Why I'm thinking of ignoring all my charts
- Charts indicate there are some opportunities on the horizon
- High-risk Brexit event Thursday legislates against risk taking
- Volatility likely to be extremely high
has the right idea by sitting this one out. Photo: iStock
By Clive Lambert
Let's go through them first of all, then I'll explain the sentence above.
1. Sell USDJPY. If you read my ramblings regularly on here you'll be more than aware that I've been harping on about this trade for a long time now. And it's been rather fruitful. We have been going down more or less relentlessly for most of June so far, and before that a good chunk of February and April, with only a few counter-trend moves splitting this up. Breaking 105.50 last week started a fresh leg lower and we're currently trading 104.33, shy of big resistances at 105.13 and 105.50. We have downside targets at 103.08 then 100.70. I'm still short and still thinking rallies should be sold.
2. Buy gold. This got a bit carried away with itself at the tail end of last week and posted a "Long Legged Doji" candlestick on the daily chart on Thursday after hitting a high of $1,318.90/oz. Again I've been on the long side of this now since we were down at $1,200-07 which I cited as a key area of support at the time. So it's been a "theme" that's played out well. I have a strong area of support at $1,280-85 and for now we're holding this. We saw some downside rejection this morning in this area and I thought that could prompt a rally but so far it hasn't.
3. Sell the Dax short term. Yesterday's big jump seems a little overdone and has come up against resistance at 9999.5 which is a 61.8% Fibonacci retracement level — something the Dax always takes notice of. I'm only thinking this can track back to have a look at the huge gap between 9,712.5 and 9,838 that was "created" by yesterday's very strong open. A break below 9,909.5 may be needed to trigger this sort of move..
So there's some solid chart-based trading ideas (well, I think so!) but I'm tempted to do nothing about any of them. Why?
Simple really: Is this week the week to be getting too heavily involved? We have Federal Reserve chair Janet Yellen talking tonight, and we have the EU referendum in the UK on Thursday and these events, especially the latter, will surely have a profound effect on volatility, and may well mean that charts go "out of the window". I'm pragmatic enough to put my hands up at times like this and say, as an old friend of mine often says, that "charts are for sailors"!
One footnote to this: Whilst fundamentals like Thursday's vote are big "risk" events that could sertiously mess up my charts, I do think technical analysis can serve a purpose. Look at the "bigger picture" charts, and know the big levels that have had a say in things like GBPUSD and EURGBP and the FTSE over the last few years... If nothing else it can serve as a good exercise in putting things into perspective.
Have a safe week, and make sure you're still around next week.
— Edited by Martin O'Rourke
Clive Lambert is chief technical analyst at FuturesTechs