Tip from the Geek – Top 5 Binary Options Trading Tips 01/27-02/03/2014
Market Correction And The Fed
Last week the market began a correction that we all have been aniticipating in one form or another. I thought the market would at least wait for the Fed but it turns out some participants were a little over eager. The FOMC meets again this week with several important events on tap. First, it is the last meeting to be presided over by Ben Bernanke. It is the end of an era. Ben ushered us through the 2008 financial crisis and orchestrated massive amounts of economic support in order to rebuild the economy. Second, Janet Yellen will be present at this meeting and takes over as chairman. She is sympathetic to Bernanke’s policies but still an unknown in terms of what she is actually going to do. Last, the FOMC is going to do something and say something about the economy, QE and tapering. Most importantly will be the taper. As I see it they have three choices; increase QE reversing the current taper, keep the taper at $10 billion until next meeting or increase tapering another $10 billion.
It is a little known fact that whenever the Fed unwinds loose economic policy it always crashes the markets. This could be a reason behind last weeks 3% drop in U.S. equity prices. At the same time however earnings growth is starging to look pretty good in 2014. The current earnings season started off without much to cheer about but since then I have seen many more impressive reports than disappointing ones. Today for example, Caterpillar reported quarterly EPS of $1.54 versus the expected $1.28, a 20% beat. Revenues for the quarter were over a half billion better than analysts predicted and the company says 2014 is promising. The combination of FOMC, FOMC meeting, tapering and earnings is going to make a volatile combination this week and possibly into the short term.
1. S&P 500 Breaks Support
SPX
Call/Put = Put
Entry = Above 1790
Expiration = One Week
My Trading Advice
I won’t deny that I am a long term bull and I still hold that position. At least until the long term trend line is broken and there is some form of confirmation and a change in the underlying fundamentals. The FOMC may cause a correction but the earnings, as well as other economic expectations, are perking up for 2014. This does not meant that today is the day to start initiating any new long term bullish positions. The drop in the SPX on Friday was very bearish and could have long term implications of its own. We’ll have to wait a little while to see about that.
At this time it looks as if the index is going to be moving down to retest the long term trend line. The trend line (the one I have drawn, they can be subjective) is about another 35 points below Friday’s closing price. The action on Friday broke a short term support line I have been watching alongside a bearish increase in momentum. The indicators are not strong at this time so I am fairly confident the trend line will at least provide support in the short term if not reverse the current correction. Until then I am going to trade a put with a target entry above 1795 and one week until expiry.
2. German DAX Falls With U.S. Markets
DAX
Call/Put = Put
Entry = Above 9375
Expiration = One Week
My Trading Advice
The DAX held its ground in early Monday trading but it is indicated down in the near term. On top of that the wieght of falling U.S. markets will surely add downward momentum. The bright side is that EU economic data has been improving and earnings are also looking better. I am trading a put this week based on the short term correction but maintain my longer term bullish stance. My target entry is above 9375 with one week until expiration.
3. Euro Testing Support
EUR/USD
Call/Put = Call
Entry = Below 1.3675
Expiration = One Week
My Trading Advice
The euro gained some strength last week and reversed an apparent down trend versus the dollar. The pair is now sitting above a long term support/resistance line and has bullish indicators. Momentum is on the rise and stochastic is moving higher after making a bottom near the lower signal line. I am trading a call on this pair for the week with a target entry below 1.3675. Weakness in the emerging markets makes has been helping the euro.
4. Kuroda Boosts Yen
USD/JPY
Call/Put = Call
Entry = Below 102.75
Expiration = One Week
My Trading Advice
Last week the BOJ and Governor Kuroda gave the yen a big boost, even though I am sure they did not mean to. The banks long term plan is to devalue the yen in order to boost exports and economic growth. The plan is working, according to their statements, and there was no need to increase QE. Many pundits disagree but regardless, the BOJ plan and Abenomics has a two year time horizon that is not even half up. There is still a lot of BOJ QE to come, the long term trend is still up. In the near term, the USD/JPY is sitting on support and oversold in the near term. I am trading a call on this pair with one week until expiry and a target entry below 102.75.
5. False Rally In Gold
Gold
Call/Put = Put
Entry= Above $1260
Expiration = One Week
My Trading Advice
The rally in gold is not to be trusted in my opinion. For one, there has been no retest of support which is a must for a long term technical stance. At this time the metal is testing resistance, driven on fear and speculation over the fed. Tapering is dollar positive and that is gold negative so I am trading puts again this week. I am targetting entry above $1260 with one week until expiration.
More Tips by the Geek – 01/27-02/03/2014 Trading Tips On Forum.
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That’s it for this week; Michael will be here next week with fresh trading tips. Meanwhile, we will be testing Michael’s tips to see what kind of an “expert” he really is. All trading assets and expiry times featured in Michael’s trading tips are based on CommuniTraders Binary Options Trading Platform.
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