Assessing the markets around holiday periods isn’t as clear as it was before the rise of electronic trading. Back then, when the markets were closed, they were closed. Now there’s more gray area. For example, the stock market was closed yesterday, but Globex was open, so stock index futures traded. If you include yesterday’s bar in analysis, yesterday gave a breakout setup for today in the SPs, NASDAQ and Dow futures.
I would tend to discount the breakout signals for stocks, as there was no cash trading to anchor the trade to yesterday. However, I would consider yesterday’s trade for the currency futures to be ‘legitimate’, as the currency market is so globally based.
With this in mind, today was a breakout day for the Canadian Dollar futures; yesterday had the narrowest trading range of the previous seven days. In addition, yesterday made a one tick low below Friday’s, so it was also nearly a breakout day. This combination had me expecting a directional move today.
On the daily chart below I drew the Fibonacci retracements for the rally off the Jan. 12 low at 9601. The 50% retracement level is at 9691; I am watching that as the downside breakout point. Normally we would use the previous session’s low as the downside reference point for a breakout sale; with the fib support so close, I’d give it an extra couple of ticks of cushion.
click to enlarge
The 10 minute chart below shows this morning’s action. The first test of the support held, and led to a bounce. As this rally faded, the second move through gave a bigger selloff, although it didn’t result in a big move down.
click to enlarge
From here, I’m out of USCAD for now. I would look to sell another break below 9691; the series of lower highs today attest to the downtrend. Breaking the series of lower highs would be a sign of waning downside momentum, and clearing the resistance at 9721 could turn things bullish.
This is a sample of the analysis from my Swing Trader’s Insight advisory service. For information on STI, and to sign up for a free two week trial, visit here.
The information contained here includes information from sources believed to be reliable and accurate, but no guarantee is made as to accuracy, nor do they purport to be complete. Opinions are subject to change without notice. Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.
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