Thursday, October 28, 2010

10/28 Forex

  • The U.S. dollar moves to bull phase against the yen (USD/JPY).
  • Cable to bull phase against the U.S. dollar (GBP/USD).

ppspps openupper pivotlower pivot
EUR/USD US$1.39 US$1.39 oct19 US$1.40 US$1.30
AUD/USD US$0.98 US$0.99 oct25 US$1.00 US$0.91
USD/CAD C$1.03 C$1.03 oct25 C$1.06 C$1.02
USD/JPY¥81 ¥81.43 sep27 ¥85 ¥82
GBP/CHF C$1.57 C$1.53 sep25 C$1.58 C$1.52
GBP/USD US$1.59 US$1.58 oct28 US$1.60 US$1.54
EUR/JPY ¥113 ¥107.82 sep14 ¥117 ¥108
AUD/JPY ¥79 ¥80 oct19 ¥83 ¥77
USD/CHFSF0.98 SF0.96 oct19 SF1.02 SF0.96
NZD/USD US$0.75 US$0.75 sep US$0.75 US$0.72
USD/MXN M$12.39 M$12.39 oct21 M$13.06 M$12.28

There is so much to dislike about yesterday's bull phase on USD/JPY that I scarcely know where to begin.

A large decline today has erased the signal-day's gains and has pushed the price to below yesterday's open and its low.

Neither the price rise on the signal day nor the decline on the day after managed to penetrate any monthly pivot level.

News reports attribute the decline to short-covering after the Bank of Japan lowered its growth forecast and said it would look anew at its monetary policies after the U.S. Federal Reserve acted.

Except for daytraders -- which I'm not --this sort of action moves beyond anything the signals I follow can handle.

So, what's a trader to do?

When in doubt, look at the price action. USD/JPY has been trading in a range for 11 U.S. market days, with a point just below ¥82 being the upper bound and just below ¥81 being the lower, with a couple of breakdowns spiking below the lower level.

To be bullish on USD/JPY, I would want to see the price break above 82 and stay there for a couple of days.

Also, the charts tells me that the bear side ought to be my default. Wednesday's bull signal came after a bear phase that lasted 25 U.S. market days and bought the price down 4.3%.

For my own account, I would not take the bullside in this pair.

The GBP/USD bull phase is a similar case.

The pair has not been been strongly directional this month, oscillating between the upper monthly pivot at £1.60 and the midline at £1.56. It's certainly possible to make good money out of oscillators, but I personally prefer strong trends.

True, today's price rise in conjunction with the signal has covered 1.2%, but that could easily be retraced the next day, especially in the absence of a trend. GBP/USD has been whipsawing madly, throwing off six signals since Sept. 30.

So for my account, I would tend to keep my money on the sidelines when it comes to this pair.

The preceding bear phase lasted seven U.S. trading days and brought the price down 0.7% -- not too shabby, all in all, but for all but the nimblest traders, the short profit would have been wiped out entirely by today's price rise.

The analysis uses the daily Person's Proprietary Signal, developed by John Person, and the monthly Person's Pivot, which he also developed.

These are black box signals -- the "proprietary" means that Mr. Person knows how they work under the hood, and I don't. But they have shown a fair degree of success in identifying good entry and exit points, and I find them useful.

On the glance, "pps open" means the price at the start of trading in the United States on the day the signal appeared.

I also refer to the Heikin-Ashia trend or candlestick. The Heikin-Ashi averages six days for high, low, open and close, signalling uptrend if the close is in the upper half of the range and downtrend if it is in the lower half. The signal for opening and closing positions require confirmation through a turn in the 8-day exponential moving average.

Tim Bovee, Private Trader tracks the trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

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