By Adam Harris, Trade With Precision
One of the many benefits I enjoy of being a trend-based trader, is the wide selection of markets open to me as I am not limited to any one asset class. If it’s trending, then I will put it on my watchlist! When searching for trends, there is a virtual buffet of choice, from Currencies, to Commodities, to Equities and Indices.
It’s very rare to have most asset classes in a state of unrest at the same time. But for the past week and possibly for the near future, tensions surrounding trade tariffs and speculation about a looming trade war has been taking its toll on global markets.
These are the moments where experienced traders often exercise caution. They may become more selective than usual, reduce their risk per trade, or even stay out of the markets altogether.
The good news is that when stagnant moments pass, they can result in strong trends. Today I will be pointing out that, while the northern hemisphere appears to be chasing its tail, there are several choice setups currently setting up down under.
New Zealand is not only known for the immense beauty of its landscape and its fine rugby team, but also the high-quality meat. I’m going to discuss both the NZD weakness in currencies, and also have a look at Feeder Cattle.
Starting off with the NZDUSD weekly chart, I can see that we have a downtrend, with price having recently broken below the November lows, and the moving averages (MAs) all angling downwards and re-ordering into what I identify as a bearish geometrical structure. Price is not over-extended from the MAs and there is a notable recent level of support that has been broken at 0.6850
Looking at the Daily chart, we also have a strong downtrend, with the MA geometry in a perfectly ordered structure.
Price is currently re-tracing back up into the Sell Zone, the area between the 10 & 20 MAs. There is also a level of potential resistance at 0.6850, which overlaps with a 50-61.8 percent Fibonacci zone. I will be stalking this and waiting for a small bearish candle to form in this area.
Ideally, I will also place my stop-loss above the resistance level at 0.6850 for additional technical protection. As usual, I will split my maximum one percent risk into two 0.5 percent orders. They will both have the same entry and stop-loss, but one will have a 1:1 take profit target. Once this has been reached, I will update the stop-loss of my second/remaining order behind recent Daily candles or Four-hourly swing-highs.
Feeder Cattle is next on my watchlist. The Weekly chart is in an uptrend, with clear higher highs and higher lows, of which the last few candles have been bullish. Price is currently between two historical levels - 151.00 above, and 146.00 below.
On the Daily chart this uptrend of higher-highs and higher-lows continues, with price a little over-extended and shortly due for a re-tracement to a point of equilibrium, which is where I plan to join this trend if it resumes. The MAs are fanning out and in the correct order.
I am going to wait patiently until price retraces back down to the Buy Zone between the 10 & 20 MAs, and ideally align with the support of the 146.00 level. If a small bullish candle forms above this level, I will take advantage of the increased technical protection of the level by placing my stop-loss underneath 146.00 as well. In terms of risk and trade management, I will apply the exact same approach as the NZDUSD trade above.
I have learned through the school of hard knocks that when trading during tumultuous times, a defensive trade and risk management strategy can make the difference between a full-loss trade and a breakeven/profitable trade.