For those who know me, I am heavily technical with my trading however there are often times I do pay attention to the news/fundamentals. Most recently has been when the Japenese government (and not too long ago the Swiss) announced their intent to aggressively weaken the JPY. This has caused me to avoid selling JPY and JPY pairs even when there are excellent technical setups. I simply want to make my trading as profitable and easy as possible, and this is always on the side of a government, not against it.
[subscribelocker] Another person I want to be trading with, and it may come across as a bit of a shock to many of you, is Santa Claus :). One of the best-known seasonal events on the financial calendar is the Santa Claus Rally. This is a rise in stock prices in the month of December, generally seen over the final week of trading prior to the new year. Investors consider price gains during this period as Santa’s gift to financial markets.
Influencing factors include upbeat investor sentiment, lighter trading volumes, encouraging economic events, expectations for strong fourth-quarter earnings triggered by consumer holiday spending and the investment of year-end bonuses. This all adds to a ‘risk on’ approach and some strong gains across the stock markets. To see how powerful this has been over the past 20 years take a look at the December market returns chart below. Almost 80% of the time, did the S&P500 achieve a positive return in December. And as stock markets heavily correlate, you will find the FTSE100 doing a very similar thing.
This is incredible probability of a successful return on your stock market trading in December, especially if you combine a technical approach to entering. And the FTSE100 looks very interesting if we are provided with a buy signal over the next week. So keep your eye out for your technical clues which suggest a move higher is imminent. It is approaching key trend line support, is starting to show divergence, and is about to hit a critical fib number.
Many of you have asked me to provide some examples of the best technical trades from previous weeks so please see a few below (I will aim to do this every week as it is a great way to learn):
NZDUSD LONG (29.11.13 setup day)
- Key horizontal support level reached (from previous historical resistance)
- Big level hit at 0.8100
- Doji buyer bar reversal price action
- Daily stochastic divergence
- Weekly hidden divergence
- 50% Fib retracement (from June 13 low)
- Fundamental support from NZD government confirming increased interest rates early next year.
- Position has near term resistance to break through, but if cleared, 0.8840 (2011’s major high point) is a realistic and sizeable target.
- Price retraced 50% from July 2012’s major low.
- Weekly and daily stochastic divergence
- Soft level of horizontal support at the big 0.8300 level
- Beautiful inside buyer bar created off the support
- Price is now running back up to trend line resistance around 8460 level (where sellers may turn back up again)
- Room still available to make a +3% return on the trade and to then look for a short opportunity if provided with enough evidence.
- 50ema, Trend line and horizontal resistance came together to produce a firm ceiling to hold price down
- 2 reactions to the level but price eventually sunk
- Bearish reversal bar formation
- Subtle hidden divergence
- Major AUD weakness across the board with Aud government hinting about weakening their currency.
So, I hope this blog has helped. It is not long until Christmas and the end of the calendar year. I am sure that you, just like me, are keen to finish the trading year strongly so keep your eyes peeled for those high probability technical setups which can finish you strongly for 2013 and set you up nicely for 2014.