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Mystery Chart: Is this a technical turn?

Mystery Chart: Is this a technical turn?

By Michael McCarthy, Chief Market Strategist, CMC Markets Australia Technical analysis – voodoo or a short cut to trading success? Try this quick quiz: Above is a daily chart. Consider the indicators. The black arrow is pointing to a three candle formation. Although this is not a perfect “morning star”, it is is very similar in that there is a strong down day, a day of indecision (the star or doji), and then a strong up day. It may be a reversal signal. The MACD uses the standard 12,26,9 configuration. It has clearly crossed, well below the zero line, and the widening gap between the MACD lines suggests increasing upward momentum: So, is this chart signalling a trend change now, or do traders need to wait for trading up through the (green) resistance line? Or is it a pause within an ongoing downtrend? These are important questions to answer, especially ahead of the US Fed meeting this week, and the potential for the first US rate rise in many years. As an exercise, decide where you stand before you scroll down. Here’s a picture of a preposterously cute cat to give you time to think: Yes, I’m not a cat person either. (Colin is though!) Did you say upturn? As many have already guessed, this is the daily chart of AUD/USD. For mine, the technical picture is pretty clear – I’m bullish on any breach of the overhead resistance (which btw, is at 0.7180). However, this appears to directly contradict the fundamentals. Lower commodity prices and a potential US rate rise should lead to a lower AUD/USD. Which do you go with, technicals or fundamentals? CMC Markets is an execution only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.


Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.