Its been a while since I posted a Yen chart. We have been running into some selling at 96.23. Considering that the low seen earlier today was 94.50, even this is a strong move. Part of the credit for the recovery goes to the Japanese Finance Minister who said that rapid forex moves was undesirable for economy. and there is a need to avoid rapid forex moves at all cost. Now we all know that this market is not going to turn around unless all the G7 central banks show up in concert (and even that will work only if the market is spent on one side). Yet, some knee-jerk reaction is to be expected, and if we break the resistance at 96.23 in New York today, maybe we will get a move to 96.64. When we get there, we should try and sell some dollars with a stop above 96.74. That is a very close stop, and we could see both the sell and stop-loss order done within seconds of each other! But then we do have a resistance at 96.69 and if one wants a really, really close stop, this is it! Enjoy.
By now you would have realized that what this blog is attempting to do is to give you a sense of direction, and also highlighting pressure points. The most recent example of the value of some of the charts I post here is the call on Sterling yesterday. Take a look.
Here is yesterday’s post for easy reference.
The Saudi markets have lost more than half its value since the beginning of the year. How much more pain can they bear? Looks like there is scope to fall by at least another 12%. Check out this chart.
The Governor of the Bank of England, Mervyn King, has said today that the UK is probably in recession now and 2009 is going to be difficult. He also asserted that he stands ready to cut interest rates again if that is required. Clearly, we need to remain short in Sterling. (Early resistances come at 1.5345 levels). I am posting two charts for your use today, suggesting a short-term target of 1.5090 and 1.4865. But in the bigger picture, we will likely see a test of 1.4570. Remember one thing, folks. We are not using technical analysis to predict the future. We are trying to organize the way we trade into safe compartments. So, when I have 1.5090 as one objective, I will take back a good part of my shorts near there, but be ready (like Mr King) to sell the Pound again if that level breaks. If the analysis helps us to re-enter at better levels, then that is great! Good luck.
If my analysis of S&P500 (and Nasdaq) suggest that we will get a 5th wave move down, then how can I recommend buying Citi from $11.54? This is a valid question, and any good analyst should have thought that through. What I did, instead, was to look at the index and the stock separately.
Having conceded that, I looked at the S&P500 again in greater detail, and decided to post the accompanying chart. The whole decline from 1576 could be labelled as ABC/x/ABC and we are in the second “C” wave, which itself has 5 internal waves. I know this is wishful thinking at this time, but even if it is an incorrect approach to the patterns, we should expect a nice bounce in the index from 830 levels. Now let us turn to Citi. If this stock were to decline about the same extent as the main index, we will be close to $10. But even if it declines that far, it will still fit in the diagonal triangle picture. You might ask what is the value of a recommendation where one could see a 10% (or more) decline in price. You are quite right in posing that question. My strategy with Citi is to only buy small lots as we go down so that I will be in the trade when the reversal takes place. I am definitely not going to bet my daughter’s college fees on this one. But I will surely invest a sum that I am willing to see a 10% decline, but hope to double my money in a year. Enjoy!
Related S&P500 links:
Was that the stock market bottom?
Fifth wave extensions can make you rich!
What is a significant rally in the stock markets?
Harmony in markets: S&P500
S&P 500: Potential Ending Diagonal Triangle
Ending Diagonal Triangle in S&P500?
S&P500 Elliott Wave update
S&P500 index: is a top already in?
S&P 500 update: where is the top?
S&P500 continues its rally
S&P500 remains resilient
S&P500 ready to dive?
S&P500 Update: May 19, 2009
S&P500 Elliott Wave update:21 May 2009
S&P 500 breaks higher: update 2 June 2009