Average returns show opportunities in Dow and EUR. Will the big trend in COTTON finally end?

Average returns show opportunities in Dow and EUR. Will the big trend in COTTON finally end?

EURO (EURUSD)

Unlike the British Pound where short-term declines do not last for long, the Euro made its down move and even might be at a turning point. Let's see the chart.

Euro analysis


The blue line on the chart is showing that the Euro is approaching a seasonal bottom. That coincides with a short-term bullish COT pattern. The bullishness of the situation is enhanced by the fact that the downfall has reached a meaningful target (the drop 01/23/2021- is almost as big as the one starting from the top 01/07/2021). Also, the On Balance Volume is a little bit stronger than the price.

From a price action perspective, four consecutive down daily candlesticks made 1.42% on average in the last ten years. The move we saw last week was 1.37% or almost equal to the average. That was another indication of the rise on Friday.

Now, to enter I would be looking at either a complex signal or a higher short-term low.

DOW JONES

Dow futures analysis

The average length and the frequency of occurrence can be of use to us with the DOW situation. Last week Dow made five consecutive up closes. The average gain of such a movement, observed in the last ten years, was 3.18%. But the current one already reached 4.13%. A full percentage point above the average. If we add to that the 5% probability of having six consecutive up closes, we may conclude that the market is ready for a pause the least.

By saying the least, it is meant that a period of seasonal decline is coming, as shown by the blue line, and a move down of some significance is not out of the question. Currently, there are no short signals! This is a strong uptrend and for something significant to the downside, it would be best to see liquidity problems, lower short-term high or a break below the last bottom (dotted red line).

COTTON

Not something you'll see very often here in this blog but when the situation is worth mentioning such not very liquid futures will be discussed.

Cotton futures analysis

Long story short, what you see on the chart above is something that might lead to the end of the 10-month uptrend in Cotton or at least signifies a pause. That is the combination of an upcoming seasonal top (beginning of March) and On Balance Volume that is diverging from the price. But most of all, it's what we witnessed on Thursday – one of the largest LB days we saw in the whole movement with the biggest volume

Of course, it is early to take action, besides closing longs. To enter the short side we'll need to wait for a lower short-term high.


 

Now, let's find your missing piece!

Vassil Banov,
Founder of Piece of Trading


Trades mentioned here are either taken or will be taken by the author if the right conditions appear. They are NOT recommendations nor any of this constitute investment advice. Please read the Risk Disclaimer
Seasonal indicators courtesy of Larry Williams, ireallytrade.com. Charts made with TradeStation®. tradestation.com

TAGS: S&P500, SPY, SPX, COT, Commitments of Traders, Cotton, Euro, EURUSD, Dow Jones, Cycles, Fundamental Analysis, Price Action Trading

Find this content helpful? Support our efforts by buying us a coffee!
Top