FXP Follow Up

FXP, UltraShort FTSE China 25, is a position I've been looking for an entry area in all year. Things are going south in China, from GDP, Imports/Exports, Credit Defaults, numerous bubbles and just the last several days some of China's largest banks are issuing $13 bn ($USD) in preference shares to try to raise capital as a buffer for rising credit concerns as default after default hits the nation which had until very recently, been covering interest payments so there would be no defaults, they obviously felt it was time to let bond investors figure out there's no such thing as a risk free market or a free ride anymore.

In any case, I have FXP in the trading portfolio and if I had the room, I'd be looking at an add-to position or a new long position in FXP, especially on a slight gap fill (but really anywhere in the immediate area I'd be fine with).

The charts...

 This is a daily chart of FXP, earlier in the year it was trending up in a channel, not really giving us a low risk entry until a recent channel buster on the downside. While Channel Busters have a lot of unique characteristics about them and make (in my opinion) for great trades, we only need to know that most of the time, what seems like a clean, clear break of the channel and an obvious short is VERY RARELY THE CASE. 

More often than not, these are some of the most deceptive price patterns in the market and they typically not only move back inside the channel, stopping out any traders who followed price on the break of the channel (up or down trending channels), but they often shoot right through the channel and exit on the opposite side, above the top channel in this case.

We'd need 3C confirmation to make sure it is the large head fake move we call "Channel Busters" and not a real break of the channel...

This 60 min chart that shows distribution inside the channel just before it broke through the support channel is now in a strong leading positive divegrence on a very respectable timeframe so I have no problem with FXP long in this area.

The 30 min chart shows the same two events, distribution ;leading to the break and a large, clean, clear positive divegrence under the channel.

On a VERY short term basis, 3 min., we do have a gap up right after what looks to have been a head fake shakeout which we see commonly just before a move or reversal starts (they tend to be proportional), so there's a chance FXP may fill the gap between April 10th and now, that's likely the last chance we get at an FXP long before it takes off with lots of momentum to the upside.

You might want to set an alert if you are interested for the gap area, although if it were me I'd probably phase in to the position, taking some here and adding the rest if FXP fills the gap below from last week.

I REALLY like FXP long as a longer term position trade.