Swiss Franc Nears Support

The Swiss Franc currency had a healthy 12% rally from March of last year into its recent January 6th high this year. However, since peaking last month this currency has now slowly drifted almost 3% lower. How much lower will it go? Let’s check out the continuation chart. Price action is currently trading at the upper end of a significant volume at price (V@P) cluster. If we look at all volume traded between the March 2020 low and the January 2021 high you will find the most volume was traded between 1.1037 and 1.0890. This V@P cluster has a point of control (POC) around 1.0980, which is the price level where the heaviest volume traded during a specific time frame. Most of this volume was created from the sideways price action between July and December of 2020. This consolidation phase saw prices break to the upside in early December, which shows traders were adding to their long positions. I expect this area to serve as support on the way back down. Other factors that could provide further support to this zone are the 200 DMA and the 34 EMA wave on the weekly chart. I would look for long trades anywhere inside 1.1037 and 1.0890 with special attention to the POC ~ 1.0980. This potential support zone falls apart with a move below 1.0851. Potential risk with an entry at the POC and a stop @ 1.0850 would be 1,625.00 per futures contract. An aggressive upside target on this trade would be the recent high around 1.1441 for a profit of 6,887.50. But there are two large V@P clusters to deal with on any move higher, which could be good levels to scale out of any multiple lot positions. Stay tuned for more updates on Twitter.

Crude Oil Ready for Pullback?

Crude Oil has seen a nice rally from its April lows, but it will it continue? Let’s take a look at the continuation chart. Prices are currently trading inside a large volume @ price cluster between 51.00 and 57.40. This cluster formed during the downwards move off the October 2018 high when it traded sideways from December 2018 until February 2020. This could prove to be an area of stiff resistance. Friday saw the first sign of weakness since entering this zone on January 7th by forming a bearish engulfing candle. This also formed near January’s monthly R2 pivot point. Prices are also a bit overextended compared to its 34 EMA wave. I think we could see a correction back into this area between 47.30 and 49.10. This area also contains another volume @ price cluster that could provide further support. Let’s watch how the next couple of weeks unfold.

30 Year Bond Futures

The 30 Year Bond futures have reached an interesting area today. Price action found support at previous support from 6-16 and 8-28. Also, it found support on its VSCORE (measures standard deviations of VWAP anchored to 9-2-19) at levels of previous buying. Large Traders are also holding record short positions, which is bullish. Finally, this market could be forming a minor low pattern. If we get a push above 175 3/32, then we could see upside follow through. The resistance test would come between 175 12/32 to 177 24/32. Sometimes it can take just a few days for the COT extreme to play out. Sometimes it can take weeks. Either way, this is a market worth watching for more upside.

Check out my first tweet on this market here.

Euro Forecast

Commercials last went record short in the Euro currency back on August 25th. Sometimes you see an immediate sell-off and other times it takes weeks to see the market turn. This market went through a two month consolidation period and formed a head and shoulders top. This bearish pattern was confirmed on Tuesday with a close below the neckline. The downside target is around 1.1500. I think we will see prices reach this target, which also contains the 100 DMA and a 261 fib extension of an ABCD pattern formed with the right shoulder. If prices breach the 100 DMA, then I think we could see a move lower down to a volume @ price cluster around 1.1350-1.1250. I would look to sell any rally that tests the H&S top neckline. There is a strong volume @ price cluster just above it along with a downward sloping trend line, the 50 DMA, and the 34 EMA wave. This is a market to watch over the next few weeks.

Is Gold Ready for a Breakout?

Gold made a bearish engulfing candle on August 7th, which was followed by a severe 3 day sell off. Gold has traded in a sideways range ever since and is forming a symmetrical triangle pattern. The size of the potential breakout is equal the the size of triangle pattern from point 2 to the bottom of the range, which is roughly 140.60 points. We take this distance and apply it the the point it breaks either the downward sloping trend line for an upside breakout or to the the point it breaks the upward sloping trend line for a downside breakout. We would need a close above/below the trend lines for the pattern to be valid. Also, the breakout needs to occur before 9/25, otherwise it gets to far into the apex of triangle. This lowers the probability of the pattern. The big question is whether it breaks to the upside or the downside?

Case for the upside:

  • It has found support at the 50 DMA (yellow) during this consolidation, which is bullish.
  • It has found support inside the 34 EMA wave during this consolidation, which is bullish.
  • It has 8:13:21 EMA alignment, which is bullish.
  • The trend before this consolidation was bullish, which increases the probability of a continuation pattern.

Case for the downside:

  • October is traditionally a seasonal weak period.
  • The lackluster response to the recent FOMC meeting.
  • The most recent benchmark candle, from 8/11, is bearish and acting as stiff resistance.

Conclusion:

Gold looks poised for a breakout and I think the probability favors the upside. This market still has directional bias the the upside. However, let the pattern decide which direction. Whichever way it does go, it should offer a chance to re-enter on a pullback. Options might be a good play here.