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Good day traders!

The growing anxiety among my fellow friends and students lately on the fundamental issues have somehow make me smile. I remember giving seminar to more than hundreds people on the “what’s move the price” topic only to be asked when to start the technical subject. It is at my concern that we learn and understand  the fundamentals that moves the price before we even jumped into the technical.

On the latter technical analysis class, I decided to teach my students based on Jim Wyckoff analysis. There are even more jargons that they are not used to. Words like risk off and risk on are undoubtly the most usual suspect. Its economy 101 with supply and demand as the basic underlying factors after all.

So, what is risk off and risk on? I’d personally emailed Mr Jim Wyckoff regarding this matter so I think I would like to share his explanation with you, my readers. Attached is the original writings from Jim himself. Take some time to read.

Risk off and Risk On

Where are the bargain hunters?

With current low price of the yellow metal, buyers should have entered the market by now. But nothing is supposed to be “normal” in market. That’s what make it so special. Before you can expect any buyers coming in, you have to actually know where the buyers are coming from.

My focus now is on India’s purchasing power, in which at this current time are limited by the weak rupee. I recommend more readings at these sites:

• http://www.hindustantimes.com/business-news/Markets/Falling-rupee-rising-tensions/Article1-856297.aspx
• http://economictimes.indiatimes.com/markets/forex/why-rupee-has-been-the-worst-performing-currency-among-emerging-market-peers-in-asia/articleshow/13156854.cms
• http://economictimes.indiatimes.com/markets/forex/rupee-hits-new-5-month-low-record-in-sight/articleshow/13161011.cms

And why is India very important? This picture would explain everything.

India Power

And for those who are expecting good news from gold, maybe this article would cheer you up.

• http://economictimes.indiatimes.com/markets/commodities/gold-will-bounce-back-may-give-10-15-returns-experts/articleshow/13157731.cms

Its fundamental after all. Happy reading folks!

Shufaad

Gold Daily

As you can see from the chart above, I drew a fibonacci retracement level from the lowest price in 2011 till the highest  on the same year. Then there is also another support level stands at 1522.55, which is our Dec 2011 low. And as I’m writing, price stands at 1537.20, which is actually below our golden ratio (61.8) but slightly above our Dec 2011 low. With this current development, we can say that the current price is traded between our trading range of 1542.25 (61.8%) and 1522.55 (Dec low). How interesting!

Now let’s look on the pattern point of view.

Buying pressure

On both occurrences, we saw that the price had significantly drop lower only to be caught by the bargain hunters. On the first attempt to break the golden ratio level, we can see how strong the sellers was by the size of the first candle before the hammer pattern emerged. Price than move back above the 50.0% retracement level and hovering there for quiet some time. On the second attempt, although it managed to chalk lower price than before, the close price for the hammer candle is above the 61.8% level. The next day, a bull candle open slightly above the closing price and it then close above the opening predecessor price to form a long dawn line pattern, a strong reversal signal.

As the price is still in the mentioned trading range, I can neither say its going down nor its going to reverse. On the pattern point of view, we have to wait for today’s candle to close. If there’s no buying pressure, it likely that gold will continue to fall below 1522 and headed towards psycho level 1500. But if there is buying pressure, I would like to see what kind of pattern emerge; is it strong one or just a consolidation pattern. So close price for today is very crucial.

On the momentum indicators point of view, both my RSI and Stoch are oversold. One thing you need to remember, oversold DOES NOT signal a buying position. It is a way of telling that the supply have exceed the demand of that current security. MACD is also pointing lower, with no divergence or crossover signal .(For spot trading purpose, my main strategy include crossover and divergence).

Gold Momentum

Now lets look on the volume side.

Gold Volume

Thrice the volume expands accordingly to price down trend, which signals a healthy sellers are in the market. A selling climax pattern were actually formed on the first time gold hit the 61.8% fibo level. The latter two signals sellers agree that the current price should move lower.

Conclusion; technically gold is moving lower inside a trading range that I’d mentioned above. Breaking either levels of the trading range with an emerging of candlestick pattern would signal more movement, either going up or down. It’s a fundamental game after all.

Shufaad

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Good day traders!

If you’re one of my Technical Analysis student, you might heard of this recently introduces system that I apply onto my analysis. I named it Support and Resistance Rating System. The system is build from the Balance of Probabilities rules that incorporated the basic of price action and fibonacci studies.

Before I begin to explain how to apply the system, lets look at the Balance of Probabilities rules. The rules is use to identify whether the established price level is strong or not. If it does, then a bounces off that level are more likely to happen. Conversely, it will break the levels accordingly to the price trend. The rules are:

1. How often the price go to that level and bounces off. The more, the better.
2. How long the price has been trading in that vicinity. The longer, the better.
3. How recently that level had been visited, reached and hold strong. In simple word, tested. If recently, then it is more likely to hold up for further testing.
4. Check the amount of trading volume where the level was reached. If the volume is high, you can sense the present of the market players at that level.
5. Is it near the psycho level? Or maybe a retracement level? If yes, then pay most attention at that level.

The Support and Resistance Rating System is based on a scale of 1 to 5, with 1 being the most probable to break, and 5 means the level will hold strong and it also means it is a level to watch. The rating system is created using the Balance of Probabilities rules only and can be enhanced to the next level using other technical tools. It depends on the traders experience and willingness to learn.

Ok. So now I’m going to show you how to apply the rules in our favorite counter, which is Gold.

Support and Resistance Rating System

Explanation are as follow:

$1532.64 – $1522.55: Point C is the lowest price from the historic drop. Priced at $1532.64, it proved to be a bargain price for buyers at that time. Price went flying back to $1800 (point G) in less than 2 months. It is not until 29 Dec 2011 (point K) where price re-challenged the level and managed to squeeze few dollars more from point C. Now, it was priced at $1522.55, a 10 bucks more than the previous level. And needless to say that, buyers are lining up to buy their shares at this level and push the price towards the psycho level $1800 back, only now it short $10 (point N). The $1532.64-$1522.55 is our key support. SRRS: 5

$1558.07:  Point A, priced at $1558.07 (22 June 2011 high) served originally as a resistance level. It didn’t hold that long as it were broken on the 12 July 2011. The same level came back into the picture with a different role, now serve as a support to hold the biggest drop in gold price on the 26 Sept 2011. But it is not a strong one where the price break the level convincingly and then create a new low at $1532.64 (point C). On the 15 Dec 2011, it came back as a support (point J), and was broken on 29 Dec 2011, shown by point K. SRRS:1

GAP ZONE: A very,very crucial zone indeed. Of course in my technical analysis seminar, I only explained about the importance of price action and fibonacci levels. But for more advance students, gap is something you want to explore more. A gap zone is created on the 8 Aug 2011 from $1663.11 to $1683.45.  The zone were first tested when gold reached it’s first parabolic price above $1900 and drop more than $200 in a 3 days sell off. Luckily, the psycho level $1700 was there to hold the drop, as shown in point B. The second attempt to break the level came at 23 Sept 2011, which is actually a part of the biggest drop in gold price history. What is more interesting is that the zone were broken by candles with attitude; a long black (red) candlestick. The price than hovers back at the zone for quite some time as shown at point D before it tumbles back to point E, where the psycho level $1600 serves as a support level. A strong bull move managed to break the zone, again shown with a long white (green) candlestick, on the 25 oct 2011, before a short correction occurred and the upper level of the zone served as a support level (point F). The zone were tested again on point H, broken to the downside again on the 12 Dec 2011, back to the upside on the 25 Jan 2012, serve as support at point O and broken to downside on the 14 Mac 2012 and were tested numerous time till now. SRRS: 5.

Psycho level $1600: As the name suggest, this level proves to be more psychologically important now than before. A break below this level would signal more bearish to come from the yellow metal while providing the best spot for the hunters to camp.Point E was the first support price at this level. Both point P and Q are short around $10-$20 respectively.  SRRS: 4

$1612.22: Shown at point P, this level needs to be broken before any move towards $1600 can even be considered. Buying at this level is recommended. SRRS: 2

$1623.14: Another new support level from the price. It has been tested 2 times in 3 days. On both occasions, hammer was formed, signalling buying pressure from buyers. Point Q is the price to watch in near term. SRRS:3

Psycho level $1700: Once a support at point B, this level seems to be the level to beat by both buyers and sellers. In many occasions we can see both the long black and white candlestick cutting above and below the said level.  Only recently (27 Mac 2012)  that the level served as a resistance level. SRRS: 3

$1762.97: It started with point I, where it serve as a resistance level. Technically, it was a pullback level of point G to point H. This is a very memorable level for the seller because from here onwards it opened up more downside pressure, as shown in the presence of multiple long black candlesticks. Another attempt to break this level were made on the 3 Dec 2012, shown in point L.  The drop were short live however when it bounces back to point N before a mighty long black candlestick breaks all the barrier. SRRS: 5

Psycho level $1800: This is my key resistance level. Point G is the point to break before any movement to the upside is allowed. To make it more interesting, point K is the lowest price from the drop originated from point G. And from point K, the next attempt to break the psycho level was made (point N) but failed. This is worth of selling. SRRS: 5

Based on this rating system, its up to you to deploy your own trading strategy. Some might use pullback, some would prefer a breakout. Others would look for divergences. Whatever it is, stick to your trading plan. That what make us traders.

Happy Piping!

Shufaad

p/s: To make this analysis more interesting, why not drawing the fibonacci levels yourself based on the 3 fibo levels that I’d mentioned in my early post. It should be an eye opener!

One of the fundamental news that I closely watch is the Purchasing Manager’s Index or PMI. Last time PMI were on the 22 Mac and it took the precious metal to the floor.

What is PMI actually?

The PMI is a composite index of the manufacturing situation that includes; new orders, production level, employment, supplier delivery times, and inventories. Data for this index, which is essentially a sentiment indicator for the national manufacturing sector, are obtained through surveys of purchasing managers. Like the Durable Goods Reports and the Industrial Production Report, PMI releases are important to the foreign exchange and metals (gold and silver in this case) because they provide a good measure of the manufacturing sector, which is an integral component of the economy, whether it is the US, the Euro, the German or even China.

So, first off you need to know where you can get the data. As a trader, many would prefer to read it at forexfactory.com. It’s a primary source for fundamental analysis. And have I told you that you’re going to see one tommorow?

US PMI

On the other hand, you can also read it directly from markiteconomics.com. You can read all the PMI details here.

Markit Economics

Now you know where to find it. Next is how to read it. Isn’t that important too? OK. So let’s say we scroll down and click at China: HSBC China Manufacturing PMI dated 1st April 2012. You will eventually download a PDF copy of it.

China PMI

According to this PMI release, China PMI is at 48.3, down from 49.6, in which it means the economy is contracting. And for China alone, it means five consecutive month to month deterioration in manufacturing operating conditions. And it doesn’t look good.

To make matter even worse, US’s PMI looks good, at least it hold above the 50.0 level which eventually means the economy is expand.

So bad data for China and relatively good for US. In terms of gold index, more sellers to be seen with no fresh new orders and also a stronger USD is expected. I wonder which support could hold the price?

Gold Daily

Happy Piping!

Shufaad

1. Kelas Pattern and Strategies: Gold, Silver and Commodity Currencies akan di adakan pada 2 April di Batu Berendam Melaka. Fee RM500.
2. Kelas Analisis Teknikal Harga Emas akan di adakan di Hotel Park Avenue, Sg Petani pada 7 April ini. Fee RM300.

Hubungi saya untuk pendaftaran. TQ

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Good day traders!

When trading intraday breakouts, or when engaging in any type of trading, for that matter, it is important for traders to use every type of advantage possible. We want to search for situations in which the odds are in our favor and then take action.

Breakouts falls into three general type; real breakout, false breakout and pre mature breakout. A real breakout is spotted by an upward or downward movement of the price in a more convincing fashion. That is to be said, it is represented by either a long white or black candlestick or better, a marubozu. This is what we called candlestick attitude.

A false breakout occurs when the price appears to break below support or above resistance, only to rise back above support or fall back below resistance. A premature breakout is somehow between this two breakouts. First it break the support/resistance level, then it rise/fall back to the levels, only to continue its breakout direction back.

In trading the market, consolidation patterns exists in many forms such as:

Consolidation Patterns Diagram

For today’s purpose, I shall explain the ascending and descending triangles patterns.

Ascending and Descending Triangles

These two patterns create excellent intraday breakout opportunities, because the pattern itself establishesa directional bias for the currency or commodities pair.

An ascending triangle is formed by a combination of diagonal support and horizontal resistance. The diagonal support is drawn by using the trendline tool.

Ascending Triangle

In the case of this pattern, the bulls are gaining strength and buying at higher and higher levels, while the bears are merely trying to defend an established level of resistance. Since the bulls are more aggresive than the bears, they are more likely to prevail in this battle. The odds favor a breakout to the upside.

A descending triangle on the other hand is formed by a combination of diagonal resistance and horizontal support.

Descending triangle

In the case of this pattern, the bears are gaining strength and selling at lower and lower levels, while the bulls are merely trying to defend an established level of support. The bears are the more aggresive party in this case, so the odds favor a breakout to the downside.

Trend filter

When trading these patterns, traders can gain a further edge by:

1. Checking the direction of the currency pair prior to the formation of the triangle pattern;
2. The time of the day filter.

On top of that, to be able to understand the buildup before the breakout would be essential in forecasting the breakout direction.

Happy piping!

Shufaad

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Good day traders!

This article is purposely written on how to understand the Wyckoff’s Market Rating System based on Jim Wyckoff’s writings. The idea of having this article appeared after my technical class in Kuala Terengganu. I did explain a little bit about how to read Jim’s technial analysis, as I did before this, and I think it’s better for me to have on the blog, for educational references.

Firstly, reading a report is not hard. After all, anyone can read. But to understand it and having to translate it in your technical analysis is a bit of challenge especially if you have no idea on the technical terms. Lets take this paragraph for example;

“Technically, April gold futures prices closed nearer the session high Monday. However, prices are still in a three-week-old downtrend on the daily bar chart and the bulls have more work to do to regain upside technical momentum. The gold bulls’ next upside price breakout objective is to produce a close above psychological resistance at $1,700.00. Bears’ next near-term downside price objective is closing prices below solid technical support at last week’s low $1,634.70. First resistance is seen at today’s high of $1,670.10 and then at $1,675.00. First support is seen at today’s low of $1,652.30 and then at $1,640.00. Wyckoff’s Market Rating: 4.5.” Source: http://www.kitco.com/reports/KitcoNews20120319JW_PM.html

Searching for keyword is very important here. Firstly, you need to know that gold’s currently is in downtrend. Technically, you need to draw a trendline on a daily chart to see this. Now lets draw the trendline shall we?

Downtrend

When you have a downtrend drawn with a trendline, a breakout strategy implies here. A convincing breakout is shown by what I called the candlestick attitude. To regain the upside momentum, price need to close above the psychological resistance level $1700. Breaking the psycho level is important, but staying above with for the coming weeks is also very important.

For bears, a closed below the  weekly low at $1634.70 will confirm its downside momentum.

Next, we need to draw the resistances and support levels as per stated;

Support and Resistance

On the last paragraph , you need to understand what is the Wyckoff’s Market Rating. What does a 4.5 rating means? Here is some of the extract from Jim’s writing:

“Wyckoff’s Market Rating System is based on a scale of 1 to 10, with 1 being the most bearish market rating and 10 being the most bullish market rating. The number 5 would be a neutral rating. And it is not uncommon to see fractions used – like 1.5, 3.5, etc. – if conditions warrant.

It’s important to note that just because a market is rated as very bullish (8 or above), it does not mean I want to establish a fresh long position in that market. A high rating likely means a market has been trending higher for a sustained period of time, or has already seen a quick, powerful move that could mean a “correction” is near. An 8 or higher bull market is likely a more mature one – with the risks being higher for steeper setbacks and a more volatile topping process.

Similarly, a market rated as very bearish (2 or below) does not indicate you should rush out to establish a fresh short position and sell a market. It means a market has likely been in a longer-term downtrend, or has seen a quick and powerful down-move, and is at or near its contract low. It is a more mature bear market that has a higher risk of a corrective bounce higher, or even change in trend to sideways to higher.

Markets rated 4 to 6 are in the middle, and these are the markets I watch most closely, on a shorter-term basis, for trading opportunities. They are usually characterized by more of a “sideways” and choppier trading range on the daily chart, or have just backed well off from a recent up-trend high or have moved well up from a recent downtrend low.

Importantly, markets that have been in sideways trading ranges for a while – i.e., non-trending and then move to either a rating of 5.5 to 6.5 on an upside price move, or to 4.5 to 3.5 on a downside move – are the most critical to monitor on a daily chart basis. It’s at these ratings levels that most trading “set ups” occur, based on my trading philosophy and experience.  It’s at these ratings which are just above or just below neutral (5) that most “breakouts” from trading ranges occur. But remember, the market has to have been trading generally (but not always) sideways beforehand, for the best trading opportunities to present themselves.”

There you go. I hope this article would help you further in understanding how to use the Wyckoff’s Market Rating System. I have used it for some time now and I found it very useful in my trading.

Till me meet again.

Happy piping!

Shufaad

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Trading Philosophy

“All successful people men and women are big dreamers. They imagine what their future could be, ideal in every respect, and then they work every day toward their distant vision, that goal or purpose.”

— Brian Tracy: is a self-help author and motivational speaker

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Alhamdulillah, saya dah ada pun jadual untuk kelas Analisis Teknikal sehingga bulan April ini. Setakat hari ini, macam ni lah jadualnya:

1. 17 Mac 2012 – Anjung Emas 8 Kilo, Kuala Terengganu.
2. 7 April 2012 – Hotel Park Avenue, Sg. Petani
3. 28 April 2012 – Kuala Lumpur (tempat belum di pastikan lagi. Ada cadangan? )

Selain dari itu juga, bagi yang ingin mempelajari chart pattern dengan lebih lanjut, saya akan mengadakan kelas Patterns and Strategies pada 2 April ini di Batu Berendam, Melaka. Kelas ini boleh lah di katakan sebagai lanjutan kepada kelas Analisis Teknikal. Lebih padat dan detail.

Jadi apa yang terkini di dalam kelas Analisis Teknikal Harga Emas?

Untuk kelas kali ini, saya akan banyak menumpukan kepada faktor-faktor psikologi yang boleh dan akan mempengaruhi harga emas dunia. Saya akan mengupas dengan lebih dalam bagaimana peranan buyer dan seller dan apa kaitannya fear dan greed di dalam menggerakkan harga emas. Saya juga akan memberikan info bagaimana emas di seluruh dunia di dagangkan.

Selain dari itu, penekanan juga akan di berikan kepada tajuk Support dan Resistance. Untuk tajuk ini, saya akan menunjukkan kepada anda bagaimana cara nya untuk mendapatkan historical price dan bagaimanakah psycho level sangat penting di dalam menentukan garisan support dan resistance. Dan sebagai seorang trader full time, saya juga akan mengajar anda bagaimana untuk melukis dan menggunakan garisan fibonacci dengan lebih berkesan. Bagi saya, Emas + Fibonacci = PROFIT!

Lebih istimewanya kali ini adalah saya akan membuat cross platform trading menggunakan MT4 untuk:

1. Dealer-dealer Public Gold yang ingin mengetahui harga TERBAIK untuk membeli, memborong dan menjual emas fizikal,
2. Trader-trader VGMC yang ingin memaksimakan keuntungan di dalam akaun gold trading mereka, dan
3. Mereka-mereka yang ingin menceburi bidang spot gold trading sebagai kerjaya full time mereka.

Saya juga ada menyediakan satu kalkulator khas yang saya hasilkan dari Microsoft Excel untuk dealer-dealer Public Gold mengira kenuntungan mereka. Kalkulator Excel ini secara asasnya akan mengira berapakah untung (atau rugi) yang boleh anda dapat sekiranya anda membeli dan menjual pada harga-harga tertentu. Screen shot nya macam ni:

Dengan adanya kalkulator ini, saya telah memudahkan kerja anda untuk mengira pada harga apakah anda perlu jual emas fizikal anda untuk mendapatkan untung. Mudah kan?

Dan seperti biasa juga, saya ada menyediakan slide presentation saya untuk pembacaan awal mereka-mereka yang berminat menghadiri kelas ini:

Bagi mereka yang telah belajar dan ingin belajar semula, saya akan memberikan harga diskaun untuk anda. Don’t wori .

Akhir sekali saya berharap agar anda dapat meluangkan sedikit masa dan wang anda untuk melabur di dalam ilmu Analisis Teknikal ini. Semuanya bermula dengan langkah pertama dan ini adalah peluang anda untuk bermula.

Semoga kita berjumpa di puncak graf! :p

Shufaad

+60166447174