As in past years, the FX (forex) markets are likely entering a “consolidation” phase over the summer season.
While I still have a couple of interesting FX charts for you this week, I’ve increasingly (and very successfully) been applying my price action and price pattern trading methodologies and strategies to other asset classes including the US stock indices, common stocks, and options.
I’ve been enormously successful trading the shares and options in FB, TSLA, PG and many other stocks. I’ll tell you more about that in just a moment, but first some words on the FX markets to keep everything grounded.
First the U.S. Dollar Index (USDI):
As you can see, we’re in a very tight trading range right now as the H-bottom inspired rally has peaked for now.
Despite all the tensions over steel and aluminum tariff exemptions for the European Union and Canada plus the North Korean summit meeting, the dollar isn’t doing much except further range-bound (sideways) trading in most USD-correlated pairs.
This is borne out in USDJPY (dollar against the Japanese Yen) too:
The market looks to be tightly bound in sideways action for the foreseeable future.
Accordingly, my focus is now in non-USD pairs (and US stocks too).
First, the non-USD forex pairs …
I really like the risk:reward in NZDCAD (New Zealand dollar against the Canadian dollar).
This pair made a head and shoulders top back in March and then proceeded to plunge fast. It’s since retraced, but now we’re seeing what looks like an H-top (two spiky tops that form a letter H when joined). That’s very bearish and I expect further declines from here.
After all, the H-bottom we saw in USDI proved to be a decisive low which prompted a sustained USD rally soon after. Accordingly, I expect we’ll shortly see lower prices in NZDCAD soon, possibly to as low as 0.89 at previous lows.
Now for two GBP (British pound) picks that look promising as GBP grabs a foothold at current levels against NZD and AUD.
I think we’ll see GBP traversing higher against these currencies rather soon.
GBPAUD (pound against the Australian dollar) is showing a triple bottom and has already retraced to the neckline of that formation. We’ve just seen a bullish key reversal and from here on, any dips are buying opportunities.
The same can be said for GBPNZD (pound against the New Zealand dollar).
Instead of a triple bottom we have a double bottom here. This pair is also tracing out an ascending triangle with at least three instances of solid support along the lower trendline.
The future of GBPNZD remains bullish and again, any dips are buying opportunities.
Now onto some U.S. listed stocks I’d like to share with you. I’m now applying my price action and price pattern trading methodology to the (US) stock market.
In fact, I’ve made a boatload of money shorting stocks, and/or buying put options in AMAT, A, & MELI just before their respective earnings announcements.
I put on these trades very shortly (as in minutes or hours) before they announce their quarterly earnings. A stock will typically move 5% – 10% moments after the earnings announcement.
While this can very obviously be an enormously risky endeavor, I’ve been quite successful in identifying the most likely post-earnings movement of a stock based on the prior price action and price pattern.
For instance, on May 10, 2018, I shorted MELI stock @ 328.00/share minutes before they announced earnings. Only 15 minutes later, in extended market trading, I made $75,000 as I covered my short stock position at $300 for a profit of $28/ share. (More on MELI in a moment).
Here’s a more recent trade: in a subscriber email last week, I suggested buying Proctor and Gamble (PG) @ 73.78. On Friday, PG closed at 77.18. This is an unleveraged profit gain of 4.6% in just one week.
What was the basis for this? As you can see, PG was in a downtrend for quite some time.
Then it made a rather subtle double bottom followed by a selloff to the neckline. There was an inside bar after that which re-tested the neckline.
After that, PG moved up sharply and delivered a very nice profit if you’d speculated in some call options in advance of that particular move. Even the unleveraged stock alone was worth a 4.6% gain in just one week.
So you see, it doesn’t matter what market you look at. Patterns and price action behave the same across all investment markets.
Now here’s a new stock pick for you to consider …
I’m looking at MercadoLibre (MELI on the NASDAQ) again. This time on the long side. There’s an emerging (and rather large) H-bottom forming here.
Remember, it takes two large spikes to form an H-bottom. The price has since re-tested the lows and held up.
H-bottoms are rare patterns but very powerful when they appear. On that basis, I recommend taking the long side of this stock. I’m already long MELI common stock and call options from Friday..
And furthermore, I’m currently mulling over a stock trading subscription service around this idea. There are still a number of details to work out, and I haven’t definitively decided on anything yet.
If I decide to launch a product around the idea of getting a jump on stock earnings, I’ll hold a webinar to inform you about my strategies and send you an invite.
In the meantime, you can “get the jump” on that potential future announcement by booking at spot at my LIVE 2-Day Bootcamp where I’ll demonstrate exactly how to make trades just like the ones I’ve outlined here, including my “Lazy Trader’s” 5-step execution plan. That’s the one I’ve used to pull in more than 9,000 pips in FX last year and highlight the potential winners I’m showing you today.
Remember, these exact same patterns show up just as profitably in the stock market too.