Prime AUD/CAD Selling Opportunity At Hand

Last updated 11/2/2009 3:41 PM EST (GMT -5) 21 Comments

FX360 Technical Analyst Staff

Technical Analyst, GFT

Earlier this week, long-term AUD/CAD& nbsp;triple top resistance was highlighted (" AUD/CAD Hits Triple Top, Ready to Drop ") serving as a sign of a potential shift in long-term trend. At that point in time prices had started to fall of the major resistance near .9840, and were testing 30min bull trend line support. This opened the door for a "...quick rally to Fibonacci resistance (see 30min chart) before prices take another turn south." Prices did in fact post a quick rally touching 61.8% resistance near .9800 before taking a sharp drop break through the 30min bull trend line and bottoming out around .9665. Which leads us to the current rally…bulls are now re-testing that same 98.00 barrier providing an ideal pull back opportunity to enter/re-enter this short as we look for the broken bull trend line to now provide resistance. Additionally, .9800 also reflects 78.6% resistance of the initial drop from the triple top (.9839 down to current bottom near .9665), and a potential double top in and of itself.

In terms of risk, there is may still some room up to .9860 based on the April 2005 top—the highest exchange rate the aussie has seen against the looney in nearly 6 years (since the first week of Jan 2004). From a risk/reward standpoint we have an excellent trade opportunity at hand with initial targets at .9450 and .9200 and long-term targets as low as .8800, .8500, .and 8180. As always, it's important to remember that a good trade is not the same as winning trade. There are no certainties in trading, which is why disciplined risk/money management is critical to sustained profitability and overall trading success.

Potential Strategy: Sell AUD/CAD at market (currently .9792) risking .9865 targeting .9450, .9200

(click here to see Tuesday's weekly and 30min charts)

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Comments (21)

fx-naija

October 29, 2009 at 05:08 PM ET

nice and simple analysis. there was even a visible head and shoulder on 1hr TF that gave entry
nice

fx-naija

October 29, 2009 at 05:12 PM ET

nice and simple analysis. there was even a visible head and shoulder on 1hr TF that gave entry
nice

buphalo

October 30, 2009 at 01:00 AM ET

Tthank you my friend. Excellent spot.

juanflorez

November 02, 2009 at 01:16 AM ET

Hi,
I see two big risks here:
1- The AUD/USD touched and bounced the support line today (does it mean that it will bounce in all the AUD pairs?)

2- How do you see the future anouncement from the Australian bank where they may actualy raise the rates again? Is it time now to tighten the stp, losts?

3- There was aviolent bounce at 0,9658... Do you think it will go to those levels again before the Australian bank makes the anouncements tomorrow?

Any way, so far so good.

cheers!
J-

Stevie G

November 02, 2009 at 12:38 PM ET

Roger: Please pardon me if you have answered this already but, I saw someone asked a question about your thinking on the AUDCAD and the RBA announcement and comments tonight. As a technical trader, do you consider those things prior to recommending a trade or do you adjust stops or limits based on those things after entering a trade? Thanks, Steve

rstojsic

November 02, 2009 at 02:05 PM ET

hi juan,

1- no :)

2- i make a conscious effort to completely avoid any forward looking news or news related commentary, especially when it concerns what "may" happen in the future, so i'm afraid i'm not of much use there. boris and/or kathy are far better suited to provide feedback on the fundamentals. from a technical standpoint, i would typically look to tighten stops once a key level(s) of support is broken (this may be previously established support like the .9658 level that you mentioned, or failure of an emerging bullish geometric pattern, for example) or when an intial target is hit.

3- i think it's pretty common to see sideways movement/consolidation prior to interest rate decisions, so it wouldn't surprise me if prices re-tested this established level of support (approx.9675-.9640).

Big A

November 02, 2009 at 02:39 AM ET

I went short at 0.976 which means one thing. The AUD will gain strength over CAD. We all should have gone long. I say this as I have an almost perfect 100% failure rate with Forex lately. If a trader can never be right 100% of the time, how come I am wrong 100% of the time?!

juanflorez

November 02, 2009 at 05:47 AM ET

Well, Big A, if you apply risk management, you only need to be right less than half % of the time to make money here :). May be you enter a little late in this one... but the good news are:
if you are ready to loose around 100 points if this trade fails, you may walk away with around 300 if it reaches TP1. which is still good.
But don't let your emotions take the best of you... If you made pace with your wallet, and those 100 points can be lost, hang on there and hope for the best---

cheers!
J-

rstojsic

November 02, 2009 at 02:29 PM ET

that's pretty hilarious, Big A, but be careful if you feel your emotions are running high, which is disastrous. it's times like these where it's especially important to stay consistent and disciplined (assuming you've been consistently applying a disciplined strategy prior to and throughout your current slump, which is almost never the case). everyone has slumps/draw downs sooner or later so don't get too discouraged, and most importantly, don't get desperate. disciplined money/risk management is key during a slump. i find that its helpful to remind yourself that if you flip a coin and get 8 out of 10 heads it doesn't mean you have an 80% chance of getting heads. moving forward. this may seem totally obvious, but this is the difference between traders and gamblers,... gamblers will bet that after several consecutive heads flips there will somehow be a higher probability of a tails to come up even though we all know the odds are 50/50 no matter how many consecutive heads you flip. traders rely on probabilities and play the numbers game.

djcash

November 02, 2009 at 05:56 AM ET

I also went short at 0.9761.
It could be that this set up is a slow burner. if you look back to the last peak, it spent part of May, June and July 2008 before it finally dropped down. Maybe we just need to hold on wait.

Dave

rstojsic

November 02, 2009 at 02:35 PM ET

good observation, djcash. as noted in the original article, (see 'AUD/CAD Hits Triple Top, Ready To Drop')....."Keep in mind that this analysis is based on weekly chart price volatility, so "temporary" is a relative term as this potential correction may last up to several weeks."

Big A

November 02, 2009 at 09:09 PM ET

Thanks for the comment Roger. I have learned from some past emotional errors (that have cleaned out my account) trying to get even with the market is not a good decision :) I am new to trading (1 year now) and think that the discipline lesson is the most important one to master, and the most difficult. I do ensure that the money I am risking is affordable to me, so I see my losses as paid lessons in a way.
My wife sees trading as just making me an irritable b&^%*rd, :) !

fxnewbie

November 03, 2009 at 08:15 AM ET

Big A - while I didn't have 100% strike rate, I have to agree that I could certainly be on your camp! :o) For me, every time I decided to increase my exposure, I usually ended up messing up.

I saw that the MACD in H4 chart finally turned negative - and so (smack me on my head, please) decided to add my short exposure to play a shorter downtrend within this bigger one. So, that probably means that I messed it up for everybody this morning! :o(

MDion

November 03, 2009 at 04:51 PM ET

MDion
Hi Roger, a week ago when you published this article i got so excited and ignored your instruction and jumped into a short trade, the result was being -140 pips, down but then i read your instructions carefully and placed my second order on 9838 and then everything worked out as you thought it would, almost six months ago you had a similar setup for EURJPY and i also got some pips from that setup too, thanks for that too, :-)

rstojsic

November 04, 2009 at 04:45 PM ET

thanks, MDion, always great to hear such positive feedback.

m.hollingshaw

November 04, 2009 at 03:33 PM ET

I just got the update on the trade and was wondering, given the stop now being break even for you would that invalidate or make unwise a trade using your current break even as a stop for someone who (of course not me) missed the entry point? thanks

rstojsic

November 04, 2009 at 04:58 PM ET

excellent question. yes, the current break even stop is still a solid exit for new shorts based on current price action as it's well enough above the 78.6% correction of both the CD and AD swings. but the question you really have to ask is does it make sense from a risk/reward standpoint based on whatever your entry is.

sky

November 04, 2009 at 06:05 PM ET

I cannot afford much risk,,so I use 35 to a 57 pip stop loss, I did proact trading charts for 3 months, I enjoyed that, then started GFT 's data, and I prefer GFT more now.. The staff here usually are on target with their entry points and tp points. I'm looking forward to the AUD/CAD doing well,,,ty Roger,,,keepup the good work,,,,Sky

djcash

November 06, 2009 at 06:53 AM ET

I'm out of this trade now due to the rise. I was wondering whether we could enter again should the price get near to the original entry point again? Presumably as long as the original triple top level is not invalidated then this trade is still valid?
I would be grateful for any thoughts on this.
Dave

Big A

November 06, 2009 at 10:33 AM ET

Ha, see my bad luck still runs!

Big A

November 06, 2009 at 11:42 AM ET

There are a couple of long bars reaching into a retest of the recent double top. Possibly making a shorter term triple top coinciding with an rsi of 70. Could see a test of 0.9860. If that holds then a short is of interest. Or resistance at 0.983 may hold, however looking at the momentum up to this level I am going to be patient for now. If the top doesn't hold, why not a retest of the 2004 high of 1.0546 in the coming weeks?

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