FXP gearing up for another trade

Last week I warned to tighten stops and consider taking profits in FXP (Ultrashort China 25) which makes the second nice, quick money making trade in a row as this ETF is giving great signals.

It looks like it is getting close to another long entry (short China as it is an Ultrashort).

We do have China's official Flash PMI on Sunday night, but we may be able to squeeze a 10-15% move in before then as I'm not keen on holding over the weekend as China's data tends to be opaque, but the UBS (I believe it was) Flash PMI for China last week was not pretty. I can only guess that China's version will be a bite rosier.

Here are the charts...

 FXP (after last week's warning to get ready to close out the trade for our shorter term traders) looks to be setting up again. FXP has found some support at the top of the range and again as a reminder, this is another one of those charts that came out of a bullish descending wedge. Standard Technical Analysis tells us to buy the breakout of the wedge or as it reaches the apex, we have found that the initial breakouts tend to fail and increasingly we are seeing a lateral base form before there are any significant upside gains, another manipulation of technical analysis dogma by Wall Street. In any case, the base is there and the underlying trade is bullish to keep trading FXP from the long side. I prefer to take the hit and run trades and get out before a pullback as that is the best use of this type of ETF, but there' certainly an argument to be made for the longer term trend in FXP. Note how volume picked up beautifully in to the right side of the rectangle base and on the first breakout.

 Here's my X-over screen which is used to avoid false crossovers or whipsaws. We have a 10 and 22 day moving average in the price window, a custom proprietary indicator in the middle window with a blue 22 day moving average applied to it for signals and RSI 14 in the bottom window. A long signal needs to see both yellow indicators crossover the clue 22 day moving averages and RSI must be above zero. Typically after the first long signal and leg up, we see a pullback to the 10-day moving average, subsequent pullbacks tend to be a bit deeper toward the 22 day. Right now we are very close to the 10-day and I would love to see an intraday tag of that 10-day moving average as a potential entry.

 The daily 3C chart shows a nice positive divergence, FXP did the work in forming the base.

 The 60 min chart is just insanely bullish, leading positive, note the positive divergence as FXP was inside the base.


On the 2 min chart below, we see the negative divergence causing the last pullback, however today we are seeing the first signs of a positive divergence and it's in the right area for it. So keep FXP on your list, we can usually pull at least 10% in several days out of the trade and it is optionable. I'll have an update on FXP tomorrow hopefully to fid a nice entry.