The Forex Chronicles

Dow Jones Trading in Symmetrical Triangle Heading into Thanksgiving

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Price Action

The markets have been fairly turbulent in recent weeks. After a big sell-off that took the Dow Jones all the way down to 24,120, the markets bounced back and the Dow went on to hit a high of 26,278.

However despite this temporary strength, I think many traders and investors were wary that this may be a dead cat bounce and further weakness may be just around the corner, and this has proven to be the case so far because the Dow has since fallen back to 24,902 at the time of writing (based on the future price pre-opening).

Dow Jones Symmetrical Triangle - November 2018

Symmetrical Triangle and EMA Convergence

If you take a look at the daily price chart of the Dow Jones above, you can see that the price has been trading in a symmetrical triangle if you draw some trendlines connecting the highs and the lows of the recent price action.

Furthermore, you can also see that the EMAs that I like to use, ie the 20, 50, 100 and 200-period EMAs, have all converged and are tightly packed together.

Both of these chart patterns generally point to a possible breakout when they occur together, and with the symmetrical triangle getting smaller and smaller every day, a breakout is looking highly likely right now.

Trading Opportunity

At the moment the price is trading very close to the bottom of the triangle, and is therefore very close to breaking below the lower trendline and breaking out to the downside.

However it is still unclear whether the price is actually going to break below this trendline or whether it will find support at this level.

You would normally expect the price to continue falling, but we are now in Thanksgiving week, which is usually a very good week for the major stock markets, with the S&P 500 higher 75% of the time since 1945, for example.

So any downward breakout may be curtailed by a short-term rally during the remainder of Thanksgiving week, and with Christmas just around the corner, there could well be a Santa rally to look forward to in about a month’s time.

Therefore while this would ordinarily be a possible breakout opportunity, you have to be very careful if you are tempted to sell any downward breakout. Indeed I wouldn’t be at all surprised if the upper trendline is breached in the coming weeks.

EUR/GBP A Sell At 0.8900?

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Brexit Chaos

Some financial experts have recently claimed that the GBP pairs have become untradable just recently as a result of the ongoing chaos surrounding the Brexit negotiations, and it is hard to disagree with this.

That’s because there is so much uncertainty surrounding the Brexit deal, and so many questions still to be answered:

  • will Theresa May survive a plot to oust her from within her own government?
  • if she survives, does she have enough support to get the agreement through?
  • will the Brexit deal be delayed or changed if there is a change in leader?
  • will there be a catastrophic no-deal Brexit?
  • could there even be a second referendum?

It seems that every day that are several stories that only add to the confusion and chaos, and all of these events have a major effect on the GBP pairs.

However at the time of writing, it would appear that Theresa May’s position is looking a little stronger, and there is a greater likelihood that her Brexit deal will go through, although there are no still no guarantees of anything of course.

Time To Sell EUR/GBP?

The Euro rallied hard against the pound last week for obvious reasons, moving from 0.8656 to a high of 0.8908, but it is clear from looking at the price chart that the price has reached the upper trendline that has recently been established:

EURGBP Price Chart - November 2018

Subsequently, this trendline may well act as a strong resistance level in the coming days and weeks, even amidst all of the ongoing chaos surrounding Brexit.

Potential Trading Opportunity

The longer term downward trendline currently sits just above the 0.8900 level, which is interestingly a nice round number. So this is another reason why this pair may be sold off at this key level.

Therefore if you were thinking of trading this EUR/GBP pair, it might be worth looking for a strong reversal signal around this 0.8900 level, such as a pin bar or a divergence pattern on the MACD, RSI and stochastics indicators.

You could also move down to the 4-hour chart and look for the same reversal signals on this lower time frame to get you into a trade earlier.

Anyway these are just my own thoughts and opinions on the future direction of this pair. At this moment in time, I would say that a reversal is looking more likely, particularly with Theresa May’s position strengthening, but please note that I am not offering any trading or financial advice. This would still be a risky trade because this and other GBP pairs are still vulnerable to any major Brexit developments.

Bitcoin Finally Breaks Out… But To The Downside

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Bitcoin’s Trading Action

The price of Bitcoin has remained steady for quite some time now because it has continued to trade within a fairly predictable sideways trading range between around $5900 and $6800.

I think it is fair to say that many people, particularly those people who have purchased some Bitcoins as a long-term investment, expected the price to eventually break upwards out of this trading range when the breakout finally happened.

Therefore I think many will have been shocked to see the price drop sharply downwards yesterday. The price hit a new low for 2018 of $5304, according to my IG chart, but has since recovered slightly to $5555 at the time of writing. However it is still well below the previous trading range, as you can see below:

Bitcoin Downward Breakout - November 2018

Cryptocurrency Sell-Off

It is not just Bitcoin that has experienced heavy price falls either because all of the other major cryptos have dropped sharply.

Bitcoin Cash experienced the biggest falls, but cryptos such as Ethereum, Litecoin and Ripple were also affected.

The question is; is this the end for cryptocurrencies, or this just a temporary set-back?

Future of Cryptocurrencies

The reality is that no-one really knows. I personally have never purchased any cryptocurrencies or traded them long or short, and don’t really intend to either because to me it is just gambling.

Yes these assets could well be the future and the price could easily move dramatically higher in the future, but they could just as easily become completely worthless in a few years.

Some of the most well-known cryptos may not be around in a few years time, and there may end up being one or two dominant ones that make all the other ones practically worthless. Indeed the biggest cryptos in 2020 in beyond may not even have been invented yet.

As I say, there is just too much uncertainty to trade these assets with any real confidence, but at least now we have finally seen a breakout on Bitcoin, even it is a negative breakout. This should create some decent trading opportunities for those traders who like to trade these assets on a short or medium-term basis.

AUD/NZD Likely To Find Support At 1.0600

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Price Action

The AUD/NZD pair has fallen quite dramatically in recent weeks. After posting a yearly high of 1.1176 back in August, it has since fallen all the way down to 1.0620, which is equivalent to a fall of 556 pips.

Looking further back in time, the price has generally been trading in a fairly predictable sideways trading range, generally fluctuating between 1.13 and 1.03, so there is nothing unusual in these recent price movements.

However the key point I want to make in this article is that the price is now approaching a key support level that may well prevent the price from falling a lot further.

Support Level

AUDNZD Weekly Chart - November 2018

Although there has been a lot of sideways movement, if you look at the weekly chart above, you can see that the price has been slowly trending upwards since 2015 (indicated by the rising trendline), and has always found support when it has come close to this trendline, bouncing off it on 5 separate occasions.

Future Price Direction

Based on this key support level, you would have to say that the price is highly likely to reverse and move higher as it gets closer to this trendline.

Therefore as the trendline is currently around the 1.0600 level, it may be worth watching for possible reversal signals on the daily chart to look for opportunities to go long, although as always, I am not recommending any trades or offering any advice. These are just my own thoughts and opinions.

Pin bars and divergence patterns on indicators such as the RSI, stochastics and MACD are examples of some very effective reversal signals that are worth looking out for on the daily time frame.

The bigger picture is always best viewed on the weekly time frame, but it always a good idea to zoom down to shorter time frames, such as the daily time frame in this instance, in order to spot the reversal signals earlier and get a better entry point.

Profit Target

If the price were to move higher, there is the potential for the price to move back up to the 100 and 200-day exponential moving averages on the daily chart, which are currently around the 1.0860 mark, 240 pips higher, particularly as the 200-week moving average is currently around the same level.

However there are still no guarantees of anything at this stage because trendlines don’t last forever and the longer they go on, the more likely they are to be broken.

This is why there is a need to look for definitive reversals around this level rather than blindly opening long positions at 1.0600 in the hope that the trend will resume.

eToro Have Launched Their Own Crypto Wallet

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The New eToro Cryptocurrency Wallet

There are now quite a few sites that enable you to buy and sell Bitcoin and other cryptocurrencies, but many people are still reluctant to use some of these sites due to security and trust issues.

So with that in mind, you may be interested to know that eToro, one of the largest social trading platforms with over 10 million registered users, have just launched their own crypto wallet that promises to be secure and easy to use.

Here are some of the key benefits of the eToro cryptocurrency wallet:

  • supports Bitcoin, Bitcoin Cash, Ethereum and Litecoin (with more added soon)
  • syncs with existing eToro accounts
  • transfer cryptocurrency assets from eToro platform to wallet
  • can be used for wallet-to-wallet transfers
  • easy to access
  • no need to enter private or personal keys
  • multi-signature security
  • crypto to crypto conversion
  • mobile app available from Google Play and Apple app store
  • backed by a secure, trusted and regulated platform

eToro Wallet

Walkthrough Video

Why Do You Need A Wallet?

In case you didn’t already know, crypto wallets basically enable you to store any cryptocurrency assets that you decide to purchase safely and securely.

This is the basic functionality of a crypto wallet, but the eToro wallet has many other useful features as well, including wallet-to-wallet transfers and crypto to crypto conversions, and can be used alongside your existing eToro account.

Company Comments

Here is what the CEO of eToro, Yoni Assia, had to say about the launch of this new crypto wallet:

“We believe that crypto and the blockchain technology that underpins it will have a huge impact on global finance. Blockchain has the potential to revolutionise finance and we believe that we will see the greatest transfer of wealth ever onto the blockchain. We believe that in the future all assets will be tokenised and that crypto is just the first step on this journey. Just as eToro has opened up traditional markets for investors, we want to do the same in a tokenised world. The eToro wallet is a key part of this.”

“The eToro wallet today is just the beginning and we will be adding a whole host of additional functionality which will include supporting additional crypto and fiat tokens, crypto to crypto conversion, the ability to deposit fiat, payment in store and more.”

Rollout

The eToro wallet is currently being rolled out on a phased basis, from country to country. It will initially be used to store Bitcoin, Bitcoin Cash, Litecoin and Ethereum, but will eventually be available for many other cryptocurrencies as well, and as alluded to above, more functions will be available in due course.

Final Thoughts

Cryptocurrency trading and investing is of course very risky. There is a chance you could lose all of your invested capital if one of these cryptocurrencies goes under because your investment will suddenly become worthless.

However if you are looking to buy and hold Bitcoin or one of the other cryptocurrencies and are aware of these risks, you might want to make use of the new crypto wallet from eToro because this offers multi-level security, is easy to use and is backed by a fully regulated and secure trading platform that has millions of users.

Past performance is not an indication of future results. This content is for information and educational purposes only and should not be considered investment advice nor portfolio management. 81% of retail investor accounts lose money when trading CFDs with this provider.