Stainless Steel Rats
I’ve been serving up a healthy diet of Bollingers in the past few weeks and as a result we all have turned into lean and mean super stainless steel rats:
Congrats to everyone who continues to contribute and has been banking mighty coin lately. We are just getting started. Now let’s look at some charts – and yes, there are even more Bollingers – no worries, there’s enough for everyone. BTW, I have nothing against Keltner channels and there are times when a combination of both works like a charm.
Also, Scott and I are drooling over ‘cable’ these days – yes the GBP/USD currency pair – and I present a juicy setup you may want to consider:
Charts and commentary below for anyone donning a secret decoder ring. If you are interested in becoming a Gold member then don’t waste time and sign up here. And if you are a Zero subscriber it includes access to all Gold posts, so you actually get double the bang for your buck.
You’ve seen this chart before and let me explain what’s going on right now. There are various things that can happen from here and key is not to guess on a direction right now. As you can see we popped above the upper standard deviation line of my 25/2.0 BB. That was a great place to take profits and it still is apparently. What happens next is anyone’s guess: We may drop back to the moving average (the center line in the BB) or we may push toward and outside the upper 100/2.0 BB. If we do that is the place where I would want to take short positions. Fortunately we are only about 15 handles away, so if we paint an inside bar (plus a doji) today then it’s probably fair to grab a few selected shorts. Don’t go crazy just yet though – we are still just playing the swings.
It’s easy for the human brain to perceive patterns where there are none (and Scott touched on that issue as well in yesterday’s post). Thus my golden rule for painting trend lines, especially long term ones, is that a minimum of three touches are required. And we the daily Zero has now satisfied that requirement on both the down and upside, which indicates that we are inside an descending expanding wedge formation. And at least on the daily Zero long term this is not good news for the longs! So be cautious and remain nimble – don’t go too crazy on the long or short side (yet). We need more clarification first – the market is talking to us right now but it may be lying.
More Bollingers – this time on my precious metals chart. Silver snapped back as I expected while gold has remained more lackluster in following it’s shiny cousin. For market direction I would recommend that you look at silver right now as gold is less clear. I expect silver to run into heavy resistance at the MA line at around 28.87, if it manages to breach above that mark with confidence we’ll push toward 31.34.
Finally ‘cable’ which refers to the GBP/USD for historic reasons:
Before the advent of radio, the only means of communication across the Atlantic Ocean was to physically connect the continents with a transatlantic telegraph cable, which was operative in 1867. The exchange rate between the United States dollar and British pound is still colloquially known as “cable” by financial marketeers on account of the fact that the rate was originally transmitted via a transatlantic cable.
There you have it – and the name still sticks to this day. No matter what you want to call it – I think we have ourselves a pretty solid short setup here. I would however recommend a 2N stop. When chatting with Scott yesterday I gave him two BPC setups:
This is the 2N stop/pyramid setup on our BPC. Please note that I shifted the comma by one digit to the right as the calculator rounds for equities. I could probably produce one for FX as well but I think this works just fine.
Of course 2N based on a 155 pips ATR means a 310 pips stop and that may be too much for you. You can do one of two things: take a smaller risky position or wait for a higher entry (like earlier today) and get positioned from there with a 1N stop:
Either way you play it I think it’s a reasonable setup and my target is around the 1.59 mark.