JPY. USD.JPY is still correcting. Both charts show one of the most reliable patterns, a cup and handle formation, on a decade-long monthly chart. Timing the entry on multi-time frame trades is always tricky. On CAD, we’re in. On JPY, we’re waiting for the Daily to settle or smooth before entry. We’ll re-evaluate USD. JPY ahead of Wednesday’s Meeting Minutes.

To that end, I will look to add long-term leveraged positions to USD.CAD and USD.JPY, and take shorter term opportunistic trades in other pairs such as GBP.JPY.

Trade / Results:

Open Position: Long USD.CAD
Entry: 1.2927
Target Exit: Long-term hold, 1.47
Exit: Open
Gain / Loss: +200 pips

Update 10/18

USD.CAD appears poised to break out of the handle as the election nears.

Update 10/23

USD.CAD is consolidating in a 50 pip band between 1.3079 and 1.3132. Stop loss moved up to 1.3075. If the pair reverses, it’ll be only for a 50 pip move before moving sharply higher on anticipated Bank of Canada dovishness. 50-day support on the 4-hr chart is at 1.3035. Re-enter at that level, a full measured move south.

Action

Be prepared to take profits on tomorrow’s 0830 CAD news with a tight stop and reverse position through Wednesday’s BOC decision of next week.

After Action Review

Lesson Log

  • Maintain tighter stops on charts that are elevated well above the Daily MA in order to lock in gains or seek to enter on pullback.
  • The Administration is working in concert with other officials to actively manage the currency and prevent aggressive breakouts. Enter positions at pivot points .
  • Patience. When a pair is extended and you anticipate a pullback, set the ambush and wait to trigger. De-lever and allow for room to move so as not to be stopped out.
    • Huge measured moves that seemed highly unlikely have occurred on two occasions, both of which, had I set the ambush entry and waited patiently would have yielded enormous gains. Set the ambush and wait.
  • On light news days, play the 5 & 15 minute chart with a News Trail (10-pip trail on a 20-pip trigger).

Fed Week

Situation

Calendar

This Week

Monday:
– 0900 EUR Draghi speaks
Tuesday:
– 1000 USD Consumer Confidence
Wednesday:
– 1030 USD Crude Oil
– 1400 USD FOMC Rate Decision
– 1430 USD FOMC Press Conference
– 1700 NZD Rate Decision
– 1800 NZD Press Conference
Thursday:
– 0830 USD Core Durable Goods & Final GDP
– 0930 EUR Draghi speaks
– 1630 USD Chair Powell speaks
– 1745 CAD Gov Poloz speaks
Friday:
– 0830 CAD GDP, US News (medium)

Pending News

  • US & Canada NAFTA talks pending resolution
  • Fed Decision, Bank speak every day

Next Week

  • New monthly candle on Monday
  • Friday news for USD and CAD

Indicators

Formation Status

USD.CAD
  • Monthly – Pullback to support
  • Weekly – MACD showing bearish bias, possible breakdown below 50-period support and retracement to the 1.2500 area.
  • Daily – 5 waves complete without a reversal candle, possible 7 wave cycle
  • 4HR – pending breakout either way

News Sentiment: USD NEUTRAL
– No significant news bias

Price Action: Formed a new 4Hr triangle for 60 pips at 1.2920. This could break down to 1.2840 or pop to 1.3000.

Analysis

The FBI and Fed are engineering a Democratic takeover of Congress in order to have Democratic ownership / buy-in on the changes to healthcare and Social Security. (These legacy programs are the greatest threat to our financial stability. I believe Trump was elected specifically to address this budget problem. GWB couldn’t get it done with a majority. Trump has pulled the carpet out from enough Dem programs to give them bargaining chips to run on when then inevitably concede ground on healthcare and Social Security.) With that in mind, polls are showing the Dems with a 12-point lead, more than the Republicans had in their 1994 takeover or the Dems had in 2006. With that in mind, I expect the Fed to apply pressure on the Congressional purse strings over the first few months of next year in order to force Congress to deal on legacy programs. However, in order for this plan to work, the Dems need to win. So, because the economy is humming along and voters are loath to change with good economic news, I expect the Fed to come out hawkish ahead of the election this week in order to manifest a market pullback on a higher USD and an inverted yield curve.

Adjustments

I added a News Trading button, that adds a 10-pip trailstop with a 5 pip stop loss for planned news trades.

Key Questions:

  • The Weekly chart shows a USD sell-off against CAD. Does this reverse or follow through?
  • How will NAFTA news be used to manipulate price?
  • How will Fed and BOC speak affect the market overnight on Thursday and Friday?

Scenario Plan: Bracket trades may come in handy this week.

Trade Plan

Monday: 0800 No news, trade the 4Hr
Tuesday: 0830 news ahead of FOMC; expect light reaction, use the trail stop.
Wednesday: 1030 news, 1400 FOMC; expect little action ahead of 2pm meeting
Thursday & Friday: Look for follow through

Action:

Trade / Results:

Position: Long USD.CAD
Entry: 1.2927
Target Exit: Trail
Exit:
Gain / Loss:

Position:
Entry:
Target Exit:
Exit:
Gain / Loss:

Weighted Average Result:

Update:

The 5 & 15 minute charts showed a short, but I expected 4Hr support to prevent a large move so I went long. My stop was appropriately placed, so the position is rallying, but in the future on light news days within a formation, I’ll play the short term direction for a 20 pip gain.

After Action Review

Lesson Log

  • Maintain tighter stops on charts that are elevated well above the Daily MA in order to lock in gains.
  • The Administration is working in concert with other officials to actively manage the currency and prevent aggressive breakouts. Active management is required.
  • Patience. When a pair is extended and you anticipate a pullback, set the ambush and wait to trigger. Allow for enough room to not be stopped out. The pair will likely regress too fast to get the ideal entry without the ambush limit entry order.
    • Huge measured moves that seemed highly unlikely have occurred on two occasions, both of which, had I set the ambush entry and waited patiently would have yielded enormous gains. Set the ambush and wait.
  • On light news days, play the 5 & 15 minute chart with a News Trail (10-pip trail on a 20-pip trigger).

Trade Plan: 2018/09/16 — USD.CAD back in handle, GBP.JPY breakout

Situation

Calendar

This Week

Monday:
– 0830 USD Empire Mfg Index (medium)
– 2130 AUD Monetary Meeting Minutes
Tuesday:
– Evening JPY Rate Decision
Wednesday:
– 0430 GBP CPI
– 0830 USD Building & Housing (medium)
– 0900 EUR Draghi speaks
– 1845 NZD GDP
Thursday:
– 0430 GBP Retail Sales
– 0830 USD Philly Fed Mfg Index (medium)
Friday:
– 0300-0430 EUR news
– 0830 CAD CPI, Retail Sales & more

Pending News

– US & Canada NAFTA talks pending resolution
– $200B in new China tariffs

Next Week

– Federal Reserve Rate Decision (Wednesday)

Indicators

News Sentiment: USD BEARISH, GBP BULLISH
– China tariffs (Bearish) are the lead story; expect Chinese tariff talk (USD currency management) to step up after the FOMC
– Article on Bond Market Betting on Hikes mentions deficit spending (Bullish), a key topic that I expect to see more of following the election. Fed has signaled that deficit spending is a threat to our economy. I expect the Fed to raise rates until Congress has difficulty paying the bills in order to force hard decisions on healthcare and Social Security.
– GBP headlines, Sterling Benefits on Lack of Bad News, is begging for bad news on Brexit

Formation Status:

USD.CAD

Breakout on the handle failed. Price action is back within the handle, poised for a second breakout in anticipation of a hawkish Fed.

GBP.JPY

Price Action: Sitting just below upper handle trend line resistance at 1.3036. Weekly chart shows another possible drop to 1.2850. Monthly chart sitting above 9, 20 & 50 period. Daily is neutral. 4HR appears bullish.

Key Questions:
– Will China news be enough to push USD.CAD lower to the bottom of the channel in a week light on data?
– Will Wednesday’s GBP data push GBP.JPY through resistance or will headline risk sink it?

Scenario Plan: Play the formations and expect headlines to reverse breakouts.

Trade Plan

Monday:
– GBP.JPY – High base on 4Hr
– 0830 USD.CAD, Bullish setup on 4Hr
Tuesday: No news. Scan the 0800 4HR
Wednesday to Friday: 0830 News

Action:
– GBP.JPY Short at 147.90
– USD.CAD Short at 1.3080

Trade / Results:

Position: Short USD.CAD
Entry: 1.3070
Target Exit: 1.2850
Exit: 1.3069
Gain / Loss: Breakeven

Position: Short USD.CAD
Entry: 1.3062
Target Exit: 1.2850
Exit:
Gain / Loss:

Weighted Average Result:

Update:

2018/09/19 Larry Kudlow signals entitlement reform is coming, as we stated earlier this week in this post. Read more here. Success on entitlement reform will be enormously bullish for the USD.

Analysis
Coordinated currency management on part of the US, Britain and Europe through headline manipulation. Both USD and GBP should be higher, if not for headline risk.

After Action Review

Lesson Log

  • Maintain tighter stops on charts that are elevated well above the Daily MA in order to lock in gains.
  • The Administration is working in concert with other officials to actively manage the currency and prevent aggressive breakouts. Active management is required.
  • Patience. When a pair is extended and you anticipate a pullback, set the ambush and wait to trigger. Allow for enough room to not be stopped out. The pair will likely regress too fast to get the ideal entry without the ambush limit entry order.
    • Huge measured moves that seemed highly unlikely have occurred on two occasions, both of which, had I set the ambush entry and waited patiently would have yielded enormous gains. Set the ambush and wait.

Cup and Handle on USD.CAD

Situation

Monday: US & Canadian holiday
Tuesday:
– 1000 USD ISM PMI
Wednesday:
– 0830 CAD Trade Balance
– 1000 Bank of Canada Rate Decision
Thursday:
– 0815 ADP Non-Farm Employment Change
– 1000 ISM Non-manufacturing PMI
Friday:
– 0830 CAD Employment & Unemployment, USD Average Hourly Earnings, Non-farm Employment Change, Unemployment Rate

Pending News: US & Canada NAFTA talks pending resolution

News Sentiment: Neutral. Nothing of consequence over the holiday weekend.

Up Next Week: Federal Reserve Rate Decision

Formation Status: Handle on a monthly cup and handle formation seeking a breakout, due to breakout with a likely Fed hike this month. Currently trading at the upper end of the channel. Possible continuation or reversal. Tighten stops.

Price Action: Sitting at Resistance of 1.3100. Monthly bias is strongly bullish as is the Weekly bias. Daily is neutral. 4HR and 1HR are pausing.

Key Question: If I tighten the stop and get stopped out, will I be able to re-enter at a lower price or will the pair rebound faster than I can get in?

Scenario Plan: NAFTA agreement reached ahead of Wednesday’s BOC meeting, which could enable the BOC to raise rates this week rather than waiting until October, as the market expects. If this happens, the pair could sell off by 100 pips, a 50% retracement of the recent move from the bottom of the channel.

Because the risk of this is limited to Tuesday and Wednesday, I will tighten the stop ahead of the meeting and re-evaluate afterwards.

If NAFTA breaks after the BOC meeting, I expect the USD to appreciate aggressively as one less barrier to a Fed hike is removed.

Action: Tighten stop to below daily and weekly open. A break below the open could send the pair appreciably lower and offer a strong re-entry point ahead of next week’s Fed decision.

Targets: 1.3385, 1.3585, 1.3750
– Update: 1.3385, 1.3690

Update: Tuesday 20180904
– 0930 USD.CAD strength broke resistance at the channel last night and kept going. As of this morning, the pair traded through another level of resistance at 1.3175 and is now hovering just below 1.3200. I stopped into another position at 1.3175 and placed the stop loss at break even for the new position.
– 1030 The pair has broken 1.3200, but not likely to hold it. I expect a retracement in anticipation of tomorrow’s BOC meeting.

Update: Wednesday 20180905
– 0830 Trade Balance and 1000 BoC Rate Decision served as a buying opportunity. I was previously stopped out at breakeven. I entered the same second position at 1.31805 with a GTC stop at 1.31575. So far so good. I expect further consolidation on the Daily with an upward bias towards 1.3290.
– NAFTA update: Now that the BOC decision is behind us, any NAFTA positive news will be bullish as another barrier is removed from Fed decision making. As the trade picture clears and the US economy shows continued strength, I expect a long-term bullish breakout for the USD.

Position Management: I will hold my initial position entered at 1.2950 for the month of September, perhaps longer. Secondary positions will be for trading purposes.

Update: Thursday 20180906
– The pair is forming a high base on the Daily chart with support above 1.3150. The next two targets are 1.3290 and 1.3375. Market sentiment continues to be positive and the opportunity to reverse course on a Wednesday came and went. NAFTA news is still outstanding as well, which is bullish. To that end, I would not be surprised to see the pair trade up to the next target at 1.3290 and possibly beyond it in advance of next week’s Fed decision. Buy the rumor, sell the news. With that said, risk remains for a bearish breakout to the moving average support at 1.3100. To that end, I will maintain the stoploss at 1.3149, just below S1 support, 20 period MA on the 4HR and the psychological level of 1.3150. Risk on this half position is 3%.
– 0815 ADP showed a modest decline in payroll growth. The market shrugged it off with little reaction. 0830 news was inconsequential.
– 1000 ISM and Fed-speak could send the pair into a 4HR correction as the chart is currently in consolidation mode after the run up on Tuesday. It also could send the pair to the next target or continue to consolidate ahead of tomorrow’s employment data. Hold the stoploss.
– 1125 ISM data outperformed and SF Fed President Williams says that the economy has room to grow and that muted inflation data suggests little impetus for faster rate hikes. Clearly the market is not buying it as the USD has broken short-term resistance at 1.3206 and climbing. Stops on all positions moved to break even on the last entry at 1.3149, locking in an account gain.
– 1644 USD rally peaked at R2, 1.3226 before reversing on bearish Fedspeak about inverting the yield curve and Trump talking up a trade revision with Japan after concluding NAFTA talks.

Trade Results: Stoploss at 1.3149 locked in a 199 pip gain from an entry of 1.2950. The re-entry target is set for 1.3101.

First Position
Entry: 1.2950
Exit: 1.3149
Gain / Loss: +199 pips

Second Position
Entry: 1.3180
Exit: 1.3149
Gain / Loss: -31 pips

Weighted Average Result: +180 pips, +32% account gain

Analysis
Just when the path towards a stronger began to accelerate, President Trump put on the brakes by announcing that Japan was next. That plus Fedspeak and a BOC announcement that a NAFTA deal was “still possible” cast doubt on the deal getting done and caused the reversal. Had this occurred on a Wednesday, I would’ve been prepared to sell at the high. In shortened weeks, I’ll now anticipate reversals in the afternoon on Thursdays.

After Action Review
The decision to raise my stop loss to Daily support appears to be a good one with the 4Hr chart showing more bearish sentiment to 1.3100-1.3050. One should never complain about a 32% gain.

  • Maintain tighter stops on charts that are elevated well above the Daily MA in order to lock in gains.
  • The Administration is working in concert with other officials to actively manage the currency and prevent aggressive breakouts.
  • The good news is that with this in mind, there should be plenty of trade signals based on the daily pivot points.

Crypto Update: DSH, IOT, XRP

(Disclosure: I have trade positions in DSH, IOT & XRP. Long-term HODL positions include: BTC, ETH, XLM, and XRP. This is not a recommendation to buy or sell any currency.)

After a successful couple of months with gains of 2800% since October, I decided to split my portfolio into two. The first will be a trading portfolio while the second will be more of a HODL portfolio. The analysis provided below is on the trade portfolio only.

Each trade is risk adjusted to reflect portfolio capital at risk of just 2%. This means that when one of these trades stops out, my max loss will be limited to 2% of portfolio value. Trading with this style of risk management is profitable provided that greater than 30% of trades prove profitable.

Trades

Dash (DSH) appears poised for a reversal after consolidating on the Daily chart since December 20th.

Entry: $1099.80
Stop Loss: $1100 (moved to break even from $1050)

 

Iota (IOT) is a low-risk entry point near trend and moving average support. After consolidation since a high on December 19th, Iota appears ready to move again.

Entry: $4.12
Stop Loss: $3.80

 

Ripple (XRP) has already had a fantastic run to close out the year. I’m skeptical that it will continue without consolidating for a few weeks. To that end, I have a quarter position with a tight stop in the event that it turns bearish.

Entry: $2.72
Exit: $2.60

Crypto Update: Bitcoin Reversal?

(Disclosure: Mr. McHugh owns XRP and XLM. This is not a recommendation to buy or sell any currency.)

Bitcoin (BTC)

Bitcoin corrected, but held steady at weekly support of $12,000. If BTC closes above $14,550 today, we’re looking at a bullish reversal which bodes well for the rest of the crypto market. If it closes below $14,550, which is trendline resistance, it’s possible that we may still be in for a sell off. Depending on the direction of the breakout, I expect a $6,000 move to $8,000 on the bear side or $20,000 on the bull side.

Bottom line: A close above $14,550 is a bullish signal.

Ripple (XRP)

It’s been a great run since buying on the breakout of 80 cents. I’m holding strong waiting for an inevitable Coinbase listing, which should spike XRP nicely.

New Position: Stellar Lumen (XLM)

There is room for competition in most markets. Stellar is the Google Android to Apple’s iOS or Microsoft’s Windows. Both Stellar and Ripple should prosper in the coming year.

 

Trade Record: +2080% (since October 28, 2017)
– Fund forthcoming

– Key trades:
— BCH buy stop at $401
— IOT buy stop at $1.11
— XRP buy stop at $0.80
— XLM buy limit at $0.000036

The Christmas Crypto Crash of 2017

2017/12/28 Update:
After a run to resistance on the daily chart, #Bitcoin (#BTC) has begun to sell off as expected. We now have a head and shoulders top, which points to an extended sell off and a break of support at $12,000 and $10,700.

 

2017/12/24:
Watch out below! Everything will soon be on sale. Raise cash now and get ready to shop at a discount!

Charts are showing a sell-off in Bitcoin. The FUDers will cry foul, but the charts will be the ultimate arbiter of truth.

I’m in cash waiting for the carnage to settle. Buffet says to buy when there’s blood in the streets. Bring it on.

(Disclosure: I own XRP and USD. This is not a recommendation to buy or sell any currency.)

Fool Me Once, Shame On You; Fool Me, Can’t Fool Me Again

Bitcoin Cash’s momentum was so great that it became their worst enemy. Like a deft move from a Bruce Lee movie, Cash’s momentum came to a screeching half as Coinbase repeatedly halted BCH trading as if they were NFL referees reversing touchdowns.

Well, I paid attention during the Bush years (GWB), and I learned not to be fooled more than once. This time, I’m betting with The Man, and The Man likes XRP.

 

(Disclosure: I own XRP and USD. This is not a recommendation to buy or sell any currency.)

Crypto Market Monday: Bitcoin Gold & Market Pullback

(Disclosure: I own BCH and USD. This is not a recommendation to buy or sell any currency.)

The market is extended. I’ve raised 80% cash and will wait for entry on Dash, Ripple, and Iota at a lower price. If Bitcoin Gold maintains formation, I’ll buy in for an upside breakout.

Bitcoin Gold (BTG) Set to Breakout

BTG is set to break out. If it breaks higher, we’re looking at a 100% potential bump, from a breakout price of $320 to a target of $650. Conversely, if it breaks lower, this could get ugly.

Bitcoin Cash (BCH) is breaking formation for a pop or drop of 25%.

Update: BCH regained the trendline and shot upwards on Roger Ver’s YouTube talk.

I love Dash, but it’s too extended to enter. Entry point was last Monday. I’ll wait for a pullback, which we should get some this week.

Ethereum (ETH)
– Weekly: Extended

Iota (IOT) pending breakout from a triangle like the rest. Could break up or down.

Ripple (XRP)
– Stopped out for gains at $0.70
– Seeking Re-entry at $0.55

Buying Bitcoin Cash (Bcash)

I’ve been wanting to experiment with crypto assets lately. So here’s a quick chronology of where I started and where I ended up.

  1. Opened account with Coinbase and funded my accounts with a credit card. It’s easy to do and actually kind of fun.
  2. I became uncomfortable with the price action on both Bitcoin (BTC) and Ethereum (ETH). Also, Coinbase is not a trading platform. They have a 5% fee every time I make a change to my portfolio. Clearly that wasn’t going to work.
  3. I heard about Coinigy’s charts, which I love, so I started there.Here’s an example of a chart I made using Coinigy: https://www.coinigy.com/s/i/59f4fc9b9ed32/
  4. Coinigy is connected to what seems like all the exchanges, which meant researching exchanges. As a trader, liquidity and access to markets are important as well as security. While GDAX interested me because of the investors and FDIC-insured accounts, I settled on Bitfinex for the moment. They’re UK-based, don’t allow for much leverage to Americans, but they seem like they really have their act together.
  5. After seeing the charts on BTC and ETH, I realized that I wanted out. I did some reading on Bitcoin Cash (Bcash or BCH), looked at the chart and set a buy stop above resistance.

In crypto, there are two types of assets that matter and knowing which is which is important. The first is a speculative coin and the second is a coin with utility. The latter is what was expected originally of Bitcoin. Some transaction limitations have opened the door for other currencies. In parts of the world where Bitcoin adoption is gaining steam, processing time matters and that’s where Bitcoin falls short.

Bitcoin Cash, on the other hand, boasts a faster processing time and still includes the same supply limitations as Bitcoin (classic), meaning as more users come online, the price will increase in value.

Ultimately, as this technology matures, there will be a number of forks and opportunities for change and volatility. And that’s good if you’re a trader like me.

Stay tuned!