Friday 7 June 2013

Text book channels on S&P and RUT

I have been away the last 3 days. Looking back to my last post at the start of the week, the channel charts on RUT and SP500 delivered quite accurately. 

Since SP500's green channel broke down, it was retested once which was a great level to go short. The blue support that I showed in my last post was broken and retested; also a good short opportunity. The 'formerly hypothetical' orange channel's support at 1600 was also remarkable which also coincided with the support of the red channel from November 2012. This is why I like channels. They give very accurate turning points with good stop loss control.
Russell's blue channel also delivered a very good long opportunity yesterday. The broken down green channel was tested twice before continuing downwards. We will see if this channel turns to a bull flag or break down which would be the start of a major bearish move.
On Euro, my previous post showed the blue declining channel warning that a break up of that channel will deliver prices towards 1.32-1.34. We are there now and a rising orange channel has formed in my view. Any pull back towards the lower band is a good place to go long.
My bearish prediction on GBPUSD didn't deliver though. I expected the decline would resume after the correction is over around 1.53 but it kept rising to 1.56. Now we have a steep blue channel. The green resistance was tested 5 times in the past before breaking yesterday. I think it will act as support next time it is hit which would be a good chance to go long with a tight stop loss. The red channel is not violated yet but there is a big dent on it. If it is broken, I will dismiss this channel in my next posts. The most important action on GBP would be to hit the orange resistance (2nd chart) which was acting as support the last 4 years and broken down in February. If that resistance is hit, i.e. 1.58-1.59, I reckon it would be the final one before the decline resumes towards 1.40. As you may have noticed, I like charting with pencil not crayon. GBP fits the profile with pencil but Euro usually fits the crayon style. Therefore, I usually give some leeway to Euro with my channel predictions otherwise there is too many false breakouts. Hope it helps.

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