For the Week of January 28, 2013
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:
March 2013 Australian Dollar
The March 2013 Australian Dollar contract recently broke out above the previous contract high of 1.0520 (10/05/12) but failed to continue upwards. The market since has sold-off and is trading along a lower Trend Line. There are touches at 1.0025 (10/08/12), 1.0285 (12/27/12), and Friday’s low of 1.0365. The Trend Seeker (a US Chart Company tool to help identify market trend) is Neutral . A close below the lower trend line (1.0365 for Monday’s trading session) and the Trend Seeker flipping to a Downtrend will trigger a new short entry setup. The MACD indicator crossed over to bearish and done so above the base line. The Stochastic indicator, however, shows a market that is already “over sold”. A surge in Momentum (ADX is at 19.90, just below the 20.00 confirmation level) could keep the pressure on the downside. The market is trading below both a 20-day Exponential Moving Average and 50-day Simple Moving Average. A stop loss, depending on entry price and risk tolerance, can go above these Moving Averages. A downside target could be the first touch on the Trend line at 1.0025.
March 2013 U.S. Dollar Index
The March 2013 U.S. Dollar contract has formed a Pennant Formation. A Pennant Formation consists of two converging trend lines in a market with consolidating prices. There are touches on the lower trend line at 79.015 (12/19/12) and 79.405 (1/14/13). There are touches on the upper trend line at 80.995 (1/04/13), 80.790 (1/10/13), and 80.225 (1/24/13). Friday’s trading session high (80.175) touched the upper trend line but the market sold-off. The Trend Seeker (a US Chart Company tool to help identify market trend) is Down with an Extreme ranking. A close below the lower trend line (79.650 for Monday’s trading session) will trigger a new shorty entry setup. Both the MACD and Stochastic indicators appear to be rather Neutral. This coincides with the market trading near the apex of the Pennant Formation. A potential stop loss may need to be tight just above recent highs at 80.275. The potential downside target is the twelve month contract low of 78.945 (9/14/12).
March 2013 Soybean Meal
The March 2013 Soybean Meal contract has a Momentum Entry Technique setup. The Trend Seeker (a US Chart Company tool to help identify market trend) is Down with an Strong ranking. A break below the low of 408.0 (1/24/12) will trigger an entry to the downside. The contract is also forming an Inverted Fish Hook Formation as long as recent contract highs are not taken out. The roll-over to the downside will coincide with the M.E.T. breakout. A potential stop loss can go above the recent highs at 425.3, which is also above both a 20-day Exponential Moving Average and 50-day Simple Moving Average. A short-term downside target is the low of 392.4 (1/11/13). A longer-term downside target is the 350.0 trading level where the market consolidated roughly last March through June.
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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