The Landscape Has Changed — Here’s How
Three In A Row?
Possibly. Yesterday I mentioned that
HVT had come back to the market in a big way
after 2 weeks of relatively quiet trading. The unique thing was that the
trading was more robust in the afternoon session, not the morning. While I can
offer no explanation, nor really care, the fact is, the trading has been
excellent. Naturally HVT, like all trading styles, has had to make some
adjustments over the last year or so, the approach now is to not rely so heavily
on any 1-2 stocks each day, but to find the stocks that are in “play”.
Yesterday’s candidates were UNH &
MTG.
While MTG was a classic “buy the pull-back in the
uptrend HVT set-up” throughout the day, the UNH, at least on the first trade of
the day, required some tape reading skills. Tape reading simply requires
observation, it is not difficult, but does require persistence.
The S&P’s offered quite a few nice moves both
sides of the 50 EMA (1126) which certainly helped with the volatility.
So what is the plan today? Well, naturally, if
the price action remains the same you should continue to trade assertively and
take full advantage. However, it is really hard to know which stocks will be in
play ahead of the opening, although recent experience has shown that stocks with
earnings and or other “one-off” news headlines move quite well. This has been
the biggest change to HVT in the last year, seeking the action, rather than
waiting patiently for the action to come to you. The market is simply too
rotational at present to not be proactive.
^next^
FX (Forex)
The FX markets, after a real fireworks display on
Tuesday and Wednesday is beginning to shape up again and showing some
potentially nice short set-ups in the making. The action is being driven
primarily by the interest rate scenario here in the US. The economy and
inflation appear to be perking up and as a result, pricing models and forecasts
have been turned upside-down. Suddenly the ugly duckling Dollar is in demand.
Witness the dramatic moves in the main Dollar pairs over the last few days,
GBP, EUR,
JPY…simply stunning.
So now what? Well, Greenspan testifies next
Wednesday, April 21 and will likely provide a viewpoint from the Fed regarding
the recent bout of economic data. The market has already made its intentions
known: a rout in the bond market, weaker equities and a rebound in the Dollar.
However, do one or two economic reports really make for a change in trend? As a
trader, these answers, while interesting to discuss and consider, cannot play to
large of a role in ones decision making process. The bottom line is that the
landscape has changed, what were once long set-ups are now short set-ups. One’s
opinion cannot cloud this new reality. Keep and eye on these pairs over the
next few days as possible short set-ups. These are not meant to be quick
trades, they make take several days to play out or even a few weeks.
Shorts:
EUR/CHF
EUR/GBP
GBP/JPY
EUR/CAD
Also keep an eye on the British Pound,
GBP/USD. On Wednesday the neckline of a head
and shoulders top was broken on the daily chart. It will likely re-test this
level (1.79) before resuming a move lower. This is a very solid technical
pattern and has proven to be consistent. Refer to Thomas Bulkowski’s
Encyclopedia of Chart Patterns for
further explanation regarding statistical data on head and shoulders patterns.
Enjoy the weekend.