Tickers: $EURUSD UUP EEM EWC EWG FEZ EWT EZA EWY EWZ FXI
This weekend the Navigator focuses in on compelling trades in the currencies and world markets.
Inspiration: The Hero’s Journey
Whether you realize it or not at some point you will find yourself on the Hero’s Journey. Since we have all had a “Call to Adventure” in Trading, I can only assume we are on that path together. While many will quit along the path and never make it to the other side, others will make it and the rewards will be great. Knowing the path can only help prepare you for what is ahead and what is important to understand from the above graphic is that there are no shortcuts shown. If you know that, you will at least save time not looking for one. Please also note that finding a mentor to shine a subtle light on your path comes early in the process. Without a mentor, the journey is not impossible, but much harder. It is no coincidence that the biggest blockbuster movies of all time like Star Wars are a re-telling of the Hero’s Journey. There is a resonance there that speaks to everyone’s heart and experience. If you want to dig deeper, I found reading this article helpful. Find it HERE. You can also gain great insight from the work of Joseph Campbell. Find a quick 12min video describing the Hero’s Journey. HERE
About as dead a week in earnings as you can imagine.
Macro Data Releases Week of July 4
- Monday – Holiday
- Tuesday – Auto Sales; Factory Orders;
- Wednesday – Mortgage Applications; PMI composite final; ISM services; JOLTS; FOMC Minutes
- Thursday – Challenger Job cuts; ADP; Int’l Trade; Jobless Claims; Oil & NatGas Inv; Bullard 1pm
- Friday – June Jobs Report
Currency and World Market Review
This weekend I venture off to look at some compelling trades setting up in the currencies and world market exchanges. Charts and trade ideas below.
Macro Framework Spring / Summer 2022
Find the Blog Post HERE
Earnings Season & Bracket Trades
As earnings season kicks into gear, a reminder that this is prime time for Bracket Trades. Bracket Trades are those trades created when a stock gaps up or down from a news driven event. Bracket Trades are set up as “2nd day trades” where you alarm the high and low of the prior day’s trading range, then patiently wait for price to either break lower or higher from the range. You then follow price out of the range. I will do my best to help identify them for you, but you can easily find them yourself by doing a sort for “GAP ups” and “GAP Down” on your trading platform. I add additional filters for only stocks above $10 and at least 500,000 shares traded. You can add additional filters to cut down the sort further. Generally speaking, stocks favor continuing in the direction of the gap higher or lower.
You can find out more about Bracket Trades in the video Run the Player at 1.5x HERE.
The Euro tests Key Support
As you can see from the chart below, the Euro / Dollar currency Pair is testing key support at 1.04 which was tested multiple times in the 2015-2017 timeframe. You can also see that the all-time low of 0.85 looms below with not a lot of support in between. The 2nd chart shows the Euro Ultra short ETF on the weekly timeframe. It is testing the highs at $31.
The Trade: Alarm $31 on EUO. On a break above $31 buy EUO Calls. I’d be looking out at least 3 months with the expectation of at least an initial sharp leg down in the $EURUSD ( EUO higher ).
$USD Wrecking Ball
The USD has broken out to 20+ year highs. As shown above, it is having an effect on the $EURUSD pair shown Above. From your TA fundamentals, we see the measured move target of 116. A simple way to play this is to get long the UUP long dollar ETF.
The Trade: In the Panel below, you can see a clear line to shoot against on a breakout above $28.25. But also a strong dollar has secondary effects, namely wreaking havoc on emerging markets who often have tons of $USD denominated debt.
$EEM Emerging Markets
Price sitting at support on the high volume / price bar at $39 and a location for your alarm. . A break below is your cue to go short with the door open to $35. A doomsday scenario with a runaway $USD could push this to $29 at the covid lows.
EWC – Canada
Price consolidating at the last train station out of dodge at $33. A break below opens up the pre-covid highs of $28.50. Any backtest of $36 would be another shorting opportunity with massive OH resistance in place. I’d set alarms at $33 and $36 for head’s up on an entry point.
EWG – Germany
Has already lost key support at $24. If you can accept $1 of risk I think it is an immediate short w/ a stop just above $24. Anything short of a Ukrainian settlement, hard to see higher prices as citizens and industry alike dig in for a cold winter amidst an existential energy shortage that may include either rationing or a pricing moonshot. I’d use $24 as your pivot going forward.
FEZ – Euro Stoxx 50
Price perched on the high volume / price bar at $34. A break below would likely result in an immediate drop to $32. Below $32 and its over. While I failed to mark it on the chart, the high end of value is at $38. Any rally to $38 would probably be short lived and give you a better entry point on a short.
EWT – Taiwan
Price broke hard this past week down 7%. While there may be some consolidation here there is really no technical support until $42. Buyers were active Friday in the Sept 45 Puts and Aug 50 Puts. Use $48 as your pivot if you want to take a shot. Any rally should see resistance at $54. While setting alarms, I’d go ahead and set one there as well.
EWY – Korea
No immediate trade here but I’d set alarms at $61 and $52.50 as objective trade locations of interest
EWZ – Brazil
$25.50 setting up as a make or break level. Below lies 23, then the covid lows of $19. THat said, $25.50 is massive support. Support is support until it is broken. I’d expect at least some kind of bounce there unless the world decides to end in the next few weeks. However you decide to play it, have $25.50 alarmed. Uber critical level on the chart.
EZA – South Africa
Price approaching the high volume over price support at $41. A break below opens up $34. Another example of how a fake breakout at $52 and re-entry of the old trading range targets the bottom of the box at $41. We missed this one, but it is instructive that if you can catch ne of these set ups, they tend to be great risk / reward opportunities.
FXI – China Large Caps
One market bucking the bearish world trend is China. The KWEB and stocks like BABA have found a bid. THe question is, can China continue sustainably higher or does it succumb to the global trend? I think the key level to watch is $36. That is where the big resistance lies. A strong break above would target $41 at the far side of the value range. On Friday a whale SOLD 140,000 of the Aug 37 calls for 58cents on the bid so at least that guy thinks this run is ending. We know one thing for sure…$36 is the key level to watch. Set an alarm there.
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