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A month has passed since I’ve written to you all. Writing these articles can be tricky business, last month I was speaking with you about a potential first higher bottom set-up on Gold. Of course, as history would have it, only a couple of days later Gold went into melt down. Firstly, the good news is the entry for the first higher bottom trade was not triggered! Secondly, Gold was close to making a low – all be it, close in terms of time and not price at that stage. Gold went on to make a low just a few days later. What I’d like you to check out is the volume on the day prior to the low and the day of the low itself (16 April 2013) and see what you think…
This month I’m going to focus on a sharing a set-up with you that has already come into play and represent one of my latest trades. What we are looking at this month is the classic cliché’, ‘Old Tops become, new bottoms’. I’ve said many times at Trading Tactics, ‘I want everyone to make money out of that saying, and when you do, remember me.’
Chart 1 is the daily bar chart for the U.S. Dollar Index (DX-SpotV) that I presented to you back in February. Here I was speculating with you about the U.S. Dollar Index sitting on a large 50% support level and looking ready for a potential rally. Well I pleased to say in that case we nailed it.
Chart 1 – U.S. Dollar Index (DX-SpotV) – Daily Bar Chart – Big Picture 50% Retracement Levels
Click to Enlarge
Moving on to more current market action and where things could be headed in the next few weeks. Chart 2 is the up to date daily bar chart for DX-SpotV in ProfitSource. There are several important points that I’ve marked on the chart, but I guess most of all would be the potential giant ABC pattern that may have formed.
Chart 2 – U.S. Dollar Index (DX-SpotV) - Old Tops, New Bottoms
Click to Enlarge
The basis of the giant ABC formation is:
| Point A |
78.92 |
1 February 2013 |
| Point B |
83.66 |
4 April 2013 |
| Point C |
81.78 |
16 November 2013 |
The theme this time around, as is the case with many of my articles – what have we got here in terms of price and time? The first element of price I’m going to keep really simple. Looking at ‘section’ analysis, 16 November 2012 (81.52) represents a recent confirm significant top. Point C for our giant formation is at 81.37 (1 May 2013) – that’s close enough to an old top offering us price support for a new bottom.
Taking a look at time, it is again old faithful, Time by Degrees. What I especially love when looking at giant ABC patterns is a time relationship between A, B or C. In the case we have 90 degrees between our giant Point A (1 February 2013) and Point C (1 may 2013). That’s great and what I’d call a potential time set-up.
Lastly to look at how to trade this set-up using a swing chart, once again it is nice and simple. On 9 May 2013 we had confirmation of the first higher swing bottom on the 1-day swing chart, with entry achieved at 82.41. This trade was not entered by 33% of the previous upside daily swing range, however considering the alignment of the big picture with the small picture, in this case my rules allow me to enter outside 33% on a first higher bottom trade.
We’ll know more next month about how things have unfolded. But for now the range from 1 February 2013 (78.92) to 4 April 2013 (83.66) represents a reference range for this new upward move and will be a large part of my pressure point calculations on the upside. All things going well there could be a couple more swing trades along the way, but for now – C’mon the bulls!
Until next month…
Noel Campbell
Professional Derivatives Trader |