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Short term
Trade view / 30 September 2016 at 9:43 GMT

A trilogy of trades to cap off Q3

Trader / Saxo Capital Markets Pte Ltd
Singapore
Background: Light sweet crude

Oil prices jumped on September 28 on news of a sideline Opec deal in Algiers but the rally may prove to be short-lived. 

Price action today in Asia was muted and capped within a $0.30 range as the price tests the 100-day simple moving average at $47.6/b, which capped the gains seen in oil just three weeks ago on September 9.

The %K line of the Stochastics (10,3,3) has now moved into overbought territory and we anticipate a bearish crossover in the coming days should oil prices turn to the downside. 

The Ccommodity channel index currently reads at 131.95, again putting prices in overbought territory. The CCI has performed well as a leading indicator of the decline in light sweet crude oil in June and August of this year.

Parameters

Entry: sell CLX6 at 0.5 ATR from market, i.e. 47.17 – 0.5(1.64) = 46.35, GTC
(CLX6 = Light Sweet Crude Oil (WTI) – Nov 2016).

Stop: one average true range away, i.e. 46.35 + 1(1.64) = 48.00.

Target: $43.04/b , the 76.4% Fibonacci retracement of the move from the August lows to the August highs.

Timeframe: two to three weeks.

Risk/reward ratio: 2.01.

Slide 1

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Source: Saxo Bank 

Background: USDNOK

A related trade to crude oil would be to buy USDNOK.

USDNOK bounced off the all-important psychological support of 8.00 on September 29 and has continued to rally today.

The %K line of the Stochastics (10,3,3) has now moved into oversold territory.

The pair seems to be capped by the 75-day simple moving average, which we can use as our take-profit level. The 75-day SMA stands at 8.3155 today.

Parameters

Entry: Buy USDNOK at market, 8.0438.

Stop: 7.9680, just below the May 2016 lows.

Target: 8.3155.

Timeframe: two to three weeks.

Risk/reward ratio: 3.58.

Slide 2
Source: Saxo Bank  

Background: AUDNZD

We have seen AUDNZD rally some 3.5% since the middle of September.

The price action today has given up all of Wednesday’s gains, suggesting that the initial breakout of the downward-sloping trendline resistance may be a false break.

Stochastics (10,3,3) had a bearish crossover on September 27 in overbought territory, indicating that the upside momentum has declined.

Parameters

Entry: sell AUDNZD at 1.0483 on re-entry into the down channel.

Stop: one ATR away, i.e. 1.0483 + 1(0.0077) = 1.0560.

Target: 1.0236, the low of 15 September 2016, or when the stochastics next exhibit a bullish crossover – whichever is earlier.

Timeframe: two to four weeks.

Risk/reward ratio: 3.21.

Slide 3
Source: Saxo Bank   

— Edited by Michael McKenna

For more on forex click here; for commodities, click here.

Non-independent investment research disclaimer applies. Read more
30 September
AMIB AMIB
Thanks Edmund. Great stuff, as always!
30 September
Edmund Liu Edmund Liu
Thank you for the support AMIB
30 September
Crispee Crispee
technically CL and EURNOK still look attractive but closing in on ur stops so wondering your thoughts now?
30 September
Crispee Crispee
USDNOK :)
30 September
John Roberti John Roberti
Fundamentally, I agree that oil has to go down in the next weeks but today I did not follow because I wad afraid of short covering for month end! (and apparently it did happen) Let's see what will happen on Monday
30 September
Edmund Liu Edmund Liu
Dear John, thank you for your comment. Well yes it seems shortly after I posted oil prices started to move up. Which is why I placed the sell entry order below the market as a matter of conservatism. I do believe it is becoming at attractive short opportunity next week. Good luck
30 September
Edmund Liu Edmund Liu
Dear Crispee, thank you for your comment. For USDNOK looking at the intraday chart it seems it is still well supported at 7.9800, having tested this support 5 times in the last 2 hours. So it may still be an opportunity to go long at current levels (7.9880). Stop 1 ATR (0.0916) away @ 7.8964. Good luck : )
01 October
ajith ajith
I think we can sell two crude in the range 48 $ to 48.30$ with stop loss just above 50$. For a target of 45$ and 43$
03 October
Edmund Liu Edmund Liu
Dear Ajith, sure that is possible as well, i.e. to sell at the current levels. Alternatively would be to sell only after prices have broken down

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