HABBSTS system filtered out Coffee ETF bullish reversal

Heikin Ashi Bollinger Band Stock Trading System picks out a week-week bullish reversal in JO, a Coffee ETF; how the signal from this trading system is read.

 

HABBSTS Trading System

HABBSTS refers to Heikin Ashi Bollinger Stock Trading System that is being tested. It consists of 3 common trading indicators Heikin Ashi Candles, Bollinger Bands and a single exponential moving average used on the weekly time frame.  This describes what the components and thinking that went into the system:

1. Bollinger Bands set up here is using 13 period setting. It is meant to used on weekly chart only to show price ‘overbought/oversold’ over 13 weeks or one quarter. Bollinger Bands usually employ 20 period.
2. The middle line feature in the Bollinger Band has been removed so that only the extremes are observed.
3. I have encountered many kinds of systems using Heikin Ashi candles but all of these were designed for scalping, short-term trading.
4. I designed this system for ‘lazy’ way of visually selecting stocks for further inspection. It is designed to show stocks on weekly chart that are displaying ‘overbought/oversold’ in conjunction with change in colour i.e. trend reversal.
5. The exponential moving average line painted in thick red uses a 3-period setting with 2 displacement. It is meant for trend-following i.e. buy/sell with-the-trend when price is sitting on the ma line or as a confirmation for reversal trigger i.e. when price is at overbought/oversold of Bollinger Bands – Heikin Ashi changes colour – price cuts moving average (see examples of previous buy and sell signals indicated in chart).

 

JO bullish reversal

The system picked out a bullish reversal in iPath Bloomberg Coffee Subindex (ticker: JO).  According to ETFdb.com, JO is one of two exchange traded funds (ETFs) available to investors on the US market.

This ETN offers exposure to coffee futures, making it one of the more targeted and obscure commodity ETPs available. Coffee prices can often exhibit significant volatility due to concentration of production and geopolitical instability, and JO is the best way to play this commodity. For investors seeking exposure to coffee, JO is one of the best options out there. But investors should be aware that this ETN exposes them to credit risk, and follows a futures-based index that may lag behind a hypothetical return on spot coffee prices.

iPath Bloomberg Coffee Subindex Total Return ETN

iPath Bloomberg Coffee Subindex Total Return ETN

This is what I see:

  1. The first signal from HABBSTS system is always the colour change provided by Heikin Ashi.
  2. Second inspection confirms the uptick when price moves above 3-week displaced by 2 moving average.
  3. Third inspection of Bollinger Band shows that week to week price action of Coffee is showing higher high, higher low; this signal is confirmed by price action, not just BB.
  4. As a last input, previous low traded back in 2013 between 20.30 – 21.00 appears to be back in play again as support. This is an important signal for a bullish investor that recent 52-week lows are hopefully permanently left behind.
  5. Price appears to be resisted at high at the moment so an individual who is bullish might be willing to wait for another throwback to retest the 20.30- 21.00 zone in order to confirm support one more time.
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Soh Tiong Hum is Director of TerraSeeds Market Technician Pte Ltd. TerraSeeds is a trading educator in Singapore since 2005.   Soh's Twitter account @sohtionghum was ranked #23 out of The Top 70 Twitter Accounts To Follow In 2015 by MahiFX.   Disclaimer notice: "I do not have a financial advisor's license. I am not qualified by any regulator to give financial advice. I do not know you the reader. Your investment means and motive may be different from me. My posts here are based on observations and meant for education. I am not responsible for for any consequence from your actions."
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