Charting Asia with Daryl Guppy

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  Monday, 23 Jul 2018 | 8:36 PM ET

Why some traders are seeing promise in Shanghai stocks

Posted ByDaryl Guppy
A woman walks at the Bund in front of the financial district of Pudong in Shanghai, China.
Aly Song | Reuters
A woman walks at the Bund in front of the financial district of Pudong in Shanghai, China.

The Shanghai index retreated and then broke out this month, and that’s a bullish signal for the market.

The pattern confirms that the rally from the low of 2,691 is part of an emerging consolidation and breakout.

Given that, the immediate upside target is the value of the lower edge of the long-term group of averages in the Guppy Multiple Moving Average indicator. The second resistance level is the value of the upper edge of the long-term GMMA.

It’s too early to call for a trend reversal, but the pattern of development suggests such a move is underway.

Investors watch for the development of a series of rebound rallies to confirm that the momentum of the downtrend has slowed. The recent rally and retreat has some of the characteristics of a consolidation pattern, and that’s tested by the behavior of the index as it moves around resistance near 2,820. Breaking out above that level is bullish.

Investors continue to watch for two features to confirm a trend change.

The first is the appearance of more days when the index rises. If the structure of the market changes and the up-days move more easily and have larger daily ranges, then that confirms confidence is slowly returning to the market.

The second featured that investors are watching is the behavior of the index’s GMMA. The indicator captures the inferred behavior of investors and traders. Compression shows agreement about price and value, but agreement does not last for long in the market, so that also signals a potential for a trend change.

The short-term group of averages has compressed and turned up, which confirms a return of confidence for traders. The long-term group of averages is well separated, showing that investors are still sellers. The downtrend has not ended, but the process of a trend reversal is developing.

The degree of separation between the two groups of averages is slowly narrowing, which is a precondition for a change in the trend direction. It’s not a signal of a strong or sudden trend reversal, but it shows downtrend pressure is reducing.

Aggressive traders are starting to enter the Shanghai market in anticipation of a trend change. Conservative traders will wait for a move in the longer-term GMMA.

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, 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.

»Read more
  Tuesday, 22 May 2018 | 11:45 PM ET

The euro-dollar is in retreat, but there's an opportunity

Posted ByDaryl Guppy
U.S. dollar, British pound and euro notes.
Matt Cardy | Getty Images
U.S. dollar, British pound and euro notes.

The carefully negotiated structure of global rules and trade treaties are being torn down, dismantled and disregarded by the United States which is unilaterally making up new rules and conditions.

This is not a spectator sport. All global markets and currencies are players and collateral damage. The unilateral repudiation of the multilateral agreement with Iran and the threat by the US to impose sanctions of countries that continue to do business with Iran carries a much broader threat to the Euro and Euro pairs.

Coward countries seek capriciously granted, and just as easily withdrawn, exemptions but the damage to the international order of free trade is ongoing.

The Euro-dollar chart reflects this growing concern with a retreat from resistance and the development of a rapid downtrend. This retreat has a downside target near 114.5.

The Euro-dollar chart is defined by long term trading bands. The trend behavior develops within the environment of trading band activity.

»Read more
  Tuesday, 15 May 2018 | 8:47 PM ET

The behavior of the Australian dollar is a contradiction

Posted ByDaryl Guppy
John Phillips | Digital Editor | CNBC

Market contradictions can be interesting, but irrelevant, or interesting and significant. The behavior of the Australian dollar is one of those contradictions.

On the one hand the Australian market is making new 10 year highs. This is generally taken as a sign of economic strength. Its particularly important for Australia where the market has been trapped in a prolonged sideways movement for more than a year while the rest of the world in the US and Asia have been streaking ahead.

On the other hand, the Australian dollar has broken a long term uptrend and is rapidly moving towards 12-month, and potentially, two-year lows. The Australian Reserve bank is celebrating because they have been aiming for a lower dollar as a matter of principle.

The last time the Australian market was trading near the current highs, the Aussie was trading at $0.81 rather than heading for a low of $0.715. The last time the AUD traded around $0.715 the Australian index was at a low near 4750.

This is the contradiction — the falling Australian dollar and the Australian market making new 10-year highs. Interesting, but irrelevant, or significant?

The answer lies in the speed of both moves. Once the AUD uptrend line was broken near $0.765 it has taken less than 3 weeks to touch $0.74. The AUD chart is defined by trading bands. The lower edge of the trading band is near $0.74. The upper edge near $0.775. The breakout above $0.775 had a target near $0.81. This was achieved.

A fall below $0.74 has a downside target near $0.715. This is calculated by taking the width of the trading band and projecting it downwards.

»Read more
  Monday, 7 May 2018 | 9:07 PM ET

The Nikkei is demonstrating a classic chart pattern. Here's what that means

Posted ByDaryl Guppy

Not every price chart adheres to the perfect exemplars of chart analysis, but sometimes they do.

The daily Nikkei 225 chart is an almost perfect example of a Guppy Multiple Moving Average trend breakout pattern.

Technical indicators include those that are purely mathematical in construction. A moving average crossover is an example. The crossover is a mathematical function that can be used to identify a change in market sentiment.

Then there is chart pattern analysis. The very best of patterns capture the psychological behavior of participants and provides an effective means to set a price target that has a high probability of being achieved. An up-sloping triangle pattern shows a sloping trend line (participants getting more eager) and a resistance level (existing stock holders with consistent selling at this level). The combination usually leads to a breakout.

The Guppy Multiple Moving Average indicator combines those two approaches and uses the mathematical calculation to make inferences about the way traders and investors are thinking. When their thinking agrees, then there is a high probability of a trend change developing.

»Read more

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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