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  • #181
  • Apr 20, 2014 11:20am Apr 20, 2014 11:20am
Quoting ruffryders
{quote} OLU, I also checked historical flips of COT commercial / large specs, and here's for instance a major flip back in 06-07, where commercial were big time short, specs LONG, and regular specs NET LONG/flat. The GU then posted a rally from 1.7400 to 2.0800 (3 400 points). Here's the snapshot {image}
same business in 2004. Positions flip, red above zero (regular specs) - commercials down, Specs UP, GUs up from 178 to 194 (+1600 points) in 4 months.
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  • #182
  • Apr 20, 2014 11:34am Apr 20, 2014 11:34am
Quoting ruffryders
{quote} same business in 2004. Positions flip, red above zero (regular specs) - commercials down, Specs UP, GUs up from 178 to 194 (+1600 points) in 4 months. {image}
Now back to the current situation. COT positioning started diverging in late NOV 2013. Since then GUs up 600 points. GU also took out triple top resistance back in NOV 2013, which set a road map for the current 2014 rally.

I checked all available COT data history. Every single time there is such a divergence in positioning the GU actually goes up 1400-2000 points on average.

Provided that we started the new leg of the rally in NOV 2013 @ 6200, we are up 600 points @ 6800, we still have approx 800 points to go, which yield a final TP on GU @ 7600, which is agressive, I agree, however I see quite a few traders setting TPs on GU @ 7200-7400 area for the next few months.

GU in last 10 years staged a number of rallies each worth approx 4 000 points with little/no retrace at all. IF you calculate that 6620 NOV 2013 as a starting point of the new upleg of the current rally, the 7400 target will seem conservative.
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  • #183
  • Apr 20, 2014 11:47am Apr 20, 2014 11:47am
olu, this gu w1 chart sums it up nicely. I ran a calculation of mean of all months closing prices since 92.

the mean on gu is 6425. We are currently trading above the mean price + gu had a triple bott pattern hit @ -1 std dev to the mean price, which is significant.

that + the above reasoning on cot divergence should generally produce higher readings on gu within 2-4 months.

there is some resistance i can see @ 6900 on the way to 7000 and above. Finally, i do not like the may seasonality, as this could produce a pullback on gu and across the fx board generally, since usdx is seasonally strong performer in may. Lets see what gives anyway.

rr.
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  • #184
  • Apr 20, 2014 12:06pm Apr 20, 2014 12:06pm
Quoting ruffryders
{quote} Now back to the current situation. COT positioning started diverging in late NOV 2013. Since then GUs up 600 points. GU also took out triple top resistance back in NOV 2013, which set a road map for the current 2014 rally. I checked all available COT data history. Every single time there is such a divergence in positioning the GU actually goes up 1400-2000 points on average. Provided that we started the new leg of the rally in NOV 2013 @ 6200, we are up 600 points @ 6800, we still have approx 800 points to go, which yield a final TP on GU...
Olu, in fact, when commercials are NET SHORT on GU, it tends to trade higher overall. So I think the way the FXCM is using COT data is not correct.
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  • #185
  • Apr 20, 2014 12:14pm Apr 20, 2014 12:14pm
finally you don't have to be a rocket scientist to see the expanding triangle pattern on gu w1 chart.
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  • #186
  • Apr 20, 2014 12:25pm Apr 20, 2014 12:25pm
commercials are large corps and companies, which need to protect the currency risk exposure, and large specs are hedge funds and investment institutions. So naturally you'd follow the second group. The last and least relevant group is the red line small specs group. Can be ignored for purposes of the longer-term gu rate move projection.
  • #187
  • Apr 20, 2014 12:57pm Apr 20, 2014 12:57pm
Quoting ruffryders
commercials are large corps and companies, which need to protect the currency risk exposure, and large specs are hedge funds and investment institutions. So naturally you'd follow the second group. The last and least relevant group is the red line small specs group. Can be ignored for purposes of the longer-term gu rate move projection.

Thanks for the excellent research, data and charts. I hear you on how subjective and incomplete FXCM data can be. I am now totally open minded on the path of the gbp pairs and will trade what I see not what I think. I will be going over the your last 5 posts like a study.

Olu
If you think you can or cannot do it you are correct
  • #188
  • Apr 20, 2014 1:19pm Apr 20, 2014 1:19pm
Quoting Olu
{quote} Thanks for the excellent research, data and charts. I hear you on how subjective and incomplete FXCM data can be. I am now totally open minded on the path of the gbp pairs and will trade what I see not what I think. I will be going over the your last 5 posts like a study. Olu
Olu, NP, thanks for bringing up the whole deal with COT. I used to do COT previously, it's a pretty good tool to pick up trends for options trading. EU COT is currently flat, by the way, which kind of goes in line with the latest price action.

I think on GU there are two very important points to note currently. Price action is bullish, which is represented by sequnce of HH and HL. Price finally is trading above all time mean of monthly closed @ 6425 and price is OK with it. Test of +1 std dev level is eminent, although it might not come swiftly, possibly we will reach this level Q4 2014 - Q1 2015, so overall options traders could look to build longer-term position to profit from a potential run up in prices on GU. I'd be looking to do just that, upon any dips in price on GU.

Currently the premium for DEC 31 Call options on GU @ 6800 is 340 000 USD and break even @ 7100. Which means you have a decent upside of 500-600 points ultimately, if price takes out 7000 and keeps above that level. If GU runs for 7800 you'd be + 700K - 340K premium = 360K profit on 10KK lot size. 1 to 2 R/R not bad, but probably can shop around for better strikes/expiries.
  • #189
  • Apr 20, 2014 1:24pm Apr 20, 2014 1:24pm
Quoting Olu
{quote} Thanks for the excellent research, data and charts. I hear you on how subjective and incomplete FXCM data can be. I am now totally open minded on the path of the gbp pairs and will trade what I see not what I think. I will be going over the your last 5 posts like a study. Olu
I think FXCM is just looking for free liquidity.
  • #190
  • Apr 20, 2014 1:27pm Apr 20, 2014 1:27pm
Quoting ruffryders
{quote} I think FXCM is just looking for free liquidity.
GU bottom line the way I see it: 6700-6750 has to hold any dips, if this zone proves support, we take a shot @ 7000 soon.
  • #191
  • Apr 20, 2014 2:01pm Apr 20, 2014 2:01pm
possible bearish scenario on eur usd w1 chart with spectral analysis cycle extraction, projecting eur usd down move to 2440 by end of 2014.

while this is certainly an option, first eur usd will have to clear strong d1 uptrend line by breaking below 3600.

WHILE DAILY IS IN CLEAR UPTREND, ON WEEKLY CHART THE PRICE ACTION IS BEST DESCRIBED BY DOWNWARDS SLOPING CHANNEL.
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  • #192
  • Apr 20, 2014 2:16pm Apr 20, 2014 2:16pm
EUR USD BREAKOUT IS EMINENT (1-2 WEEKS)

WITH RECENT RANGE COMPRESSION ON EUR USD (60 TO 50 TO 40 ON DAILY AND MONTHLY RANGE COMPRESSION AS WELL) IT'S ONLY A MATTER OF 8-13 DAYS THAT WE BREAK OUT STRONG ONE WAY OR THE OTHER. TRIANGLE BREAKOUT SETUP IS VISIBLE ON WEEKLY CHARTS.

WITH NOT SO MANY CLUES AVAILABLE, THE BEST WAY TO TRADE THIS BREAK OUT IS SMART STRADDLE TRADE. WHAT I MEAN IS THAT YOU WAIT FOR THE PRICE TO PICK THE BREAKOUT DIRECTION, THEN PRICE COMES BACK TO SUP/RES BREAKOUT AREA, WHERE YOU ENTER THE TRADE IN THE DIRECITON OF THE BREAK OUT.

SO LETS SAY EUR USD BREAK OUT 3950-90 AND GOES FOR 4050. YOU WAIT FOR PRICE TO COME BACK TO 3990 AND ENTER A LONG TRADE WITH A STOP LOSS OF 60-80 POINTS TP X3 YOUR SL. SAME FOR THE DOWNSIDE BREAK OUT. DETAILS - SEE CHART BELOW.

THERE IS A CLEAR DANGER FOR THE ECB IF EUR USD BREAK OUT ABOVE 4000 AREA, SINCE THEN IT COULD TRY FOR +1.5 STD DEV @ 4800 OR +1.25 STD DEV @ 4400.

SO EITHER WAY IT BREAKS, THIS BREAK OUT COULD PRESENT AN INTERESTING MID-TERM TRADING OPPORTUNITY FOR 400-600 POINTS.

GOOD LUCK TRADERS.
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  • #193
  • Apr 20, 2014 2:32pm Apr 20, 2014 2:32pm
Olu, here's another example for you on the coffee futures. The divergence of green from the blue set off a huge 100% rally in coffee prices.

Same deal as GU currently. So I think FXCM is shooting crap on the wall with their review of GBP USD COT positioning.
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  • #194
  • Apr 20, 2014 2:45pm Apr 20, 2014 2:45pm
my take on eur gbp m1 chart to support further upmove on gbp usd.

eur gbp was rejected @ 8300-8360, price is below mp @ 8290. Targets on short side - 7800. Longer-term 7400.

Price action structure overall is bearish, which is supported by long wicks on monthly candlesticks, price action is trading
in well defined downwards sloping channel.
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  • #195
  • Apr 20, 2014 2:47pm Apr 20, 2014 2:47pm
eur gbp inversely correlation to gbp usd, meaning that when eur gbp is down, gbp usd will go up.

the correlation has not been strong all the time, however improved to -80% in 2013.
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  • #196
  • Apr 20, 2014 2:58pm Apr 20, 2014 2:58pm
Quoting ruffryders
possible bearish scenario on eur usd w1 chart with spectral analysis cycle extraction, projecting eur usd down move to 2440 by end of 2014. while this is certainly an option, first eur usd will have to clear strong d1 uptrend line by breaking below 3600. WHILE DAILY IS IN CLEAR UPTREND, ON WEEKLY CHART THE PRICE ACTION IS BEST DESCRIBED BY DOWNWARDS SLOPING CHANNEL. {image}

Thanks for more writeup I was about to say the eur doesnt look as good as the gbp and voila there was your write up about the euro.

Thanks


Olu
If you think you can or cannot do it you are correct
  • #197
  • Apr 20, 2014 3:03pm Apr 20, 2014 3:03pm
Quoting Olu
{quote} Thanks for more writeup I was about to say the eur doesnt look as good as the gbp and voila there was your write up about the euro. Thanks Olu
Probably best option is just to trade the triangle break out the direction of the breakout. It's a tough call really, USDX no clear direction, USDCHF looks bearish (downwards sloping channel). So the outlook is mixed for EU. Having said that, most time the price will resolve the direction it entered the triangle. Currently price went from bottom-up, so good chance that it breaks out to the upside. Still better be prepared for both options.
  • #198
  • Apr 20, 2014 3:05pm Apr 20, 2014 3:05pm
Quoting ruffryders
Price action structure overall is bearish...
Hi R

I am also seriously bearish the eurgbp but I need to see price below the recent double bottom for me to take action.

Olu
If you think you can or cannot do it you are correct
  • #199
  • Apr 20, 2014 3:14pm Apr 20, 2014 3:14pm
Quoting Olu
{quote} Thanks for more writeup I was about to say the eur doesnt look as good as the gbp and voila there was your write up about the euro. Thanks Olu
EUR USD the BIG boys are just not playing this game yet. Best advice - trade direction of the break out + go with the flow.
Whichever way the blue - green line starts to diverge, is the valid direction for EUR USD for the next few months.

Currently the big guns are chilling.
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  • #200
  • Apr 20, 2014 3:17pm Apr 20, 2014 3:17pm
Quoting Olu
{quote} Hi R I am also seriously bearish the eurgbp but I need to see price below the recent double bottom for me to take action. Olu
Olu I think price already told us which way it wants to go on EG. Weekly - big engulfer in play still.
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