Illustrating price action with SG30 Index (SiMSCI)
When you know what to look out for in price action, an empty chart can reveal a host of information that can be used to trade. We look at Oanda’s SG30 Index on MT4. SG30 Index is a market-made product that emulates SGX SiMSCI Futures.
Follow numbered labels in the chart with this bullet list:
- Index rallies in March 2014 following a bottom in February. Price action shows higher-high and higher low. This is the signature of an uptrend. Strategy for following month: go long.
- Subsequent months print higher-highs and higher-lows which tell us that the index is still in an uptrend. Strategy: continue going long.
- A one-day ‘blip’ shows up at the beginning of July in the form of a ‘lower-low’. This is a one-day action that quickly takes off and leaves only a ‘tail’ in the candlestick. It is a false break. Actions like this can happen because bears become overzealous. The tail is a sign of regret that also tell us that sellers met a bear trap and got slaughtered. Strategy: Fade the false break by going long.
- Index rallies to new high telling buyers that the trend is intact.
- The index consolidates in August by going sideway. It makes a higher-low but fails to confirm with new high. Strategy: presume that the uptrend will continue by preferring long positions but apply caution since index hints it is weakening.
- Index breaks August-low in September decisively. We called this a bearish expansion and it is a solid signal that trend is reversing. Strategy: go short.
- Index continues downtrend in October.
- Steep movement Northwards late-October is presumed to be a retracement if it does not do a bullish expansion (see point 6).
- November begins with the sign of another false break (see point 3). Buyers are at loss since the break did not carry through. Strategy: Fade the false break and stay short unless the lower-high, lower-low sequence is terminated by a decisive up-move. There is a perfect example here.
Director, TerraSeeds Market Technician Pte Ltd. Trader, investor. @sohtionghum was picked ‘Top 70 Forex Twitter in 2015’. Operates multiple strategies.
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