$USD Breaks Out

$USD has broken out of a small ascending triangle. On a measured move basis, target $90.00.

Breakout Comparison - ARO vs CRM

To help determine the probability of BO follow through, focus on these two key areas: 1) daily chart setup, and 2) intra-day price action around the opening range or BO.

Here are key comparisons between ARO and CRM on 6/3/2010:
From the daily charts below, both had notable daily patterns with BOs on 6/3. ARO had pulled back to form a symmetric triangle, but it was below key price pivots and below its declining 50 day MA. The CRM setup was much better technically. CRM formed a B&B above its upsloping 50 day MA. In general, a flat-top B&B in a strong uptrend is more powerful than a symmetric triangle below recent price highs. From a daily comparison, CRM carries the higher probability of follow through.


On the 15min charts below, I marked several features: 1) range/volatility of the 15min OR bars, 2) proximity of the first pullback to the 15min 5EMA, and 3) proximity of the BO level to the 5EMA. While both gapped up on the open and both had upper wicks on the OR bar, ARO was much more volatile and moved "too far too fast". CRM moved up and had an orderly pullback to the 5EMA while ARO remainded well above the 5EMA. The BO level in ARO was well extended and above "loose" price action. The BO level in CRM was much closer to the 5EMA and associated with "tight" price action. From an intraday perspective, CRM gets the nod. The result was that CRM trended up all day while ARO spent the remainder of the day consolidating the volatile OR action.

Technical Picture - Low Volume Retracement

The candlestick patterns on the $USD look somewhat bearish, so we may get a retracement back towards the trendline. This would allow energy and commodity sectors to bounce. On the S&P we need to see a move back above the 200 SMA.

Swing Trader - NetApp Inc. (Public, NASDAQ:NTAP)

NTAP is forming a bull flag on the daily (Darvis Box on the 15 min. timeframe below) following last week's earnings gap. The earnings gap accompanied by the volume spike foreshadows higher prices. Swing traders can target full extension on the daily timeframe above when price successfully breaks the highs.



What is the Darvis Box?
Trading strategy developed by Nicholas Darvas in 1956-57. Look for stocks breaking out of a base on huge volume. After the BO, price consolidates in a very narrow range - Darvis box (price/volume contraction ahead of expansion). As price breaks out of the box, enter the trade. Darvis made $2M in approx 18 months using this simple strategy.

GOLD - Double Topping Pattern

Last week we noted that GLD gapped through December's bearish island and we said that the gap should hold as support, otherwise we could be looking at a double top for GLD.

So when GLD gapped lower on the open yesterday, we had a perfect shorting opp. I prefer to trade gold stocks than the ETF, so I traded GG as depicted below.

Technical Picture - Resistance

Technical levels of interest today were the high of Thursday's WRB at $117 and the death cross of the 20 EMA and 50 SMA around $117.40. After testing and finally taking out $117.00, price rallied to the $117.40 and abruptly reversed. It formed a narrow range consolidation at the trendline and $117 level, setting up the perfect short.

I commented about this just minutes before it broke in the previous post.

The futures trade continued lower in after hours testing this morning's support. Support/resistance levels are mapped out below. The red line represents the reaction highs from Thursday's attempted recovery following the meltdown.

As I write this post, $115 ES futures is holding as resistance. That could change overnight. Futures generally pick up momentum after midnight.


Gold gapped through last December's bearish island reversal on high volume. Now the island/gap area has to hold as support, otherwise we may have a double top pattern.

I saw profit taking in large cap gold stocks such as GG, AEM, NEM... in the final minutes of the session.

$USD continues to trend higher.

Oversold bias has retraced 50% of last leg down.

Technical Picture - Markets Oversold

The charts are broken and the markets are extremely oversold following last Thursday's dive. If prices break above the intraday recovery highs as depicted on the S&P futures chart below, we could get a tradable retracement.