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Tricky Week For Trading
This is a tricky tricky week for trading. The technicals, according to the S&P 500 which is my number one choice of index, are very bullish. However, hanging over the heads of the market is the Fed. Tapering is on the table, is is definitely coming soon and we may get a taste of it come Wednesday. So far, tapering and taper fear has been the cause of numerous small sell-offs and knee-jerk reactions. It has also managed to keep the markets in check, more or less. The broad market, as represented by the S&P 500, has nearly reclaimed it’s all-time high level. This level is the only technical resistance the index faces and is also a prime location for a major reversal to place.
I’m not saying that a reversal is going to happen. I’m not saying that I have reversed my bullish position because I haven’t. I still believe the economy is getting better, that jobs are growing and that the long term trend is still up. What I am saying is that with the FOMC meeting and the all the hype built into plus the eerie conjunction of the index reaching 1700 again the same week as the taper meeting makes me a little nervous. It is just to hard to say how the market is going to react to the FOMC news Wednesday, taper or not. If taper yes this means less financial support for the markets and potentially higher interest rates, something seen by many as bearish for the markets. It also means that the economy is OK, OK enough for the Fed to slow down aid. If taper no it means easy money and loose policy is still going strong but it also means that the economy is not doing well.
Like I said, I am still bullish on the markets. The economic data is getting better all the time. There has not been any one data point that has shown serious improvement but the trend is improvement across the board and on an international level. Tapering is likely factored into the market and won’t matter one way or the other but I don’t want to take that chance. Because long term direction is in question and could change this week while we are all watching I don’t feel good opening any long term positions. Because this column is about trading weekly and monthly binary options positions this means I will not be trading the Geek account this week. This does not mean there are not opportunities for binary traders because there are. This is probably one of the best weeks I have seen in quite some time for short term traders. I think most assets will remain contained between supports and resistances up until the meeting. After the meeting I expect to see some volatility that may last into and through Friday. After that the longer term direction should be more clear. Until then here is my analysis for my favorite assets and how I will be trading them up until and then after the Fed meeting. I will be using charts of 1 hour and 10 minute expiries to look for signals and entries respectively.
1. S&P 500
Long Term Weekly Chart – MACD momentum is still bearish. Previous bullish peaks are divergent from the trend. Stochastic is also diverging from the trend at this time. There is an impending bullish crossover so this indicator is still neutral.
Short Term Daily Chart – MACD is bullish and rising, stochastic is bullish and rising. Both indicators are also currently divergent and could indicate resistance or a top if new peaks are not made.
Analysis – The taper question is hanging heavy over the market. The index appears to be moving higher but indicators suggest that longer term bearishness is lingering. The current all-time high level is the critical resistance at this time. A break above would be bullish for the next 3-6 months. A failure to break above or to remain above the all time highs would be bearish. A drop from these levels would put the index in danger of a double top reversal with a neck line in the 1625 area. Look for the index to move up from the 1690 area and to fall back from the 1705 level ahead of the Fed. Look for a break or failure to break 1710 after the Fed.
Long Term Weekly Chart – The long term down trend is intact. The recent relief rally and subsequent bullish MACD spike are now subsiding. Stochastic is also indicative of weakness.
Short Term Daily Chart – The metal has been moving down since failing to hold the $1400 level. Indicators are bearish and point to lower prices.
Analysis – The metal is now sitting just above support at $1300. The taper question is having a big impact here as well. I am looking for gold to trade higher from the $1300 level and lower from the $1425 level ahead of the Fed meeting. Once the announcement is made look to the $1300 level for guidance. A break below will be bearish with a target down near the $1225 level. A bounce would be bullish longer term with a first target near $1400.
Long Term Weekly Charts – Longer term bearishness is persisting here as well. MACD is bearish but in decline, stochastic is near the middle of the range and oddly flat. The pair broke out of its long term triangle formation but with fairly neutral candles.
Short Term Weekly Charts – The triangle break out looks a little stronger on these charts but has not made it past the next resistance. Indicators are turning bearish here as well and could lead to lower prices. Support exists at this time at the short term moving average and the top of the aforesaid triangle formation.
Analysis – The yen is weakening against the major world currencies. The break out of the triangle is proof of that. The taper is placing resistance on the trade though. If the Fed tapers then the dollar should strengthen and this pair should rise. If the Fed doesn’t taper then the dollar may weaken and this pair may fall. Until then I am looking for the USD/JPY to trade up from the 99 level and down from the 100 level. After the meeting the 100 level will be important to watch. A break above will be bullish with a target near 105 and then 110. A failure to break above will find support at 99 and 97.50.
Long Term Weekly Charts – This pair is range bound in the long term. The pair has been trading 1.2800 and 1.3500 for nearly a year. MACD and stochastic both support this. They also show that the pair is now very near the top of that range.
Short Term Daily Charts – This chart also shows a range bound asset. Indicators are both pointing up at this time but are both also very weak and suggest the top is close. The recent candles concur, the long white wick formed on Monday shows that sellers are above.
Analysis – This pair is trading near the top of its range. The FOMC meeting and tapering (I am so tired of saying tapering) could change the fundamentals in this pair, or at least change the outlook for the fundamentals. Until the meeting I am looking for this pair to trade up from the 1.3300 level and down from the 1.3750 region. After the meeting the 1.3300 level will be the important one to watch. A break down here could take the pair back down to the bottom of the range.
More Tips by the Geek – 9/16-23/2013 Trading Tips On Forum.
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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