Reminiscent of a day trading heaven
Let us set the scene - it's June 2020, we've been in a risk-on environment for the past 80-100 days. Large bullish moves in equities and crypto. Haven currencies have taken a pounding as riskier currencies such as AUD and NZD have powered up. Runs are starting to look very overextended and are decelerating at significant levels.
Higher timeframes are developing as we'd expect to play these weekly pullbacks, and we're presented with clean entries on the lower timeframes. Considerable momentum pushes the price in our favour instantly before chopping up back against us.
Our day traders performed exceptionally well during this period. If you have a longer-term hybrid/swing approach, you would have secured small profits as price reversed against you or break-even positions.
The last three weeks have felt very similar to that Q2 environment. Many of the higher timeframe biases we have been covering over the previous three weeks are still valid and present. However, with all the fundamentals at play, presidential elections, Brexit talks, stimulus agreements, and uncertainty around lockdown restrictions, we see a lot of noise on the lower timeframes, and price action is looking choppy.
*If you want to reminisce with us and see how we took advantage of opportunities during this period in June 2020, watch our founder, Irek's, Insights episode HERE.
Netflix & chill
As we enter earnings season and learn how certain businesses have performed in Q3, we may be in for some surprises.
On Tuesday, the tech giant, Netflix, reported a weaker than expected earnings update. Among other tech giants, Netflix was widely unaffected by the pandemic and benefited from more people being home and with time on their hands.
We saw the price of Netflix stock explode to all-time highs of c$575 back in July 2020. Since then, price has been consolidating and developing strong bearish signals on the weekly and daily charts. We have seen triple tops form at all-time highs, and the technicals suggest further bearish
momentum to come.
With the update on Tuesday, we saw the price gap down on open by c6%.The lower timeframes had already presented us with two clear opportunities to get short this pair. If you executed on these, your position will be running in good profit.
We expect this bearish momentum to continue, but as you will see on the daily chart, we are now at a significant level, so we need to see price break down out of this pattern to have the conviction that this bearish momentum will continue.
JPY: Last week presented opportunities to play a bullish Yen against several pairs, which we executed. After initial momentum in favour of our bias, we saw Friday closing out indecisive. We have risk mostly removed from our trades and will be holding them coming into this new week.
USD: The majority of USD pairs are decelerating at strong levels of support. Price could break down, but if current development continues, we expect to see USD power up. On the FXCM $Index the daily chart is forming a double bottom at support, and a larger inverse head and shoulders pattern can be seen, aligning with our bullish USD thesis.
Equities: Major indexes are still showing bearish development on the higher timeframes. We need to see more deceleration at recent highs before having confidence the breakdown is coming soon. We are heading into earnings season as companies reveal how they've done in the third quarter. We will likely see volatility in the markets as this data is released.
Bitcoin to the moon?
The notorious BTC has had a strong close to the week, hyping up all the Twitter enthusiasts who think the moon is back on the cards once again. Price pushed up to set a new yearly high of c13500 with a strong bullish breakout.
This bullish move is widely thought to have been powered by the news that PayPal will allow its customers to buy and sell specific crypto's and offer several investment options on their platform.
We love innovation, and the cryptocurrency space is an asset class we have actively been involved in for a long time. We are big advocates of investing for the longer term. If we look at our exposure for the year to date, i.e. if you invested on January 1st, 2020, you would have seen an 80%+ increase in your Bitcoin holdings, all while doing nothing.
If we look at the technicals, the weekly timeframe had a pullback in September, retesting that major 10,000 level that we've been keeping our eyes on. Since then, BTC has started a new weekly run, breaking recent highs this past week. When BTC enters the next pullback, we will be looking to increase exposure as it creates a new higher low to start the next run.
PS. To watch our founder, Irek, break down all these upcoming opportunities in full, plus how we plan to capitalize on them, check out our most recent Insights episode.
Member Interviews - Quentin Spilliaert
If you missed our update last week, we have now launched our member interview section on www.tradingmasterclass.com/interviews.
Our most recent interview covers a member, Quentin's, story. Quentin's interview will resonate with any of our newer members while also giving an excellent insight into the beginning stages of the journey for anyone sitting on the fence of diving into our world.
Make sure to go check out his interview to learn how at only six months in, he has already received external funding and what his plans for the future entail.
Coming up this week
Monday, October 26, 2020 @ 2pm PT
Market Update - lead by Jonny Godfrey
Wednesday, October 28, 2020 @ 2pm PT
Market Update - lead by Jonny Godfrey
Friday, October 30, 2020 @ 10am PT
Diamond Monthly Coaching Call - lead by Irek Piekarski
All the best for the week ahead - see you in the club!
Jonny Godfrey & the TMC Team