Friday Weekly Round Up 28/08/2020

*Reviewing this weeks trading, what went right/wrong and what trades I am looking at next*

Welcome back to the blog! Happy Friday, I hope your week went well and you made some good trades. This week has been quiet for me, there has not been much that I like the look of in terms of new trade set ups so I have remained patient and sat on my hands.

I have continued to hold my FTSE100 short position from the 6300 level and only entered one other new trade this week which I will now show you. I will also show you two other potential trade set ups that I am looking to enter over the next few days/weeks if the charts align with what I want to happen.

GBPJPY short trade – closed at a loss.

GBPJPY 1 hour timeframe chart – short trade entry

This GBP short trade was the only new trade position I entered this week and unfortunately it did end up as a losing trade. The chart above show the trade entry.

This was an intraday pattern and support/resistance zone trade. I shorted GBP after I saw multiple rejections of the 140.00 key price level which had been acting as a resistance for price for around 2 weeks now. There was also an expanding wedge pattern that was forming which you can see drawn on the chart.

My plan was to short GBP down to the next intraday support zone around 138.500 and potentially even lower where the lower wedge trendline was situated. The actual trade entry looked perfectly times because price dropped around 30 pips right after I entered the trade but around 3 hours later GBP gained some serious bullish momentum. The 140.00 price level was broken price went on to climb more than 160 pips through the rest of the day.

GBPJPY 1 hour timeframe chart – after trade stopped out.

As you can see on the chart above, price broke above 140.00 with strong bullish momentum candles. Price is now looking like it is reversing but as it has made a clear higher high and has broken the resistance zone, I imagine there is potential for the intraday trend to stay bullish. I will be looking for a retest of the 140.00 price support/resistance zone and bounce and higher low to form, this could be a great long trade entry.

FTSE100 short trade – still holding.

FTSE100 index 4 hour timeframe chart.

I have spoken about myst technical and fundamental views on this stock index multiple times in previous blog posts. My trade entry was a short at the 6300 resistance zone which is the upper limit of the current consolidation that price is stuck in and I am still looking to hold this trade in the hope of catching the next breakout.

This week has seen multiple tests of the 6000 price support zone and I do believe there is still a strong case for it being broken any time soon. On the 4hr chart there is downside pressure with lower highs being made and the 50EMA is trading below the 200EMa which supports a bearish bias.

FTSE100 index daily timeframe chart.

Looking at the higher timeframe, daily price chart you can see that price is now back below the daily 50EMA and it is starting to “rollover”. The sideways price action is still present but I do believe that there is enough bearish pressure for the 6000 price support level to be firmly broken soon.

Volatility Index – potential future trade.

Volatility Index VIX daily timeframe chart.

The volatility index has lived up to its name this year and been very volatile. Price climbed almost 800% from the yearly lows to the yearly highs when the coronavirus pandemic first occurred but since then it has continued to drop off.

The VIX is now back down to fairly “normal” levels for the year so far but 22.0 – 25.0 on the VIX still means that implied stock market volatility is at the upper boundaries of last years trading. Technically that chart above shows there is some serious squeezing of prices on the daily timeframe and price is now trying to break out but it isn’t doing much right now. I think there is still a good chance that should a second wave of the virus arrive or central bank stimulus dies down and stock markets begin to die once more than VIX long trades will become very profitable.

If you read my previous blog posts on trading market volatility you will learn that U.S. stocks (the S&P500 in particular) and the VIX are almost perfectly inverse over the long term. You can find the blog posts below.

In the short term I think there is potential for a short trade next week. We have the NFP employment data for the U.S on Friday and implied volatile could continue to decrease. Initial jobless claims this week (chart below) resumed the negative trend after last weeks blip and this is therefore showing that net weeks NFP data could be positive.

US initial weekly jobless claims

A reduction in unemployment levels is good for the economy and that should push stock prices higher once more which in turn should see stock market volatility (VIX) sell off in the near term. However, there does become a point where volatility can being to rise along with stock market prices. This has happened before and will happen again because there cannot be zero volatility in the stock market and even if implied volatility is low, historical volatility will still be present and that in turn will push VIX higher.

Spot Gold (XAUUSD) – potential future trade.

After the last few weeks of serious buying pressure, Gold prices have started to consolidate in a wedge shaped range between $1880 and the all time highs at $2075 per ounce. The wedge pattern is shown on the chart below and as you can see, today price is currently retesting the upper trendline. As it stands, I do believe the price action and trend should still be considered bullish because price is yet to break the bullish trendline that is supporting price. The intraday EMA’s (4hr and above) are all aligned in a bullish trend with the 50EMA trading above the 200EMA.

Spot Gold 4 hour timeframe chart.

In the long term, gold prices tend to rise in times of uncertainty and we all know this. When stock markets first sold off in the coronavirus pandemic, gold prices began to rise because it is a good safe haven. I have spoken about this in many previous blog posts. However, when stock markets began to recover in the second quarter of 2020, Gold prices continued to still climb.

This is because of the U.S dollar weakening. As I mentioned in my previous blog post, it doesn’t matter so much that the federal reserve are printing dollars because every other central bank is doing the same so it has a reduced effect on dollar inflation vs other currencies. However, Gold is traded in U.S dollars and unlike other currencies, Gold can not be printed. Therefore, as the supply of dollars does increase, naturally Gold prices will rise as it is the perfect inflation hedge and that is what we are seeing right now.

I believe that in the long term Gold will continue to rise in value against almost all currencies, especially the majors such as USD, Euro and the Pound as central banks continue to increase money supply to keep the various economies “afloat”. This is simple supply and demand economics. Combining that with the current technicals being shown and I think the breakout of the current consolidation will provide a great reward:risk entry at some point in the near future.

Many Wall Street analysts agree with this sentiment.

  • Goldman Sachs raised its target for Gold to $2300 per ounce.
  • Commonwealth Bank of Australia predicts $2500 per ounce as a long term target.
  • Bank of America raised its 18 month price target to $3000 per ounce.

End note.

The purpose of this blog post was just to catch up with you all before the weekend and also try and show you that the real life of a financial markets trader isn’t just constant buying and selling and making trades day in and day out. There are quiet weeks where trading strategies will not produce any trade entry set ups. There are also weeks where you might not make any money and that is okay, you should expect this to happen.

As you now know, I entered only one new trade this week and it was a loss. This is okay because as you now also know, I am still holding a FTSE100 short trade that has produced returns far greater than the loss on the GBPJPY short and this is why making sure your reward:risk ratios are greater than 1 is very important.

If you are interested in learning my personal trading strategies, please consider my Mastering The Markets – Retail Trading Course. Head over to my Trading Education page to check out all of my education packages and the deals available.

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DISCLAIMER: None of the information posted on this site is to be considered investment/financial advice. Trading is high risk and you should only trade with money you can afford to lose.

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