For the Week of December 03, 2012
The Trade Spotlight advisory service applies the GBE trading methodology (buying or selling commodity contracts based on breakouts of chart formations and technical indicators) to identify one to two trade setups per week.
Highlighting This Week’s Potential Breakouts:
December 2012 E-Mini NASDAQ
The December 2012 E-Mini NASDAQ contract closed above an upper trend line on November 23. The highs making up the trend line are at 2840.75 (10/05/12), 2778.75 (10/17/12), and 2691.75 (11/06/12). The market has been rallying since testing, and failing, to close below previous support just above 2500.00. The current market price is a move of roughly 50% of the sell-off from the twelve month high made on September 21 at 2871.25 to the recent low made on November 16 at 2492.00. However, the Trend Seeker (a US Chart Company tool to help identify market trend) is still in a Downtrend. The MACD, Stochastic, and ADX indicators are already bullish. A change in the Trend Seeker to an Uptrend and a break of the 2694.00 (11/02/12) high (and the 50% Fibonacci Retracement of 2681.88) will trigger an entry to the upside. In addition, the chart has the makings of a Inverted Head and Shoulders Formation as well. I’d like to see pull back from the neck line before a break out to add confirmation to this trading formation.
December 2012 Japanese Yen
The December 2012 Japanese Yen futures contract has been selling-off since the Japanese government approved two stimulus packages in a little more than a month. The market is in a Downtrend according to the Trend Seeker, the MACD and Stochastic indicators are bearish, and the market is trading below 20 day and 50 day Moving Averages. Despite the MACD indicator crossing over to Bearish below the baseline there appears to be solid Momentum with ADX reading 36.69. A break of the 1.2074 (11/23/12) low will trigger an entry to the downside based on the Momentum Entry Technique (M.E.T.). A potential initial stop loss can go above the recent retracement of 1.2243 (11/26/12). A potential downside target can be a Wave Projection of 116.67. Although a risk of 169 points may be a bit much it sets up a 2.5:1 Reward to Risk ratio.
January 2013 Soybean Oil
I’m still bullish the January 2013 Soybean Oil contract. I was looking for a break of the November 8 high of 49.57 to enter a long entry based on the Momentum Entry Technique (M.E.T.). The market broke above that price on 11/26/12 but the Trend Seeker did not change to Uptrend. It is however now Neutral. Perhaps this was a prudent decision as the market has pulled back to the breakout price which may act as support. The MACD indicator crossed over to bullish below the baseline and the ADX is 23.20. Both of these taken together signals potential Momentum to the upside. I am now looking for a break of the 50.74 (11/29/12) high and Trend Seeker changing to an Uptrend to trigger an entry to the upside. A potential stop loss can go below potential support at 49.53 (11/30/12). The initial target is still the high of 52.85 (10/19/12) but a longer term target could be the September 4 high of 58.69.
STOP ORDERS DO NOT NECESSARILY LIMIT YOUR LOSS TO THE STOP PRICE BECAUSE STOP ORDERS, IF THE PRICE IS HIT, BECOME MARKET ORDERS AND, DEPENDING ON MARKET CONDITIONS, THE ACTUAL FILL PRICE CAN BE DIFFERENT FROM THE STOP PRICE. IF A MARKET REACHED ITS DAILY PRICE FLUCTUATION LIMIT, A "LIMIT MOVE", IT MAY BE IMPOSSIBLE TO EXECUTE A STOP LOSS ORDER.
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