Week ending March 6th, 2020
Our basic system is as follows: we use three exponential moving averages, 8 (red), 21 (blue), 55 (brown or green). We establish the trend first. Is the 21 above the 55 ? yes – uptrend. Is the 21 below the 55? yes – downtrend. We only trade with the trend: buying long if the trend is up and selling short (or a suitable proxy) if the trend is down. We use the 8 crossing the 21 as our trigger (sometimes the price crossing the 21). More as we encounter our trades.
Let’s start with the S&P 500:
We have a stop – sell in place at the orange line and a contingent protective – stop at the red.
Since most of you don’t have futures accounts and/or have accounts that do not allow shorting, let’s look at our proxy.
SDS is an inverse ETF. It goes up as the S&P goes down. It also is a double up. This means whatever the S&P does, down 2%, SDS rises 4%. The use of protective stops becomes even more important when using double or triple up ETFs. You can see the blue EMA is above the green = uptrend. My secondary call to action in this situation is a clearing of resistance, which is the high point just to the left. Details early next week.
Let’s take a look at Bitcoin.
Bitcoin is currently betwixt and between. We won’t talk about what it looks like. We will wait for our set up and trigger to tell us.
This is how the Gold futures contract looks. We have an open position in Gold, so let’s switch to our proxy, UGL.
You can see in the chart above that the 21 EMA (blue) is above the 55 EMA (green) meaning uptrend. The price fell below the blue line and then crossed back above the blue and the red. We are in this trade. Scroll down to previous posts for details. We have a trailing stop $3.48 behind the price.
Oil is next…
The chart above is the of the Oil futures. We have a break of support with the rather large red down candle. Blue is below brown…let’s look at our proxy.
Remember the SCO is an inverse ETF and a doubler to boot. You can see the trend is up. We know that oil and the SCO have just broken support in the case of the futures and resistance in the ETF.
Our stop-buy for SCO is set at $24.85. It is just above the high of the most recent candle.
If our trade is triggered, position size and number of shares will be detailed here.
Our last entry is the USD EUR currency pair. As I have promised, if a trade is triggered in this pair, I will explain how currency pairs work in a bit of detail.
You can see from the chart above that this pair has just entered a downtrend. So, lets take a look at our proxy.
The chart above is for ULE the symbol that allows those of you with retirement accounts to go short instruments such as the USD/EUR currency pair.
We have a green light here; it is now just a matter of where to place our stop-buy. In this case I am going with $14.13, which clears resistance just to the left and our protective stop will be placed at $13.27.
Once triggered, details such as position size and shares will appear in this space as if by magic.
That’s it for this week’s round up. If you want to secure a FREE copy of Book 1 of my Basic Trading Series, click this link:
Drop me a line with criticisms, comments, questions:
email@example.com or Charles@bluestonetrading.school