OptionPundit

Author: ethan

  • Will US Dollar Continue To Strengthen?

    The US dollar index rose quickly over the past few trading days. Other major currencies like the EURO, Pound, Aussie etc weakened against the dollar and I am tempted to short them. However I am hesitant to do so as I noticed that the dollar index is approaching a resistance zone (see the red box in the attached chart). If the dollar index rally falters at resistance, other major currencies may cease to weaken and shorting them will then prove to be a bad decision. If the dollar index slices through resistance easily, I may miss some opportunities but I rather play safe and wait.

    Income Via Future Options

    To me, the only currency that is moving in a clear direction now is the Japanese Yen, which I mentioned in a previous post.

    If the dollar index pushes through resistance and continues its climb, EURO and AUSSIE would become prime candidates to short. I will watch the dollar index closely and provide updates in due course.

    Cheers,
    Ethan

  • Is Crude Oil Bottoming?

    Crude oil has fallen more than 50% since May of 2014. It is now approaching a 15 year supportive trend line that can be traced back to 1999. This line says that support may be found in the vicinity of $45-$47. This is also a price range OP has been mentioning on his tweets. As I write this, oil is trading at $48.26. We are very close.

    Is Crude Oil Bottoming?

    However, we have not seen any price action that says the buyers are coming back. If this trend line does not hold, the next target will be $40.

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    As crude oil moves into these regions of significant support, the risk reward of shorting oil becomes less and less attractive. I will be looking for a bounce or some form of consolidation over the next few weeks.

    Cheers,
    Ethan

  • 30 Year Bonds, Which Way Forward?

    Scottish Poll Results #ScotlandDecides will be available tomorrow. The GBP condor trade idea can now be closed for +50% collection of profit in just two day. If you followed it, please close the trade and book your profits.

    Now over to the the 30 Year bonds.

    The 30 Years Bonds futures are trading at 136.06 (as of this writing), testing an important support level at 135 which has been very well respected as both support and resistance multiple times since 2010 very obvious if you look at the attached weekly chart.

    Bonds, Which way Forward?

    Right now, I am bearish bonds. There are 2 reasons for my bias:

    1. One, recent weeks’ price action has been very weak
    2. Two, I am not seeing strong commitment from bulls even though price is testing a strong level.

    Should price close below 135 at the end of the week, I would look for a setup to go short and update to IFO subscribers. NO action, unless price confirms.

    If you are not an IFO member and would like to join our Income via Future Options Newsletter, pls sign-up here.

    Regards
    Ethan

  • How To Trade Wheat Futures Going Forward?

    Wheat futures are trying to recover from its 3 month fall. For the past 2-3 weeks, the buyers have defended the 520 level valiantly and 520 has become the low of Wheat’s 3 month fall. Buyers have also succeeded in pushing prices higher. (wheat now at 557, up 30+ points from 520)

    Despite the recent success of the bulls / buyers, the overall trend is still down and the next resistance lies close by at 580. If you refer to the attached weekly chart, you will see a red horizontal line that marks where 580 is. You will also notice that the 580 level has acted as both support and resistance multiple times, going all the way back to 2009.

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    Until 580 (and 600, the next significant resistance level) are taken out, the medium term trend remains down.

    Happy Trading,

    Ethan

  • How To Trade Gold Now?

    After failing to breach a critical level of 1350, Gold has been falling steadily since 14th July and has fallen to its current level at 1284.80. Since Gold has fallen so much, is it time to go short? Let’s analyse the daily chart.

    Firstly, in the medium term (3 to 6 month period), gold is moving more sideways than trending downwards. This means there are no strong and obvious directional bias yet.

    Secondly, there are 2 important support levels, 1280 and 1260 just under current price level. (please see attached daily chart) These 2 levels have acted as bother support and resistance and go all the way back to Jul last year. Since gold is in a sideways mode, it is harder to tell if sellers will gather enough strength to break support. (I doubt bears will break support right away)

    So what’s the trading plan then? For directional traders, it would be more prudent to observe how Gold behaves at support before jumping in. If support is really taken out, then we can start looking for shorting opportunities.

    Regards
    Ethan

  • Crude Oil Testing Resistance

    Crude Oil Crude oil futures are finding sellers at a significant resistance level  at 105, a level that has been acting as resistance since September last year. Such levels are key defining point i.e. it can break-out or turn down from this. Confirmation is the key.

    Right now, a pin bar is taking shape but we have to wait till end of day to see if the candle stays that way or not.

    If crude oil really fails at 105, I don’t believe we will see a large drop as the next level of support is likely found at 102, a mere 3 points away. Furthermore, crude oil has been making higher lows consistently since the start of the year, which suggests an general bullishness.

    As a nimble trader I might look for capturing the swift move (if it happens) from 104ish to 102. However from a long term perspective, there is still time for a major set-up to mature in either direction.

    Happy Trading,
    Ethan