The Forex Chronicles

2 Inside Bar Price Breakouts on Brent Crude in May and June

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Recent Price Action

As an investor in a few oil stocks, I tend to watch the oil price very closely, and it is fair to say that the price of this commodity has been very volatile so far in 2019.

The price of Brent crude fell sharply in the last few months of 2018, but it has since rallied from a low of just over $50 to around $75 at the end of April.

After that, it then fell back towards $60 as we entered the summer, but it has once again bounced back as a result of renewed tensions in the middle east.

Inside Bar Breakouts

Ordinarily it would be very difficult to predict these large price swings, but one way you can potentially profit from these price movements is to wait for inside bar breakouts.

These occur when you have a large candle on the daily chart, followed by three or more candles / bars (the more the better) that all trade within the range of the initial candle, and then a breakout candle where the price closes outside the range of this candle.

These breakouts are generally very reliable and will often have a lot of momentum behind them, and there have been two of these in the last month alone.

Brent Crude Inside Bar Breakouts - May and June 2019

As you can see from the chart above, the first one occurred at the end of last month. On 23 May the price dropped below the 200-day moving average, which is significant in itself, but then the price traded within the range of this strong downward candle on five subsequent days (if you include the Sunday trading session).

So this was a good period of consolidation, and when the price of Brent crude subsequently closed below the range of the initial candle one week later, this would have been a great opportunity to open a short position.

In this particular instance the price went from around $64.62 to a low of around $59.27. Therefore it would have been a very profitable trade.

The second inside bar breakout has occurred more recently, and is still in progress as I write this article. After dropping back to the $60 level, there was a strong bullish candle on 13 June followed by three inside bars.

On this occasion it took a while for the price to close outside the range of the initial candle, but there was eventually a strong bullish candle that confirmed the recovery, and the price did move over 100 points in profit (and is still in progress) after closing at around $64 on the breakout.

Closing Comments

Once again this proves the overall effectiveness of inside bar breakouts, and as I have demonstrated in several posts previously, these breakouts are worth looking out for on the daily charts of many different markets, whether it’s currencies, commodities or cryptocurrencies, for example.

Generally speaking, the longer the price trades within the range of the initial set-up bar, the stronger the breakout. You just need to be patient enough to wait for them to occur because they don’t happen that often.

MACD Divergence on the EUR/CHF Pair in 2019

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Introduction to MACD Divergence

The MACD indicator has always been one of the most widely used technical indicators because it tends to follow the trend and the general price movement of a particular market very well, and can be very effective at indicating a change of trend when the two lines cross.

Furthermore, when you combine the MACD indicator with the MACD histogram, you can get some very powerful signals on occasions.

One of the most powerful signals is when the price of a particular market is making new highs, or is making two or more peaks at the end of an upward trend, for example, but both the MACD and the MACD histogram are failing to make new highs.

This will often indicate that the trend is running out of momentum, and it might be worth opening a short position on any big downward price move or any real sign of a reversal.

Real Life Example on the EUR/CHF Pair

If you take a look at the daily price chart of the EUR/CHF pair below, you will see that we had a classic MACD divergence pattern on this particular pair in April and May:

EURCHF MACD Divergence in April and May

The three arrows on the chart indicate the peaks at the top of the upward price trend, and you can see that on each peak both the MACD and the MACD histogram failed to make new highs.

Therefore when the price failed to make another new high and actually moved strongly below the 200-day exponential moving average (indicated by the red line), this would have been a good opportunity to open a short position.

As I always say, you always want to be trading when the odds are firmly in your favour, and when you get a strong MACD divergence pattern like this one, this is a good example of a high probability trade.

If you had entered a short position on the closing breakout candle at around 1.1290, you could have made up to 170 points before there was a reversal.

A Word of Caution

I want to finish by saying that you sometimes need to be careful when looking for divergence patterns, and should only look for the very best set-ups.

Staying with the EUR/CHF pair, the price continued moving downwards, and you can see that there was divergence on the MACD histogram once again, indicating that the new downward trend may have been running out of momentum, but the MACD indicator continued to make new lows, so this would have been a more risky trade.

Indeed you would actually have lost money if you had gone long on the MACD histogram divergence alone, which is why it is better to wait for divergence on both the MACD indicator and MACD histogram when trading forex pairs or any other markets.

eToro Trading Update – May 2019

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My Worst Month Yet – Down 11.32%

I started last month’s update by saying that this had been my best month yet because I was up 9.61% at that time, and I actually ended the month up 9.31% in the end.

However I’m sad to say that all of those gains have been wiped out because May has been my worst month yet.

At the time of writing I am currently down 11.32% this month, and am now only up 0.83% for the year, which is a poor performance.

SteadyProfits eToro Stats For May 2019

Reasons for the Heavy Losses

The main reason for my heavy losses is because of the whole mess surrounding Brexit. With Theresa May resigning and the threat of a no-deal Brexit coming back once again, my portfolio has taken quite a beating because I am only holding UK stocks right now, and most of these are heavily susceptible to any adverse news regarding Britain’s exit from the EU.

The markets hate uncertainty, and unfortunately there has never been so much uncertainty in the British economy. At the moment we even don’t have a prime minister, and we still don’t know if there will be a soft Brexit, a no-deal Brexit, or even a second referendum.

In addition to this, we have also had the trade war between the US and China, which has weighed heavily on the markets.

As a result of this, the stock markets have fallen, with the FTSE 100 going from over 7500 to around 7140, before recovering to its current level of 7270.

I’m not going to make any excuses though. Shares go up and down in the short-term but good quality companies generally grow their earnings and their dividends every year, and so I’m not overly concerned.

Dividends Received

I haven’t been actively trading that much this month, choosing instead to sit on my portfolio of stocks and wait for my stocks to recover, and it has also been fairly quiet on the dividend front as well.

This month I just had one stock going ex-dividend – Imperial Brands (IMT.L) – and thanks to eToro’s dividend policy, this has already been added to my account.

Copiers

Unsurprisingly, after having such a poor month, I still don’t have any new copiers, and I wouldn’t expect to either.

However I am taking a long-term approach and am hopeful that I will soon have some active copiers once my portfolio is looking a lot healthier.

Final Thoughts

With my portfolio down 11.32% for the month, it would have been very easy for me to avoid doing a trading update this month, but I promised to document my journey as a trader on eToro, and so for completely transparency, I have to talk about both the highs and the lows.

It is never nice to see your portfolio go down so much in such a short space of time, but I am not at all worried because I am almost certain that every single stock in my portfolio will move into profit at some stage, and in the meantime I am happy to collect the dividends while I wait.

Indeed as soon as there is some clarity regarding Brexit, many of these stocks should surge higher almost immediately, but even if they don’t, I am confident of a recovery because I bought them all at a good price when they were on a very low P/E ratio, and they are all predicted to continue to grow their profits in the coming years.

My current portfolio includes GVC (GVC.L), Imperial Brands (IMT.L), International Consolidated Airlines (IAG.L), Barclays (BARC.L) and Aviva (AV.), and I would be happy to buy them all at today’s prices if I had some additional trading capital.

Follow Me on eToro

If you would like to follow my journey on eToro, simply go to the eToro website and search for SteadyProfits to view my live trading results and to see my latest trades.

Past performance is not an indication of future results. This content is for information and educational purposes only and should not be considered investment or portfolio management advice. 81% of retail investors accounts lose money when trading CFDs with this provider.

Bitcoin Surges Above $8000 After Inside Bar Breakout

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Previous Price Action

For a long while, it looked like the price of Bitcoin was just going to continue to trade in a sideways trading range between $3500 and $4000.

However there was a large breakout candle on 2 April, and in the following days there was enough momentum to push the price above the key $5000 level.

The price then stabilized between $5000 and $5600 for the next three weeks or so and it looked like this was going to be the new trading range in the following days and weeks.

Inside Bar

On 25 April, however, there was quite a large bearish candle on the daily chart, which propelled the price back towards $5000, and it looked like it could be heading a lot lower if it could close below this level.

As it turned out, the downward breakout failed to materialise and this actually became an inside bar because the trading range of the next seven days all fell within the high and low of this initial inside bar.

This is always a good thing to see on the daily chart because it is often the pre-cursor to a large breakout either upwards or downwards, and that’s exactly what happened here.

Upward Price Breakout

As you can see in the chart below, the price eventually broke out of this trading range (and closed above the high of the inside bar) on 3 May at $5689, and this would have been a great time to enter a long position because the price has since surged to more than $8000 thanks to the upwards momentum of this breakout.

Bitcoin Inside Bar Breakout - April May 2019

This would have represented a gain of nearly 50% for those people who held on to this position until now, but $6000 was breached fairly easily and a gain of 10-20% was still easily achievable once the momentum started building.

Final Thoughts

The point I want to get across is that as I have highlighted many times before on this site, these inside bar breakouts are always worth looking out for on the daily price charts because they can be extremely profitable.

You will generally find that the longer the price trades within the range of the initial set-up bar, also referred to as an inside bar, the more likely it is that there will be a strong breakout when the price closes outside of this range, and that was exactly the case here.

In this instance the price of Bitcoin traded within the range of the initial set-up bar for seven consecutive days, and so it was almost inevitable that the price would continue to rise strongly once the price closed outside of this range.

The problem is that these inside bars don’t necessarily occur that often, but if you monitor lots of different currency pairs, and a range of cryptocurrencies, indices and commodities, you should find a few really good set-ups every month.

eToro Trading Update – April 2019

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My Best Month Yet – Up 9.61%

It’s Bank Holiday Monday here in the UK and the markets will remain closed for one more day, so I thought this would be a good time to discuss my latest trading performance on eToro for the month of April (trader profile = SteadyProfits).

If you read last month’s update, you will know that my portfolio took a big dip after the share price of GVC (my largest holding) fell sharply from 700p to just over 500p.

This panic selling was all caused by both the chairman and the CEO selling a large amount of shares, but after a positive trading update earlier this month, it would appear that nothing is fundamentally wrong with the company, and they are still on course to continue growing their profits, which has helped to reassure investors.

This has resulted in the share price bouncing back to around 648p, and I’m sure that it will continue creeping back up towards the 700p level in due course.

Furthermore, it has also meant that my portfolio is now in great shape once again. After falling 2.65% in March, the portfolio is currently up 9.61% so far this month (and is up 14.02% in 2019), which I am obviously delighted about.

SteadyProfits eToro Trading Results for April 2019

Trading Summary / Dividends

As mentioned above, one of the main reasons why my portfolio is up so much is because GVC has bounced back so strongly, but other stocks have contributed to this gain as well.

I currently have three other stocks in my portfolio – International Airlines Group (IAG.L), Barclays (BARC.L) and Aviva (AV.L), and these are all in profit at the moment, helped by a positive overall stock market performance, because they are up 0.24%, 5.07% and 1.87% respectively.

In addition to this, I also sold my two holdings in HSBC (HSBA.L) for a profit of around 1% in the hope that I will be able to get back in lower, and banked a nice dividend of around 4% (after fees) from my Aviva (AV.L) shares.

Apart from this, there hasn’t been much trading activity because I can’t really find a lot of undervalued stocks right now, but I have some capital ready to invest should the markets fall in the near future.

SteadyProfits eToro Performance Chart for April 2019

Copiers

Despite being up over 14% up this year, and over 5% up overall, I still don’t have any people actively copying my trades on eToro, which is a little disappointing.

It seems to be quite hard to get noticed on eToro, and I understand that many people are reluctant to copy traders who don’t have a long trading history.

However it would still be nice to have just one or two people copying my trades because I want to help other people make some extra money as well.

Closing Comments

As you can imagine, I am still very happy with my overall trading performance, particularly after seeing the portfolio fall in value last month.

In the future I would like to reduce my exposure to GVC a little, despite being very bullish about their future prospects, and diversify a little more into other stocks if the opportunities present themselves.

However I am still very happy with my overall portfolio because I bought some undervalued high-dividend stocks at some decent prices, and am content to collect the dividends whilst waiting for their respective share prices to rise.

Follow Me on eToro

If you would like to follow my journey on eToro, simply go to the eToro website and search for SteadyProfits to view my live trading results and to see my latest trades.

Past performance is not an indication of future results. This content is for information and educational purposes only and should not be considered investment or portfolio management advice. 81% of retail investor accounts lose money when trading CFDs with this provider.