For the Week of October 16, 2017
This weekly feature examines chart formations, along with technical indicators, of two to three commodity markets. Breakouts of these formations may lead to trading recommendations published by the Trade Spotlight advisory service.
Highlighting This Week’s Potential Breakouts:
There is a 1-2-3 Top Formation setting up for the December 2017 British Pound futures contract. The number one point is the twelve month contract high of 1.3695 (9/20/17). The number two point is the recent contract low of 1.3048 (10/06/17). Waiting for a retracement to setup a number three point. This formation is a trend reversal pattern. There is a 20-day Moving Average above the current market price acting as a potential resistance level. The Trend Seeker (a U.S. Chart Company tool to help identify a market’s trend) is down, though with a weak ranking. The Stochastic indicator is waning near the overbought level. Shorting the contract on a reversal of momentum and break of the number two point (or a pivot point low). The gap between the 20-day and the 50-day Moving Average is narrowing, a cross over of the two is a bearish signal. A stop loss will likely be placed initially above the 50-day Moving Average. The downside target is near the 1.2663 (6/21/17) session low, the first point on a lower trend line. That trend line or the 200-day Moving Average below may act as a stringent support level. The stop loss will be trailed in that case.
A 1-2-3 Top Formation is in place for the December 2017 Canadian Dollar futures contract. The number one point is the twelve-month contract high of .82930 (9/08/17). The number two point is the recent low of .79395 (10/06/17). The number three point is the recent pivot point high of .80465 (10/12/17). A break of the number two point triggers a short entry. The Trend Seeker (a U.S. Chart Company tool to help identify a market’s trend) is down and with a strong ranking. The MACD indicator agrees with Trend Seeker on the down trend. The Stochastic indicator shows strong momentum to the downside. A 20-day Moving Average (.80379) is set to cross over the 50-day Moving Average (.80327), that is bearish confirmation. A buy stop will be placed above the pivot point high and Moving Averages. The downside target is near the .77000 support level and near the 200-day Moving Average (.76977).
U.S. Dollar Index
Strongly correlated with the foreign currencies, the U.S. Dollar Index chart has a bullish pattern in place. The December 2017 U.S. Dollar Index futures contract setup an Inverted Head & Shoulders Formation. To visualize an Inverted Head & Shoulders Formation, imagine a person standing on its head. The Left Shoulder was formed by the low on August 2 at 92.230. The contract traded higher before selling off once again to create a lower low, the Head of the formation, on September 8 at 90.795. The contract rallied and made a new high at 94.100 (10/06/17) creating a neckline with the August 2 high. The Right Shoulder was formed on a pull back by the low on October 12 at 92.590. A break above the neckline triggers a long entry. Looking for an early entry technique to capture more of the potential upside movement. The Trend Seeker (a U.S. Chart Company tool to help identify a market’s trend) is up and with a strong ranking. The MACD indicator is currently flat however. The Stochastic indicator hooked up today. The stop loss will be placed below the Moving Averages and 92.590 (10/13/17) session low. The upside target is the potential resistance level at the 96.000 price level.
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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