Price of Gold may fall

Gold has continued in a sideways trading range during the last week.

It’s looking very much as though it could fall to the downside fairly soon, but until it does the range is roughly between 925 – 854. A break downwards should find support between 840 – 821.

Any move below 777. would jeopardize the bullish action of the last month.

R1 – resistance area – the top of the two week old trading range.
S1 – support area – the bottom of the two week old trading range.
S2 – a zone of strong support.
S3 – critical support area for the uptrend.
Stochastic – Indicates the correction in Gold is probably not over yet.
NextView RSI – down, but in relatively positive territory.


Daily Gold price chart as at 2 October 2008 using NextVIEW Advisor

Commentary and analysis by Don Schellenberg

FOREX: Strengthening US Dollar

Euro Dollar against US Dollar (EUR/USD)

Current price 1.3874

The market did not exceed the 1.4950 resistance zone after breaking the R1 resistance, which I wrote in my previous article. By failing to close above that number, the price pattern that at first appeared to have bull-trend potential, was proven to be only a bear market rally with typical ABC pattern dimensions.

At time of writing, the market has already penetrated last week’s S1 (support) of 1.3935. There is additional minor support at 1.3840. A close below there will target support much farther away between 1.3400-1.3100.


Daily EUR/USD price chart as at 2 October 2008 using NextVIEW Advisor

TECHNICALS

There is minor support at 1.3840 which may be sufficient to trigger another rally which should not exceed the zone from 1.4450 – 1.4650. Any upwards corrective rally should take several days before the down trend resumes.

S1 – support at 1.3840 (not shown on the chart)
S2 – more distant support at 1.3400-1.3100 (not shown on the chart)
R1 – 1.4450 – 1.4650
NextView RSI – clearly a bear market
MACD/Stochastic – MACD crossed down with Stochastic already in the oversold zone – a potential recipe for a quick corrective move to the upside.


US Dollar against Chinese Yuan (USD/CNY)

The market came near to, but didn’t quite touch my first support level (S1) of 6.7850, and then moved up. Although price as closed at 6.8351 for two or three successive days, it has a good chance of reaching to around 6.8633 before encountering a potential reversal area.


Daily USD/CNY price chart as at 2 October 2008 using NextVIEW Advisor

TECHNICALS

R1 – immediate resistance at 6.8391
R2 – resistance at 6.8633
S1 – support at 6.7856

Stochastic – in overbought zone.
NextView RSI – in positive territory

Commentary and analysis by Don Schellenberg

Stock Market Tsunami

Despite Bush's government success in finally getting the congress' vote in approving the US$700 billion bailout plan, equity markets in the US and the rest of the world continue to weaken. The plan was earlier rejected and caused the Dow Jones Industrial Average (DJI) to fall its biggest-ever one day decline, with finance related stocks falling more than 40% on the 29th of Septermber.

On Thursday when the bailout plan was approved, the DJI fell 348 points as investors are not so convinced that the bailout plan would stop the economy from an impending recession, which is doubt by some as could be the worst in American history.

The events that take place in the US has caused a tsunami in the equity markets this week. It's volatility has caused many investors to tremble.

On Friday the DJI fell 157.47 points to close at 10,325.38, lower than the lowest low on the 29th of September. Click here and here for DJI forecast.

Below are the performances of the rest of the markets on Friday;

Singapore ST Index: 2,297.12. Down 66.48 points or 2.8%.
Click here and here for STI forecast.

Kuala Lumpur CI: 1,016.70. Down 9.18 points 0r 0.2%.
Click here for KLCI forecast.

Hong Kong Hang Seng: 17,682.40. Down 528.71 points or 2.9%
Click here for Hang Seng forecast.

Japan Nikkei 225: 10,938.14. Down 216.62 points or 1.9%.
Near support level. Click here for Nikkei 225 forecast.

Thailand SET Index: 590.05. Down 7.64 points or 1.3%.
Click here for SETI forecast.

The China market was spared from the stock market tsunami as it is closed for a week-long national day holiday from 29th September to 3rd October. I believe it is going to open at least 10 lower when the market re-opens on Monday.

Successful trading from start to finish

Dr. Alexander Elder needs no introduction to the trading community. His contribution to this industry through a few best-selling books and seminars has helped many traders to become successful. Among his successful trading books are Trading for a living, “Come into my trading room and Entries and Exits.

It is important to note that Dr. Elder is a professional trader and a practicing psychiatrist. Dr. Elder was a child prodigy as he entered medical school at age 16 in Estonia and at 23 he was already working as a doctor. He worked as a psychiatrist in New York City and taught at Columbia University. His experience as a psychiatrist provided him with a unique insight into the psychology of trading.

Mind, Method and Money

He greatly emphasizes that a winning formula for trading should include the mind, the method and money. Many traders put too much effort on the method of trading and failed to be successful because they do not have the other two equally important components. After years of trading experience, he realized how important psychology is every time he trades. Many fail because they don’t follow some simple rules of trading. Without experience, they do not understand how emotions can take control of their trading decisions.

Having analyzed many traders, he knows the characteristics of winning traders and losing traders and this is essential for traders to know and understand so that they do not have the characteristics of losing traders. Every successful person knows that the only way to succeed is to learn and follow the footsteps and character of a successful person, not only in trading but in anything that we want to achieve.

Dr. Elders advice in his books and seminars have helped many new traders and struggling traders to succeed in trading. After reading his books or attending his seminars, many traders are able to put together their methods and experience to develop a trading strategy to suit their personality. Dr. Elder describes this as the most important stage in trading. Most traders fail because they “force” themselves to follow a trading strategy that they are not able to comprehend and this will lead to lack of discipline and emotionally unprepared.

Money Management

Many books and trading seminars always emphasize on the methodology in trading but little is being taught on money management and the psychological aspect of trading. There is nothing wrong with that because traders are able to learn new ideas for their trading. But to become a successful trader, the trader must have the three components mentioned earlier.

Money management is often the component left out in these books and seminars because the returns may not be as attractive. There are many trading coaches and authors today are competing with each other to provide the most promising trading systems that provide high returns in a short period of time. Those who believe in these premises are doomed to fail in trading because it will affect them psychologically.

Every trader knows that trading involves risk but many failed to respect and manage them well. Every trader has a different risk profile and it is important for traders to know and understand their risk profile so that they can develop a suitable risk management plan to trade successfully. A trader should trade within their means . They should not over-trade and should not be under-capitalized.

Triple Screen Trading System

Traders continually seek the holy grail in trading so they consistently jump from one trading system to another. These people can’t seem to get any system to work. A successful trader should not abandon something that works. A successful trader will continue follow their system and only improve it from time to time to cater to market changes and not abandon it completely.
Dr. Elder developed his trading system many years ago and still trades the same basic system – The Triple Screen. He only improvise and fine-tune his system from time to time to suit current market changes.

The Triple Screen System uses a longer-term trend following technique and a shorter-term overbought/oversold indicator to time the trades. For example, you can use a quarterly chart to establish the trend direction. Next, you use the weekly chart to determine whether price is overbought or oversold. Then you can use a daily chart to find buy or sell setups in confirmation with the daily and weekly chart readings.

The good part about this system is that you can use any timeframes that you like to suit your trading style. The theory to the whole system is to trade in the direction of the trend and wait for pullbacks within the trend. Then, you enter the trade as the trend resumes.

Successful trading from start to finish

A trader should have his foundations right from the start to the finish. Many are too eager to get to the finish line and forgot to have a good start. Apart from having a method to trader, a trader should prepare the mind and have a sensible money management system that suits his/her personality before trading with real money.

New and struggling traders from South East Asia especially from Singapore now have the great opportunity to find out how to become successful directly from Dr. Elder because he will be in Singapore on the 25th of October 2008 for a one day seminar and conference. Dr. Elder promises to expose whatever he can in this one full day event to help you to become successful, from start to finish.

Click on the banner below for more details of Dr. Alexander's visit to Singapore on the 25th of Octoer 2008.

Shor-Term Opportunity in Palm Oil - Golden Agri-Resources Ltd

The price of crude palm oil has corrected heavily and companies that deals with this commodity has also been affected by the correction. Price of crude palm oil futures (CPOF) in Bursa Malaysia derivatives exchange have corrected about 54% from RM4,330 per metric ton in March to the recent low of RM2,000 per metric ton. The price have somehow found support at RM2,000. In the past few days, the price tested this level again and rebounded from it. The December contract closed at RM2,090 per metric ton today.

From the chart, technical indicators have indicated that the down trend momentum is weak and the current price is at an oversold level. Therefore there is a high chance of price rebound and rally. However, the rally is expected to face strong resistance as the price of CPOF is technically in a down trend.

A main-board listed company in Singapore that is heavily influenced by the price of crude palm oil is Goldenagr. Goldenagr is one of the world's largest privately-owned oil palm plantation companies. Its operations are strategically located over Indonesia. In December 2005, Goldenagr expanded its operations into China which include refineries, port and oil-seed crushing facilities.

The current price of SG$0.315 is more than three times lower than the price in just four months ago. The correction is more than the correction of the price of CPOF. Price of Goldenagr today rebounded from the support level of SG$0.30, with an intraday low of SG$0.285.

Chart wise, the price is in a very strong down trend and heavily oversold. The short term 30-day average is at SG$0.46. Price is oversold because it is 31% below the average. The down trend is strong as the short to long term moving averages are declining. The advancing Average Directional Index (ADX) confirms that the momentum of the down trend is strong.

The over-speculation may provide some opportunity in the short term as a strong rebound and short rally can be expected. The price of SG$0.30 which is tested twice may be a good support level. Short term momentum indicators like the Relative Strength Index (RSI) and Stochastic show a bullish divergence which means that the current low is well supported. The Volume pattern also indicates a divergence.

Another chart pattern that may confirm the rebound is the BARR pattern or Bump and Reverse Reversal pattern. The down trend is first defined as the trend line T1 in the chart below. The second trend line (T2 in the chart below) that started from September formed the bump in the down trend. A trend line bump is formed when the slope of the trend line is more than 45 degrees. The bump is usually formed because of over-speculation.

Expect price to rebound from the current level with a price objective of SG$0.46 (conservative) to SG0.58 (optimistic). The short term 30-day average and the T1 trend line is currently near SG$0.46 and the 38.2% retracement from the high on 30th of May this year with the mid-term 60-day average is around SG$0.58. The price objectives are low because the strong down trend cannot be discounted. Therefore, opportunity is only available for short term traders and they should respect the support level of SG$0.285 and should not keep this stock if price goes below this level.

Update: As at 1.00 pm, price of Goldenagr is at SG$0.33


Golden Agri daily chart as at 30 September 2008 charted by Benny Lee using NextVIEW Advisor

Commentary and analysis by Benny Lee

Shanghai Stock Market - Crucial Rebound

The Shanghai market is developing the most important change. This is confirmed on the weekly chart. The rebound that developed this week has moved the Shanghai index above the support level between 1750 and 2000. This rebound is important because it confirms the importance of this support area as a rebound level. This support area is also the downside target for the head and shoulder chart pattern. This rebound confirms the head and shoulder pattern.

This rebound has also moved the index above the value of the third fan trend line. This changes the function of the fan trend line. In previous weeks the value of the third fan trend line acted as a resistance level. The close on the weekly chart above the value of the third fan trend line shows the line is now acting as a support level. This suggests that the index can rally towards the value of the fourth trend fan trend line.

The position of the fourth fan trend line is not yet confirmed. The line is placed near the upper edge of the long term GMMA. Future index activity will confirm if this position is correct. The position of the line is near 2600. This suggests a limit for the next rally as it develops from the support level provided by the third fan trend line.

This is a developing fan reversal pattern. It is a long term reversal pattern. The index will continue to have rally and retreat behaviour. The retreats will use the value of the third fan trend line as a support level. The index can slide down this support level again until it encounters long term horizontal support near the 2000 level.

This recent rally is not part of a "V" shaped recovery. The rally is part of the normal fan pattern development. The recovery often develops a rounding bottom or saucer pattern.

The trading environment is suitable for short term rally trends. There is a high probability of several more tests of the 2000 support level. These tests may also include some temporary index dips below 2000 and moving towards the 1750 support level. This is part of the pattern of climax selling that precedes the important change in the direction of the trend.

The fan pattern reversal often has six fan lines. This suggests the developing market reversal still has several months to continue to develop before a new up trend is completely confirmed. The market has an 35.3% probability of continuing to rise after the National Day holiday.

To read more articles and commentaries from Daryl Guppy, click HERE


Charted by Daryl Guppy using NextVIEW Advisor Professional

Article contributed by Private Trader, Market Expert, Trading Coach and Best-Selling Author Mr. Daryl Guppy. For more articles and commentaries from Daryl Guppy, click HERE