If you’ve stayed in stocks (and I hope you did), you should be sitting on a great gain after the run-up in the past three weeks. Position traders would do well to sell some into strength, although it probably wouldn’t hurt to leave some on the table in this market. This opens the question of where the next trade is.
The Aussie dollar’s value to the greenback (AUDUSD) has been one of my favorite currency pairs this year (I’ve also been bullish on the euro and the past month is making me sweat a bit). AUDUSD has traced out a well defined bull pennant since its April peak, and it’s edging above the upper barrier. This is in the context of the rally since the beginning of the year. I don’t see anything technically to suggest the uptrend is over. You can spot various levels that could act as chart resistance; I’d peg it at 0.9665 based on the lows in September and October 2012. That translates to nearly 4% upside potential from the current level. Those who are comfortable with the risk could use leverage to magnify that potential.
As always, use a trailing stop and put your trading rules ahead of price targets.
Good trading everyone.
