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Asia-Pacific Markets Charting Asia with Daryl Guppy

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  Monday, 1 May 2017 | 9:31 PM ET

Op-Ed: How safe is the euro? This chart says everything you need to know

Posted ByDaryl Guppy

How safe is the euro? Well, that's tied to another question: Who will win the French presidential election? There are two methods to arriving at answers.

One method of polling remains exceptionally accurate. It's taken almost every day and the participants back their opinions with cold, hard cash. These are the major market indexes and they show that the French market was not particularly worried about the outcome of the first round of French election. Nor are they worried about the outcome of the next round and this suggests a Macron victory — although, like many recent elections, the margin may be very narrow.

It was clear several weeks ago that the markets did not expect any significant change and that a presidential runoff between Marine Le Pen and Emmanuel Macron had already been baked into the cake — factored into market activity. The index behavior of the CAC suggested the markets were comfortable with this outcomes. The current index behavior confirms the market is comfortable with either candidate, although there are other factors which suggest the market anticipates a Macron victory.

The French CAC chart shows a strong well-supported trend with good Guppy Multiple Moving Averages (GMMA) indicator behavior. Investors are not worried, according to the long-term group of averages. The wide separation shows strong trend support.

The traders — as shown by the short term group of averages — are also very confident it will be business as usual after the elections. The short-term group of averages is also widely separated, showing strong confidence in a non-disruptive election outcome.

The breakout above resistance near 5,250 is very bullish and does not indicate a euro exit. This breakout is a relief reaction, so there is a good probability the market will retreat and use 5250 as a support and consolidation level prior to a continuation of the uptrend.

Although Le Pen talks of leaving the euro, the French market suggests this is unlikely to happen. The French public also apparently believes this is a low probability. If they thought otherwise, then we would already see a run on the banks as people took their money out before it was threatened with devaluation by a euro exit.

Investors would not wait until the calling of a referendum on leaving the currency. Once it became clear that Le Pen was the next president, there would be a run on the French financial system. The French banks would be essentially insolvent the next morning.

None of this has happened, and this suggests that Macron will be the next president of France. The euro is not dead but the euro short trade is.

The CAC chart signals strategic trading opportunities that can be exploited using the ANTSSYS method to trade the consolidation 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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  Monday, 17 Apr 2017 | 12:18 AM ET

Op-Ed: The Australian dollar is trapped, and there's little sign of a change

Posted ByDaryl Guppy

The Australian dollar has remained trapped in a sideways trading band for one year and there is little sign of a strong change in the trend.

The upper edge of the trading band near $0.775 was established in April 2016. The lower edge of the trading band near $0.715 was first tested in June 2016. The trend behavior since that month has been weak, with the Australian dollar essentially moving sideways.

In November 2016 the Australian dollar retreated strongly from resistance near $0.775 and by December 2016 was testing the support level near $0.715. The rebound rally from this level confirmed the strength of the trading band.

The sharp fall from $0.775 to $0.715 and the sharp rallies from $0.715 to $0.775 offered good trading opportunities, but they do not indicate strong trend changes.

We use Guppy Multiple Moving Averages indicator analysis to identify trend strength and trend changes. In these situations it is a powerful analysis tool, but the GMMA is not the best indicator to apply to understand a sideways market. The GMMA relationships simply show that investors are not strongly bearish or bullish on the Australian dollar. This is shown by the narrow separation in the long term GMMA and its horizontal behavior.

This non-trending environment shows no signals of trend change and GMMA analysis is not a useful strategic analysis tool. However, trend-line and trade-band analysis allows the trader to identify the significant trend break points and establish targets.

The Australian dollar weekly chart has a well-defined resistance level near $0.775. The $0.77 to $0.775 resistance level has been tested eight times in the past 12 months. This level is again acting as a successful resistance level with the Australian dollar developing a retreat to $0.75. A breakout above this level can move rapidly to the next resistance feature.

A second resistance feature on the chart is the upsloping trend line starting from the low of $0.68 in January 2016. The second anchor point is the low of $0.715 in June 2016. The uptrend line acts as a future resistance feature. The line is projected forward and gives a current value near $0.80. This is also near an historical resistance level, so this acts as a double resistance feature. This combination of features indicates a limited upside for the Australian dollar.

The strength of resistance near $0.775 suggests there is a low probability an upside breakout, so traders look for a continuation of the sideways trading band.

A fall below minor support near $0.75 has trading band support near $0.715.

This is not a trending market, so traders apply short term trading methods to capture the rally and retreat behavior. We use the ANTSSYS trade and analysis method to identify the opportunities as the retreat rebound develops.

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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  Sunday, 9 Apr 2017 | 9:04 PM ET

Op-Ed: Dollar rallies from trend line support, Syria missile strike helps

Posted ByDaryl Guppy
Adam Drobeic | EyeEm | Getty Images

Is the U.S. dollar sailing north with the U.S. fleet? It is tempting to draw a direct correlation between the missile strike on Syria and the dispatch of the U.S. Navy strike group to waters off Korea and China. There is no doubt that these assertive actions have impacted on the US dollar.

The rally on the U.S. dollar highlights one of the conundrums with the application of technical analysis. Does the chart move the market or the market move the chart? Just two weeks ago we applied chart analysis to the U.S. dollar chart. In this analysis we identified support and rebound levels.

We noted the dominant feature on the weekly dollar index chart was the broad trading band between $0.93 and $1.005. This trading band has dominated dollar index behaviour since 2015 January. The move above $1.005 was very important because it is a breakout from this prolonged 22 month sideways trading pattern.

The failure of this support level showed short term weakness, but not trend weakness. It's the second dominant feature on the dollar index chart that explains why.

The dollar index chart has a well-established up trend line. It starts from the low near $0.92 in 2016 May. This is a well-established and tested up trend line that shows consistent bullish pressure.

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  Monday, 20 Mar 2017 | 9:20 PM ET

Op-Ed: Shanghai index consolidation uptrend stronger than expected

Posted ByDaryl Guppy
Qilai Shen | Bloomberg | Getty Images

The Shanghai Index consolidation retest of the uptrend was stronger than expected. However the dip to the low of 3193 followed by a close at the high of 3237 is typical of a market re-correction. Investors saw this pattern on 2017, January 16 with a dip to 3044 followed by a higher close at 3105. This panic low signaled the start of the uptrend from 3105 to 3260.

The current dip and rapid rebound rally has the same characteristics as 2017, January 16 so investors wee this as a bullish signal. This is confirmed with the behavior of the long term Guppy Multiple Moving Averages group of averages. These remain widely separated. This group of averages absorbed the dip and selloff and this shows strong investor support for the uptrend. The long term GMMA did not show any compression during this week's market retreat and this further confirms investor confidence.

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  Monday, 13 Mar 2017 | 12:25 AM ET

Op-Ed: S&P trend strength to continue

Posted ByDaryl Guppy
Emily Riddell | Getty Images

In late 2014, the market was alive with chatter about the dreaded Hindenburg Omen which was supposed to foretell a collapse. In notes at the time we explained why this analysis was so much claptrap. Subsequently, the S&P added 33 percent.

Now the media is awash with the idea that the S&P is in danger of imminent collapse, but this recent talk is just as specious as the Hindenburg omen.

Markets do not suddenly collapse out of the blue, or because some magical number is reached. Markets most often give clear signals of weakness and these show up as end-of-trend chart patterns.

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  Monday, 6 Mar 2017 | 12:07 AM ET

Op-Ed: US crude oil testing resistance

Posted ByDaryl Guppy
  Monday, 27 Feb 2017 | 10:00 PM ET

Op-Ed: How to play the euro/yen swan dive

Posted ByDaryl Guppy
  Tuesday, 14 Feb 2017 | 1:31 AM ET

Op-Ed: Want to trade gold rally? Go for silver

Posted ByDaryl Guppy
Scott Olson | Getty Images

The rebound rally in gold is well established with a move above $1,220. The upside target is near $1,290. It's good to see the gold uptrend continuing, but the upside target delivers 5.7 percent profit. Rather than trade gold, there are more effective and profitable ways to trade this rebound. Gold's companion, silver, has similar characteristics but offers a higher return for the same behavior.

Silver lags the gold price behavior. Silver has a resistance level near $18.75 and then at $21.00. The $18.75 level is the equivalent to the $1,290 resistance level on the gold chart. Since silver lags gold, its price is only just moving above the Traders ATR breakout line near $17.30.

A breakout at this level has target near $18.72. This trade offers a 8.3 percent return compared with a 5.7 percent return from gold for the same price behavior move.

Silver has a longer term upside target of $21.00. That's 16.6 percent from the current price near $18.00.

Silver is slower to move, but it has more room to move and that delivers better profits. Note the silver price is shown in cents.

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  Sunday, 5 Feb 2017 | 11:37 PM ET

Australian dollar heading toward resistance

Posted ByDaryl Guppy
John Phillips | Digital Editor | CNBC

Starting in January, the Australian dollar developed a strong rally. The rally has technical limits and two significant resistance features which may act to cap the rise and drive the Australia dollar into weakness.

When applying technical analysis indicators, it is important to know when not to apply a particular indicator. We use Guppy Multiple Moving Average indicator analysis to identify trend strength and changes. In these situations it is a powerful analysis tool. The Australian dollar chart does not have these features. Instead, the Australian dollar is confined by a long term sideways trading band starting in 2016 April.

This is a non-trending environment and GMMA analysis is not a useful analysis tool. Instead, analysis is better applied using support and resistance levels and trend lines.

The Australian dollar weekly chart has a well-defined resistance level near $0.775. The $0.77 to $0.775 resistance level has been tested 8 times in the past 10 months. There is a high probability this level will again act as a successful resistance level with the Australian dollar developing a rapid retreat.

A second resistance feature is the upsloping trend line. The anchor point for this trend line is the low of $0.68 in 2016 January. The second anchor point is the low of $0.715 in 2016 June. This trend line acted as a support level until November 2016 when the Australian dollar plunged to $0.73.

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  Tuesday, 17 Jan 2017 | 7:34 PM ET

Chart: The dollar looks poised for a rally

Posted ByDaryl Guppy
100 dollar bills
Getty Images

The dollar index rapidly rose to nearly $1.04 following President Donald Trump's confirmation.

It has fallen steadily since and is now re-testing the $1.005 support level. This rally, retreat and retest activity is often followed by a rebound rally. The potential for a rebound has increased in the run-up to the presidential inauguration day and the immediate policy announcements which will follow.

The weekly chart provides better guidance to the support and resistance features on the dollar Index chart. The dominant feature on the weekly dollar index chart is the broad trading band between $0.93 and $1.005.

This trading band has dominated dollar index behavior since January 2015. Support near $0.93 has been tested four times. resistance near $1.005 has been directly tested twice. Lower level resistance near $1.00 has been tested five times. The move above $1.0005 was very important because it's a breakout from this prolonged 22-month sideways trading pattern.

The breakout moved to near $1.04 and is retesting the $1.005 level as a support level. A successful retest of support confirms the strength of the breakout. Failure of the support level will see the dollar test the next support level. This support level is created by the uptrend line starting from the low near $0.92 in May 2016. The current value of this support trend line is near $0.975.

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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.