A look at trade setups in AUDUSD, NZDUSD, Nasdaq and XAUUSD. All 4 qualify as potential bearish reversal sell setups pending price signal and confirmation.
AUDUSD consolidation or distribution?
- Unless one was trading AUDUSD buy-low-sell-high using an intra-week strategy, I would say both bulls and bears got AUDUSD wrong.
- It is trending up but refuses to clearly penetrate the resistance (pink) on top but shorts would be equally killed too.
- This is one pair I would not touch. Looking at all those long shadows at the top, I am inclined to think of it as a ‘distribution’ that does not want to show hand yet.
- However going short would be a counter trend trade and with the China stock market still up and many commodities looking like they are bottoming, any AUDUSD correction might be over very quickly. Best to just watch and learn.
- A break below consolidation low also breaks many boxes i.e. multiple-month-lows.
AUDUSD weekly chart showing 5-month consolidation
NZDUSD weaker could be setting up for bearish trend
- Potential head and shoulders at a key 2015 support-turned-potential resistance.
- October bearish expansion month had already terminated previous 5 months of uptrend.
- This week was a wash n rinse bull trap at October high.
NZDUSD setting up reversal pattern
Nasdaq head and shoulders, fails 2015 high
Another head and shoulders theme, failed break, wash n rinse bull trap theme at a major major psychological level. So Nasdaq goes limit down when it looks like Trump was going to win, goes up when Trump wins, goes down after Trump wins.
I am going to intoxicate myself this weekend for a total reset.
NASDAQ setup looks attractive to bears
XAUUSD doesn’t look too happy
I am a gold bull who see a new trend the moment XAUUSD broke 1307 this year but it is important to be honest with chart reading i.e. to take out wishful thinking. It is still uptrend but failing the former 52-week high makes the price action on top a high chance of a bull trap. This setup places XAUUSD in the same category as Nasdaq which is very attractive. Why? Any bear can do a short with a stop loss just across the other side of the fence (2015 high) which exchanges a small potential loss for a potential to score a big reward. In any case, it is down to the fight between green versus red moving average pinball-style.
XAUUSD fails 2015-high
Trading 101: How to skin both bulls and bears
This is one angle that says it all for price action this week - treacherous.
Why does price go up?
- Push price up to kill short sellers
- Suck in buyers to buy more expensive; make them push together with you
- Reach the top and push past one more time to trip stops of short sellers (aka stop hunting)
- Suck in MORE BUYERS who trade break out
- Unload your position to them!
Why price goes down?
- Unload and SELL on your way down.
- Trip stops of buyers; make them join your push down
- Keep pushing down to kill more buyers
- When they give up and decide to turn short, YOU BUY!
- Rinse and Repeat!
Trading 101 – how to skin both bulls and bears
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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
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"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."