Charting Asia with Daryl Guppy

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  Monday, 16 Jul 2018 | 9:02 PM ET

Never mind the pullback, technical analysis shows oil is headed for a rebound

Posted ByDaryl Guppy
The Philadelphia Energy Solutions oil refinery in Philadelphia.
David M. Parrott | Reuters
The Philadelphia Energy Solutions oil refinery in Philadelphia.

The NYMEX oil price pulled back to the long-term uptrend line and then developed a strong rebound rally.

That behavior is consistent with a continuation of the long-term trend. It suggests that the recent pullback in the oil price is not an opportunity to go short in anticipation of a trend change.

The price has pulled back from $74 to around $70. This pullback takes place within the environment of a well-established uptrend. Investors watch for the opportunity to add to long positions as the price rebounds from any of the three support features on the oil price chart. The upside target for the trend continuation is $76.

The first support feature is the long-term support level near $65. That level was the support base for the most recent strong rebound rally.

Oil has a well-established pattern of moving in trading bands. The first trading band starts with the strong support level near $43 and resistance near $54. This makes the trading band around $11 wide. Applying the same trade band projection methods gives a long-term target near $76.

The second feature is the location of the uptrend line. It was tested successfully in June 2018 and acted as a base for the recent rally rebound. The current trend line value is around $68.

The third feature is shown with the Guppy Multiple Moving Average indicator.

The long-term group of averages is well separated and this shows strong and consistent investor support for a rising trend. When price retreats, then investors come into the market as buyers. That is the most consistent trend support behavior shown in the GMMA indicator on the oil chart in nearly a decade.

The degree of separation between the long-term and short-term GMMA indicators is also steady. Such a consistent degree of separation is a characteristic seen with stable trends. That again suggests that the current retreat is temporary rather than the beginning of a trend change.

The short-term group of averages, which reflects the way traders are thinking, shows a low level of volatility. The group is not characterized by rapid compression and expansion. That shows traders are buyers whenever the price falls, which tells us that traders are also confident that the uptrend will continue.

Those support features and the trend strength features all suggest that the oil price is experiencing a temporary retreat. The longer-term trading band target is near $76 and potentially higher. It is higher because the $76 level has no history of providing strong support or resistance.

We use the ANTSYSS trade method to extract good returns from the trend behavior.

Daryl Guppy is a trader and author of Trend Trading, The 36 Strategies of the Chinese for Financial Traders, which can be found at www.guppytraders.com. He is a regular guest on CNBC Asia Squawk Box. He is a speaker at trading conferences in China, Asia, Australia and Europe. He is a special consultant to AxiCorp.

For more insight from CNBC contributors, follow @CNBCopinion on Twitter.

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  Tuesday, 3 Jul 2018 | 1:07 AM ET

The Dow has lost its momentum

Posted ByDaryl Guppy

If anyone can win a trade war, then somebody forget to tell the Dow. The opening shots of multiple trade and tariff wars have been fired at friend and enemy alike and the Dow does not like what it sees. The threat of those trade wars was enough to bring to a crashing bend the multi-year uptrend in the Dow in 2018 February. The Dow has never fully recovered, although it has not yet started a new downtrend.

The 2018 fall in the Dow set the downside edge of a trading band. That is near 23,300. In a strong bull market this fall would be followed by a strong rebound and a continuation of the long-term uptrend. That did not develop.

Instead, the Dow developed a weak rebound that encountered strong resistance near 25,400. That has formed the top of a new trading band. The strength of the trading band was confirmed in June with the Dow retreat from 25,400.

The Dow had a strong and consistent uptrend that started in November 2016 and ended in January 2018. Since that month, the Dow has moved in an unremarkable and lethargic sideways trading band. There have been strong rallies from the bottom of the band to the top of the band. They have been followed by equally strong retreats and retests of the trade band. In an important sense this activity shows indecision. The market does not welcome Trump's trade wars, but it doesn't firmly oppose them either.

If the trade wars were welcomed, then the Dow would resume its uptrend with a strong and steady breakout above the upper edge of the trading band. That breakout would have an initial target near 27,500. The target is calculated by taking the width of the trading band and projecting it upwards.

If trade wars were unwelcome, then the reverse applies. The Dow would move decisively and quickly below 23,300. The downside target for that retreat would be 21,200 and is calculated using the width of the trading band.

Those chart pattern targets are important, as are the upper and lower levels of the trade band. They are significant because a breakout above or below the trading band often signals a very rapid move toward the target levels. Traders who go long in anticipation of a rebound from 23,300 would need to rapidly cover their long positions if the market moved below 23,300.

The potential for a rapid breakout above or below the trading band levels means that investors need to exercise caution as the Dow approaches those levels. It’s better to wait for confirmation of a continuation of the trading band pattern or of the breakout, before taking a position.

Traders continue to trade the retreat towards support near 23,300. We use the ANTSSYS trading method for this.

Daryl Guppy is a trader and author of Trend Trading, The 36 Strategies of the Chinese for Financial Traders, which can be found at www.guppytraders.com. He is a regular guest on CNBC Asia Squawk Box. He is a speaker at trading conferences in China, Asia, Australia and Europe. He is a special consultant to AxiCorp.

For more insight from CNBC contributors, follow @CNBCopinion on Twitter.

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  Monday, 25 Jun 2018 | 9:04 PM ET

Gold is clearly trending down

Posted ByDaryl Guppy
studioEAST | Getty Images

In April we were bearish on the dollar with the chart suggesting a downside target near 0.85 was a possibility. Support near 0.885 had no historical precedent so traders were ready to short the US dollar on any fall below the consolidation area near 0.885.

This did not develop, and the 0.885 level provided a good consolidation point. The breakout at the beginning of May was strong and quickly moved above the initial resistance level near 0.91. The strong rally pushed through the next trade band target near 0.93 and then peaked at resistance near 0.95.

The rally was stronger than expected and provided good long side trading opportunities. The key question now is about the strength of the pullback and the potential to develop a new rebound rally.

Trend analysis is applied using the Guppy Multiple Moving Average indicator (GMMA). The GMMA analysis shows the long downtrend has the potential to change.

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  Wednesday, 13 Jun 2018 | 12:26 AM ET

The dollar is set to be on the rebound, expect a potentially fast rally

Posted ByDaryl Guppy
studioEAST | Getty Images

In April we were bearish on the dollar with the chart suggesting a downside target near 0.85 was a possibility. Support near 0.885 had no historical precedent so traders were ready to short the US dollar on any fall below the consolidation area near 0.885.

This did not develop, and the 0.885 level provided a good consolidation point. The breakout at the beginning of May was strong and quickly moved above the initial resistance level near 0.91. The strong rally pushed through the next trade band target near 0.93 and then peaked at resistance near 0.95.

The rally was stronger than expected and provided good long side trading opportunities. The key question now is about the strength of the pullback and the potential to develop a new rebound rally.

Trend analysis is applied using the Guppy Multiple Moving Average indicator (GMMA). The GMMA analysis shows the long downtrend has the potential to change.

»Read more
  Tuesday, 5 Jun 2018 | 9:12 PM ET

Despite the pullback, analysis shows oil is still headed higher

Posted ByDaryl Guppy
Pumpjacks in an oil field.
Paul Giamou | Aurora | Getty Images
Pumpjacks in an oil field.

The NYMEX oil price has pulled back sharply from $72 to around $66, but that is taking place within the environment of a well-established uptrend.

In fact, the chart suggests that the pullback is not a change of trend, but it's instead just a temporary retreat.

There are three features that support the conclusion. The first feature is the long-term support level near $65. That acted as a resistance level in January and again in April. Oil has a well-established pattern of moving in trading bands.

The standout feature on the chart is the strong support level near $43 and resistance near $54. That makes the trading band around $11 wide and gives an upside projection target for the trading band near $65 which has been achieved and exceeded. Applying the same trade band projection methods gives a long-term target near $76.

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  Tuesday, 29 May 2018 | 11:17 PM ET

The S&P is setting up to benefit traders — and stymie long-term investors

Posted ByDaryl Guppy
Drew Angerer | Getty Images News | Getty Images

A double bottom pattern is developing in the S&P 500.

While that's a bullish, dominant pattern in the index, its development is slow, indecisive and uncertain. That suggests it will run into strong resistance around the level of the double top pattern created in early 2018.

But rather than leading to a strong up trend breakout, the current reaction suggests the S&P index may become trapped in a long, slow sideways pattern with the market moving between 2,580 and 2,790.

That type of sideways pattern is good for traders as the market rallies and retreats within the confines of a broad trading band. It's not so good, however, for long-term investors because the market returns are limited by the strong resistance level. Investors look for a good breakout above the upper resistance level near 2,790.

The current behavioral relationships in the Guppy Multiple Moving Average indicator suggest that a strong breakout has a low probability of developing.

The short-term group of averages used to track the inferred behavior of traders has shown some compression and expansion activity. However, this is not particularly strong. There is no great trading conviction in the rallies, nor in the retreats.

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About Charting Asia

  • Daryl Guppy is an independent technical analyst who appears frequently on CNBC Asia. He runs training, analysis and resource workshops for retail and professional financial market traders involved in stocks, CFDs, warrants, derivatives, futures and commodities in China, Malaysia, Singapore and Australia. He has his own trading company, guppytraders.com.

 

  • Daryl Guppy is an independent technical analyst who appears frequently on CNBC Asia.

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