Tip from the Geek – Top 5 Trading Signals 08/04-11/2014
Fear Subsides As Focus Returns To Fundamentals
Last week the market experienced a wicked bull market correction. A handful of global and geopolitical events led to a basket of fear with enough weight to drag the market to long term support. The S$P 500 is now trading just below a long term trend line while other major US indices such as the Dow Jones Industrials and Nasdaq Composite are also at or near long term support. The thing for us traders to keep in mind is that each and every item on the list of causes for last weeks decline was a short term factor. What were those fears? Higher interest rates, Portuguese bank failure, economic data, Ukraine, and Argentina.
The fear of higher interest rates has always been there and has not changed overly much. We know they are coming and think they will be here by mid 2015 at the latest, providing economic trends remain the same. Economic data was a little weaker than expected but you know what? Economic data all year has been weaker than expected, or I should say hoped. In the end, the data remains the same, steadily growing and continuing on an upward trajectory. No one sector is strong, but all the sectors are strong enough to combine for a 2nd quarter GDP of 4% and expectations for roughly the same for the current and following quarters. The Portuguese bank failure has been contained, and even if it hadn’t the damage would have small for the global market albeit highly damaging to Portugal. The bank has been bailed out, split in two and now becomes water under the bridge. Speaking of water under the bridge the Argentine credit default did not even get a mention in the news I get on Monday morning.
This wee earning and fundamentals will regain control. Fundamentals show slow and steady growth that I see no end to. Earnings to date, for this season, are better than expected but have not received due attention. Global issues have been in control, maybe now earnings will. So far 76% of companies have reported earnings growth with an average of 9.7%, about 50% better than the estimates I remember.
1. Good Looking Time To Buy
SPX
Call/Put = Call
Entry = Below 1930
Expiration = One Week
My Trading Advice
The market took a pretty big dive last week but is now sitting at a pretty good looking entry point. The index is trading just below my long term trend line which has provided numerous entries for long term trades over the past two years. It has also provided numerous starting points for catching a series of shorter term trades. If there were ever a great place for a newbie to start following the market this is one. I could be wrong in my bullish stance, the market could always reverse, and even if it does this is still a great place to start.
The index is sitting on a long term support and trend line that has been in effect for over two years. The length of time the trend has been intact is one sign of it’s strength. In general long term trends can last 3 to five years without correction. The indicators are bearish, but at an extreme peak, oversold and consistent with previously observed trend line bounces. Current candle action, as of Monday morning, is also consistent with support leading to a trend line bounce. All this plus my fundamental analysis lead me to trade a call with a weekly expiry and entry below 1930. Short term traders need to be ready to start taking signals once the index breaks back above the trend line.
2. Gold Is For Traders
Gold
Call/Put = Put
Entry = Above $1290
Expiry = One Week
My Trading Advice
Gold is not for investors. Stocks are for investors right now, gold is for traders. I may have to throw in the towel on my long term bearish stance but I am still bearish in the near term. There is some signs of a bottom in gold but this doesn’t mean there still isn’t weakness, and if there is a bottom it is way down near $1200. Maybe $1225. In any case, fundamentals support lower gold prices, prices are below resistance and indicated lower. I am trading a put on gold with a target entry above $1290 and one week until expiry.
3. Oil At Support
Oil/USO
Call/Put = Call
Entry = Below $36.25
Expiry = One Week
My Trading Advice
Oil prices fell hard last week as well. Supply gluts overcame geopolitical fears, fears that have as yet to affect oil production, and helped to send oil to long term lows. Oil is now trading along a long term support and extremely oversold in the near and short terms, leading me to trade calls on the USO this week. My target entry is below $36.25 with one week until expiry.
4. Back Into The Yen
USD/JPY
Call/Put = Call
Entry = Below 102.55
Expiry = One Week
My Trading Advice
The USD has been gaining strength against the major international currencies as economic data supports growth, tapering and higher interest rates. The USD/JPY has moved up from long term support, broken out of a tight 3month range and moved up to test a short term resistance along the middle of a longer term range. The pair is indicated higher and will likely be affected by the BOJ meeting this week. I don’t expect the BOJ to do anything, but I do expect the US and USD to continue to improve. I am trading a call on the pair with a target entry below 102.55 and one week until expiry.
5. Apple Trending Higher
AAPL
Call/Put = Call
Entry = Below $96.00
Expiry = One Week
My Trading Advice
Shares of Apple have been trending higher ever since the split. The new lower price has allowed more traders to gain access to the stock. The indications are good for higher prices, the stock is now at support, so I am trading a call. My target entry is below $96.00 with one week until expiry.
More Tips by the Geek – 08/04-11/2014 Trading Tips On Forum.
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That’s it for this week; Michael will be here next week with fresh trading tips. Meanwhile, we will be testing Michael’s tips to see what kind of an “expert” he really is. All trading assets and expiry times featured in Michael’s trading tips are based on CommuniTraders Binary Options Trading Platform.
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