Technical Strategies Ahead of the PBOC Economic Reforms

Trading Strategies in Capital Markets

September has been on of our toughest months yet as we have incurred consecutive losses in our recent trade alerts.  We are continuing to trade through these harsh times as our risk management and the usage of tight stops protect us form substantial losses in the market. Our focus shifts towards the upcoming European Central Bank (ECB) monetary policy meeting on Thursday, 2 October, 2014 and as we have expected, China financial reforms that are likely to be initiated to deal with the current economic slowdown. These announcements are expected to boost the risk appetite in global markets, which should in fact lift commodities prices and European indices. We are uncertain the Euro will benefit from the upcoming Quantitative Easing (QE) program that ECB will introduce, which has been heavily priced-in in the Forex market as evident from EURUSD daily chart.

We are still holding a short trade in EURCHF as we believe the ECB’s actions will ensure the Euro weakens against a basket of currencies.  The Swiss National Bank (SNB) empty threats of negative rates are unlikely to be implemented. We are expecting a great battle around the 1.2000 floor, which in our scenario is breached and as a result, billions-of-dollars worth of stop loss orders will be gunned by the market.

XPT/USD Technical Analysis

We have kept a close eye on Platinum since our long trade in the metal was stopped out. some time ago. The daily chart painted a classic Hammer reversal pattern, indicating a bottom may have been made.

XPT/USD Daily Chart

Please click on the chart to enlarge:

XPT/USD Technical Analysis 26/09/14

Platinum Daily chart 26/09/14

Gains in XPT/USD may also be as a result of mining strikes in South Africa although we are unaware of any imminent strikes at the time of this writing. The market can easily retrace to the bottom of the Hammer before rebounding higher. By taking the long trade at market price we are aware such a scenario is possible but not guaranteed. We are initiating the long trade at market price, protective stop layered at 1,288, targeting 1,363.

In regards to gold, we are currently holding a long trade in the yellow metal with a fair profit at the time of this writing. We are expecting Gold to benefit from the People’s Bank of China (PBOC) monetary actions, targeting 1,300.

Current price following the US Final GDP: 1,302.1

US Oil Technical Analysis

Similar to Platinum and Gold, US crude oil is expected to be affected as ah China’s economic reforms is expected to boost oil prices across the board. We found a technical entry on the monthly chart, that is inline with our fundamental projections.

US Oil Monthly Chart

Please click on the chart to enlarge:

US Crude Oil Technical Analysis 26/09/14

US Crude Oil Monthly Chart 26/09/14

Price has met a strong support  on the monthly chart that at the time of this writing that prevented moderate losses.  We see the dip as a decent entry for executing long trades in the commodity. Recent  attacks on Iraq’s oil refineries may also aid the bullish momentum we are expecting for crude oil. We are layering the protective stop loss order at 89.00, targeting 107.00.

Current price following the US Final GDP:  92.71

SPMIB40 / FTSEMIB40 Technical Analysis

This is our third attempt to capitalize over the expected gains in the Italian index. The ECB ABS program (QE) is likely to boost European equities. Based on heavy selling in the SMIB40, it is receiving our prime attention.

SPMIB Daily Chart

Please click on the chart to enlarge:

SPMIB40 Technical Analysis 26/09/14

SPMIB40 Daily Chart 26/09/14

The daily chart painted reversed Head-And-Shoulders (H&S), affirming the bullish projection for the index. We believe the gains will continue as the market will begin pricing in the ECB QE program’s details that will be revealed on Thursday. Recent gains substantially increase the required stop for the long trade. Our previous attempts to exercise a tighter stop have failed. Please be aware that the stop must be placed beneath the right-hand shoulder of the H&S reversal pattern.

We initiating the long trade at market price, layering the protective stop loss order at 20,190, targeting 21,916.

Current price following the US Final GDP: 20,513

USD/CHF Technical Analysis

USD/CHF daily chart has painted a classic Shooting Star reversal pattern on the daily chart. Recent gains provide a decent entry for a short trade, bearing in mind the gains may re-test the upper shadow of the Shooting Star. This is inline with our expectations for the PBOC to take actions and introduce economic reforms to deal with the current slowdown.

USDCHF Daily Chart

Please click on the chart to enlarge:

USDCHF Technical Analysis 26/09/14

USDCHF Daily Chart 26/09/14

We are initiating the short trade in market price, protective stop layered at 0.9569, targeting 0.9228. We expect to have our protective stop loss order at the entry or below on Thursday as moderate gains may be seen in the US Dollar as a result when the QE details will be introduced.

Current price following the US Final GDP: 0.9498

Updates regarding the above trades will be posted at the bottom of this page. Subscribe to DDMarkets.com or bookmark this page (CTRL + D) if you wish to follow our updates. You may also find us on Twitter, Facebook and Google Plus.

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26/09/14 UPDATE: We have gained a substantial distance from our bullish entry in SPMIB40 as the index is trading at 20,833 at the time of this writing, ensuring the trade is in +300 points profit (approx..) at the time of this writing. We are closing 35% of the trade at market price and shift the protective stop to the entry.

26/09/14 UPDATE: US crude oil is trading at 93.56 at the time of this writing. We are closing 10% of the long trade at market price.

29/09/14 UPDATE: SPMIB40 long trade triggered our protective stop loss order at the entry after booking decent profits. We are re-entering the trade at market price (20,488) with the same protective stop and take profit that was used for the earlier trade in SPMIB40.

29/09/14 UPDATE II: US Crude oil is trading at 94.29 at the time of this writing after reaching 94.64. We are closing 20% of the long trade at market price and shift the protective stop loss order to the entry.

30/09/14 UPDATE: We are in a fair profit in our new SPMIB40 long trade as the index trades at 20,580 at the time of this writing. We are closing 15% of the long trade at market price.

30/09/14 UPDATE II: Ahead of the German unemployment change and the Italian monthly unemployment rate, SPMIB40 is trading at 20,663 at the time of this writing. We are closing 15% of the trade at market price and shift the protective stop to the entry.

01/10/14 UPDATE: We are closing our long trade in the SPMIB40 at market price, 20,895.