FXP Update

As you know I've been watching FXP for an opening as a short play on China all year and it wasn't giving much until recently. Yesterday I put out this trade idea for FXP (long)  and I opened it in the trading tracking portfolio.

I may very well add to the FXP long at some point not too far off today.

Here's where we stand and what I'm looking for as it starts to move a bit faster.

*In fact things started moving so quickly, the things I was looking for to add or start a new long position here were already developing before I could even get these charts loaded for the post.

 This is the daily chart, all of 2014 we didn't get a single deep pullback until recently as China is in big trouble, FXP is one way to play that, but despite what the PBoC has already made very clear, "Do not expect stimulus", the market expects it any way and FXP fell below the 2014 trendline which made for an interesting long pick-up to play China short on what thus far is just market fantasy. 

You have to realize that the F_E_D's timeframe for policy action may be a year out or so, China and the PBoC think in terms of decades with policy actions, it's much, much different than most other economic policy across the world. Thus... FXP makes a lot of sense as a long and the recent discount on the break of the trendline is what I've spent 2014 waiting for.

*This chart was captured BEFORE the FXP long/add to post, what I was going to say I'd be looking for today on the daily is for the bearish candle to turn in to a bullish hammer with prices lifting intraday to expose a longer lower wick and a bullish upside reversal candle and the other thing was increased volume, above yesterday's as that makes the reversal candle 2x more effective.  Before I could get this post together, those things started happening.


Yesterday I mentioned that FXP is a Channel Buster of sorts...

This is not the best example of the Channel Buster concept, but the idea is shorts entering on the break of the trendline are going to place their stops just inside the channel and above the former support trendline. We typically get a reversal on the Channel break (either way, in a descending or ascending channel), so the first move is akin to a head fake and when prices move back up toward the bottom trendline (former support, now resistance), technical traders are going to look for price to fail there and sometimes Wall St. will let it fail there at first to draw in more shorts, but then it crosses back in to the channel, hits the Buy to Cover stops and squeezes sending price above the channel in many instances, so as always, PRICE IS DECEIVING.

 This 15 min chart shows the long term trendline as well as a flat range where we often see underlying trade increase, but what I failed to consider was the obvious support level which makes a head fake move all the more probable and I believe that's exactly what we got today, likely getting shorts to chase it lower.

This was the original chart BEFORE I put out the FXP Add-To post, what I was going to say was I'd be looking for a rounding/reversal process intraday and increasing volume and I drew in yellow what I'd be looking for which would give us the Daily Hammer candlestick I wanted to see as mentioned above.

Since then...

The rounding bottom taking shape as 3C charts suggested it would and higher volume picking up, that gives me the candlestick/volume combo on the daily chart that is very effective as a reversal signal.

Here's the 3 min chart of FXP (intraday), we have a long relative positive which is interesting, but needs to see migration of the divergence from stronger shorter timeframe 3C charts.

Now the same chart since then which was only 30 mins. ago...

And just like that the 3 min is leading positive as I expected it would be based on shorter intraday charts, I just didn't think it would move this fast which tells me today's move down most likely is a head fake move, thus it makes for an excellent entry (lower prices and lower risk with higher probabilities and timing).

This was the 1 min chart as of about 30 mins ago, it was leading positive and I thought, "This should migrate out to longer timeframes, I'm interested in this and I better get the post out quickly".

So now we are heading in the right direction, we have the deep discount on the trendline break, we have the high probability Channel Buster move, we have a head fake move today on a stop run or limit tag and the 3C charts to verify it all, thus I increased position size there to full size position, but I can't go any further.

I also have JJC (copper) which has been hammered in China as banks make cash calls and the physical commodities that secured the loans are being sold hand over fist,  but I figured JJC was due for a bounce and the PBoC rumors didn't hurt. I need to take a look at that position which is in the green and see if it is still viable.