You might have heard about the famous stock speculator Jesse Livermore. He made and lost several multimillion-dollar fortunes before, during and after the stock market crashes in 1907 and 1929.
One of his best quotes about trading is: “There is time to go long, time to go short and time to go fishing.”
His trading career may have begun more than a century ago, but Livermore’s advice has never been more true.
Here at the Pattern Trader we look at multiple opportunities to go long and go short a given currency pair or commodity such as spot gold. But sometimes, there’s a time to just go fishing too.
That’s because this week there are few good forex trades available … except one.
I’ll share that one good long term trade with you in a moment, but I’d also like to show you why this week can be considered “the pause that refreshes” before we see some real action in the FX markets again.
You see, it’s very important to recognize and act accordingly when it’s NOT a good time to make money. Making no profits is better than losing money when a good trade just isn’t “on”.
How do I know this?
Because I’m a proven winner with more than 120,000 trades to my name across 1,200 trading accounts and eight Wall Street firms.
I’ve worked on Wall Street as a trader for 23 years, and managed private client accounts for the past 13 years after that.
And more recently, I made over 9,000 pips last year on recommended daily and weekly trades right here as the Pattern Trader. For every one lot contract that’s $90,000 in profit. (Even small accounts could have brought in $9,000 or more.)
So I think it’s safe to say that I know when it’s a good time to trade and when it’s not.
Let me show you a few charts to illustrate why I feel this way before I get to the one that’s still worth a trade.
The US Dollar Index is undergoing what seems to be a dead cat bounce at the moment.
In fact, it ended a seven-week losing streak last week – the longest in over 13 years – to advance against its major counterparts. A cautiously hawkish FOMC policy announcement helped cool selling pressure, but most of the advance followed from January’s impressively strong employment data.
I doubt it will last, though. Right now the dollar is hovering near the support line of longer-term bearish megaphone top price pattern
This is likely to last a couple more weeks before the relentless bear trend in the dollar takes hold once again.
My long term target for the US dollar is the 108-106 level. I derive that number from the megaphone top that heralded the decline. The height of that megaphone top is a good ballpark figure for the depth of the decline once the support line’s broken. (This happened only last week, incidentally.)
Now we’re seeing a bit of backing and filling before the next leg of the drop.
You can see that hesitation in the Euro against the dollar too.
As you can see, the monthly chart for EURUSD has traced out a descending triangle stretching back over several years. However, a more recent triple bottom has signaled that EURUSD is showing strength once again. After testing the support line, EURUSD is now challenging the upper line of the triangle for the first time since 2014.
It’s at an inflection point after last month’s powerful runup. This month is unlikely to mark a breakthrough because breaking that downtrend line won’t be easy. There will be some headwinds due to resistance at the 1.2500 price level.
However, I expect the strength of the triple bottom will win out in the end and we’ll see a breakout in the next few weeks … just not yet. We need to be patient because once EURUSD chews through 1.2500, then there’s nothing but “blue sky” above.
As for the USDJPY pair, I’m long term bearish on this due to dollar weakness and last year’s double top which proved to be the high. There’s a descending triangle here too, one where I expect a bit of back and forth before we see real fireworks on the downside.
While I’m long-term bearish on USDJPY, I don’t see a good trade here for at least a week and maybe longer. As with EURUSD, some time and patience is needed before it’s time to jump in.
Now let’s look at non-USD pair.
In a recurring theme this week, EURGBP remains trapped within a descending triangle too. But unlike the previous pairs, this is one I feel could go either way because there are two competing and contrasting narratives here.
On the bullish side, we have a long term uptrend in place. On the other hand, there’s that bearish descending triangle. As with USDJPY and EURUSD, we’re approaching an inflection point here.
However I’m not so certain which way this one’s going to break. If it breaks out of the descending triangle (Path A) then the long term trend suggest it will hit its old highs at 0.92. Otherwise (Path B), it’s likely to break down to the 0.83 or 0.84 level at a minimum, and possibly much lower than that.
Because I can’t yet determine which scenario is most likely, I’m sitting on the sidelines until the EURGBP market tips its hand and tells us which way it’s going to go.
So I hope you can see that for most of these pairs, the time to jump in (long or short) isn’t now. We need a bit of time spent fishing for clues before we can make a trade with a good probability of making us a large profit.
Now for the one trade I’m still very, very keen on despite the recent inflection points in the markets …
A series of long trades in GBPNZD last year was the major reason why myself and hundreds of Pattern Trader Elite members around the world pocketed 1,726 pips last November alone. For every one lot contract that means about $17,260 in your account.
In fact, we subsequently closed out 3,357 pips in just week from longer term trades that were absolutely dominated by this pair.
And I believe 2018 shows just as much promise for large profits in GBPNZD.
I think it’s a matter of when, not if, this pair continues on the upside.
The recent key reversal at 185 underpins the cup and handle and double bottom/rounded bottom patterns from 2016-2017. (A key reversal is when there was a new low for the week and then the market rebounded to close on the high.)
That key reversal coupled with last week’s inside bar indicates there’s another very large move ahead to the upside. (An inside bar is when the high and low of the current bar is entirely enclosed by the high and low of the previous week.)
Think of an inside week bar as a storing or coiling of energy in preparation for a large move.
Have you ever held a beach ball underwater and then released it? It rockets into the air from the released energy.
All these factors together indicate another big upside move is on the way in GBPNZD. I think it will not only go to the 2017 highs but far beyond that. In 2018 I think we’ll ultimately see 215 or even higher from GBPNZD’s current 193 and change.
So that’s my best trade for this week and the immediate future. If you decide to get into this, allow a wide stop because there are 300-500 pip weekly ranges in this pair. Trade a bit smaller than you normally would — the huge gains I think we’ll be seeing will more than make up for that.
Remember, my strategy is to look at the bigger picture and bigger trades that extend for days or even weeks. That’s how we made over 9,000 pips in 2017 trading these markets.
Now if you’re a bit worried about how to trade a mega-move like this (as well we when to pull the trigger on all the pairs currently sitting at inflection points), then let me help.
I’m preparing an event to show you exactly how it’s done.
My LIVE 2-Day Bootcamp is where I’ll demonstrate exactly how to make currency trades just like the ones I’ve outlined here, including my “Lazy Trader’s” 5-step execution plan that keeps pulling in one winner after another.