TRADERS SUMMIT – SUMMARY
Dear Tech Charts members,
On the 27th of September, I gave a presentation at the Online Traders Summit. You might have missed the opportunity to attend. If you have registered for the event a recording will probably be sent out.
I wanted to summarize the main points I’ve discussed at the online event also you can find attached the charts I’ve shared with the attendees. You might find these long-term charts interesting. Though, the first part of the presentation where I discuss the general concepts for classical charting might be familiar if you have been a long-time Tech Charts member.
General concepts:
Chart patterns develop in similar geometric forms on different instruments. The way to approach a symmetrical triangle on a commodity price chart is the same as a symmetrical triangle that forms on a FX price chart.
There are several classical chart patterns. I focus on select few (in total 8). Mostly those chart patterns have horizontal boundaries. The only diagonal chart pattern I analyze and highlight is the symmetrical triangle.
Breakouts from chart patterns with horizontal boundaries are more reliable when compared with breakouts from chart patterns with diagonal boundaries. This is because once we see a breakout on a symmetrical triangle, price finds immediate resistance at the minor highs. Whereas with breakouts above horizontal boundaries, price clears all minor highs, allowing the price to trend with the existing momentum.
I use 200-day average as a trend filter. I like to see breakouts from bullish continuation chart patterns that take place above the 200-day average. Added to this, a breakout to all-time highs is a much more reliable setup. Breakout to all-time highs are the path of least resistance.
Breakouts that take place after several tests of chart pattern boundary will have so much energy built in that once the breakout takes place price is more likely to produce a steady uninterrupted trend period.
It is important to monitor chart pattern development in respect to overall price action and existing trend.
A launching pattern is a shorter-term duration classical chart pattern that forms as part of a larger scale chart pattern. Breakout from both chart patterns increases the conviction in the trade idea. It is always better to find confirmation from two bullish chart pattern breakouts.
The longer the chart pattern the stronger the period that follows the breakout.
A strong breakout is not a reason to wait for a pullback. In fact a strong breakout is a sign of impatient buyers entering into position. Such breakouts might not offer a pullback opportunity.
Breakout above more than one technical resistance is always better than a breakout above a chart pattern boundary. If price is clearing a long-term average, trend line and/or chart pattern boundary at the same time, this is a higher conviction setup and breakout signal.
Key takeaways:
USD Index might be forming a H&S continuation chart pattern similar to the price action between 1997-2000. Though this interpretation can be premature as it is still at the early stages of forming the right shoulder of a possible H&S continuation.
USD/SGD has a better defined horizontal boundary that can become the neckline of a multi-month long H&S continuation chart pattern.
USD/JPY is going through a historical low volatility condition. Usually such setups are followed by a surge in volatility and strong trend periods. If the chart pattern (larger scale) is a H&S bottom reversal, the right shoulder can be confirmed as a symmetrical triangle continuation. (IF) we are going to see Global USD strength, USDJPY can be the center point of discussion.
EUR/USD formed a steady and well-defined downward trend channel. The upper boundary at 1.19 levels will be the defining point for a possible trend reversal.
Emerging Market currencies continue to lose against the USD in the long-term. USD/MXN continues to move higher after completing two symmetrical triangles.
USD/BRL continues to remain weak after completing a cup & handle (2016-2020) and possibly a much larger cup & handle (2002-2020).
USD/ZAR continues to remain weak after completing a 4 year-long cup & handle where the handle part acted as a symmetrical triangle. Latest strength in ZAR can be a pullback towards the chart pattern boundary at 15.75 levels.
USD/RUB is possibly preparing for another 20-30% devaluation with the ascending triangle chart pattern in focus.
USD/INR stronger compared to other EM currencies, remain in an uptrend, resulting in INR weakness after the completion of cup & handle continuation chart pattern.
USD/KES, for those who manage assets in Sub-sahara africa, can be prone for a devaluation as well. Price completed a well-defined rectangle chart pattern and pushed to all-time highs.
