Tuesday, October 25, 2005

Buy signal on the Aud/Usd

Buy signal on the Aud/Usd, set up on Usd/Cad

Yesterday, I had the pleasure of hosting an active investor talk session.  During the session we discussed the fact that the Aud/Usd had a buy signal based on the MACD, 5 day SMA system. Below is a picture of the Aud/Usd (you can expand the chart by double clicking).  The signal played out well so far, I would consider adjusting my stop on this trade to about 10 pips below the low of the day (0.7470).  This tight stop is OK with the Aussie due to the low volatility..  After entering a trade based on the signal of the MACD, I am watching the MACD to cross back down or the CCI to create a divergence or cross a major line (100, 0, or –100).   Using whichever exit signal comes first.  

In the conversation yesterday, I discussed the fact that the USD/CAD had touched resistance but had not yet confirmed.  I suggested the idea of using a correlated currency pair, such as the Aud/Usd, to give a subtle confirmation to a correlated pair.  If the confirmation on the Aud/Usd were used to trade the Usd/Cad short, as indicated, you would already be up 100 pips on the trade.  If you missed this trade, I am watching to see if the Usd/Cad will break down out of the channel we discussed yesterday.  If the Usd/Cad closes below 1.1740, I would anticipate a move of an additional 150- 200 pips to about 1.1600 or even 1.1550.

BE CAREFUL.  DO NOT CHASE THE SCHOOL BUS.  If you have missed the ride wait for the next bus.

1 comment:

Blake Young said...

Based on my own analysis of support and resistance, the Usd/Cad touched the resistance in a downward channel. The short term pull back you reference, appears to me, bearish flag or a retracement to the resistance not a break of resistance. This is why I am waiting for a close below the 1.1740, roughly 10% down into the channel.