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Alan Rich Online

Alan's Trading Update

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In the next 2 years mobile internet is set to soar by 150% especially as 4g gets rolled out.

 

It has been said that mobile internet usage will grow hugely and desk top usage will stay the same.

 

The Economist says the biggest winner of all this will be Apple. If Apple does nothing then they will naturally grow because they are so big in the mobile sphere with their iPhone and iPad.

 

If Apple brings out new products then it will only enhance the company share price and profile.

 

Bearing this in mind, the next big thing is supposed to be the I watch.

 

The latest news on this is below.

 

Makers of Apple accessories have already raised more than $10m to make a watch using the firm’s iPod Nano, but Apple has changed the shape of the latest Nano, leading some to suggest it could now be making its own watch.

 

Chinese news site TGBUS reported “Apple is building” a device using Intel chips and new low-power Bluetooth technology. A 1.5” touchscreen would be used to control the phone, and Apple’s voice assistant Siri would also allow users to control the watch using voice commands. It claims the device could launch within the next six months.

 

Bearing all this in mind Apples prospects look good in the next few years. So why is its share price falling? The simple answer could be is its pulling back at the moment and setting up for the next push up. Apple has risen strongly for just over 3 years and anything that moves up so strongly has to pullback at some stage to set up for the next leg up.

 

An easy way to see where that might happen is to use a Fibonacci grid on the last strong leg and use it to see if it picks one of those levels to bounce from. It may consolidate for a while but any support at those levels could be a buying opportunity for investors/Traders in the future.

 

This is how the charts looks right now with the Fibonacci lines marked.

 

apple2.gif

 

How has Apple behaved in the past using this type of Fibonacci analysis?

 

The answer is that it did exactly the same thing before using a Fibonacci pullback before its last awesome move up. I attach the chart. When stocks use Fibonacci in the past they have a tendency to use it in the future.

 

apple1.gif

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Bearing all this in mind Apples prospects look good in the next few years. So why is its share price falling? The simple answer could be is its pulling back at the moment and setting up for the next push up. Apple has risen strongly for just over 3 years and anything that moves up so strongly has to pullback at some stage to set up for the next leg up.

 

The answer is that it did exactly the same thing before using a Fibonacci pullback before its last awesome move up. I attach the chart.

 

 

Hi Alan,

 

When trading a pullback in this manner (a sound recommendation in my opinion), would you tend to buy into the pullback using a limit order, or would you wait for a thrust back in the direction of the underlying uptrend?

 

Also, how would you determine your exit - by using fibonacci, or on a re-test of the prior highs, or by some other method?

 

BlueHorseshoe

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I don't tend to use limit orders, I manage my positions manually.

 

I use what I call pivotal areas, price will move and move until it hits resistance I usually wait for that before exiting. You will start to see price move sideways, many people will sit on a position because they have a stop in place and often price will then fall back and hit the stop.

 

I just get out when its not moving any further.

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How the Fiscal Cliff deal has affected the markets.

 

The trouble with gaps is that the market has a tendency to go back and fill them.

 

The S&P futures rose strongly after the Fiscal Cliff deal but its left a gap behind.

 

Although the Fiscal Cliff deal has lifted investor’s spirits and has risen at some stage it will need to pull back. When it pulls back next will it then take the opportunity to close the gap its left?

 

After the Fiscal cliff deal we could really do with a weak dollar to keep the momentum going, a strong Dollar only holds the market back.

 

So after the Fiscal Cliff deal there could be two things to watch out for. One would be any sell off that fills the gap it made after New Year’s trading re started and the other is the strength or weakness in the US Dollar.

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The YEN is weak we all know that and it is interesting how people see things.

 

First of all I checked out what the worriers and over analytical thought traders think.

 

They said.

“Retail short positions have actually fallen since last week. The weekly RSI is at its most over bought in 15 years.”

 

Others are saying things like “our experts say that an unwind of USDJPY long positions is extremely high”. That means they aren’t’ trading it they are just talking about it.

 

Let me tell you price action will determine when this finishes not what a retail trader thinks or what the RSI does or an analyst thinks.

 

Remember last year at this time when Mystic Meg and all those others said the Dow would collapse based on their belief but the price action was so strong it ran for 3 months straight up!

 

The YEN is a momentum play and that’s why we are on it.

 

If it dies at the highs and drops like a stone then yes I’ll play that as well. If the move does continue then knowing which pair to be on is key. The same thing will happen if it collapses. If that happens we’ll clean up on the way down! In fact we’ll make profits ts twice as fast then.

 

The thing we need to focus on is how strong is the US dollar right now?

 

In the coming month if that continues to show strength and the Yen shows weakness then that will be the pair to be on.

 

So checking out the Dollar index could give us a clue. Let’s take a look.

 

The Dollar index is finding support at a key fib level and has had a big spurt this week. In 2 previous times this spurt has led to strong 4 week moves as shown by the ellipses.

 

Is this the start of another 4 week spurt? If it is then will the USDJPY be the best play for going long?

 

See what you think from the chart.

 

By the way be sensible stay with this move but keep one very close eye using price action to spot the time when yes, it does finish. Let the system call it.

 

dxy-weekly.gif

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First lets say that almost everyone in the trading arena are nice people, but of course we have different views and that’s what makes a market. At times I will be wrong and they will be right.

 

I don’t want to be the same as the majority because it’s the minority that are the true winners. So I’m always in debited to the guys that don’t know they don’t know and keep the crowd trading their old fashioned ways.

 

A year ago someone said “Get out of any long positions on the Dow as all the indications from his technical analysis led him to believe that an imminent collapse of the index was due!!” Of course it never happened just like the end of the world December 2012, it was a belief made from the news and curve fitted to technical analysis.

 

When you look back on it you smile but at the time I had serious traders who really believed it.

 

I respect the analysis, but I had a different view based on price action which I mentioned in the blog at the time.

 

Right now I respect that Yen is oversold and the RSI is overbought, but all that is old hat now days. You can see that when it dropped under the upside band after making a high above it we took off on another momentum move, shown by the black arrow. Anyone that went short because of the RSI got burnt to a cinder.

 

Price action and the ability to understand it is the key, an RSI on a standard setting will only react after price action confirms something. If we continue to go up then the RSI will stay above the upper band only when price action makes the reversal will the RSI react.

 

As traders we need to understand price action and the closest you get to it is intraday. We are the guys that know what’s truly happening not the people who use old fashioned ideas and expect something to happen because of past belief.

 

The turn will come in the Yen and that will either be a pullback or sell off, but it’s not there yet no matter what statistics people quote to us. We have to understand the signs when it does happen and when it does it will no doubt happen intraday out of the blue. Just like that US session drop in the EURJPY before Christmas. Trade what you see and not what other lesser people tell us we need to think.

 

Remember something big could happen to it at any time, but let it tell you when that is, don’t make assumptions.

 

USDJPY.gif

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One of the hardest things when we are trading is grinding out profits intraday when things are quiet or setting up for something bigger.

 

Especially if everyone is telling us that something big has occurred in the charts.

 

Sometimes we can jump the gun only to find that out that the big thing we thought would happen has just been a pullback or another consolidation.

 

Sometimes things just need time to play out a bit before we can see what’s happening. That’s why making profits intraday can be hard. It’s a waiting game.

 

At the moment the US Dollar is back in the Fib area. I think it can hold down here and strengthen again. So I’ll set the system chart to indicate in a slightly bigger time frame when that might be.

 

dxy-120min.gif

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I'm watching the US Dollar. It’s back in the Fib areas again and at some stage it could strengthen. If it does then I'll pick the pairs that will benefit.

 

The way I look at things is like this. I'll do some analysis and think there is a scenario which could play out. If it does then I'll trade it.

 

I won’t trade it until the timing is right in the time frame I'm looking at.

 

What happens with average technical analysis guys they think something has occurred, create a belief, jump in then get stopped out, jump in again get stopped out and when it does happen they're not on it. Their timing is not so hot and they get burnt.

 

Many times of course something looks good but it’s a fake and they get really burnt because they have just been fooled by the market. Timing is everything.

 

So I can see the Dollar index is back in the Fib areas and could strengthen but I'll wait to see what is happening in the time frames I'm watching.

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I told you a while back the Aussie Dollar is strong and really that should be the one I traded.

 

I also told you that when everyone was screaming to go short the Yen pairs because of an over bought RSI and other wonderful ideas they thought of, I said it could quite easily be a pullback or a consolidation. Which it has turned out to be.

 

What they really should have said: “It was a take profit level from the last leg up”. But of course they haven’t been trading it so they wouldn’t see it that way.

 

What I’m saying now is that the momentum has waned in the YEN and we have to be selective. The weaker currencies are lagging on this move against the YEN and I’d leave them alone and focus on the strong ones. I jumped on the USDJPY because of the Dollars strength but the Aussie Dollar is stronger.

 

Why did I focus on the YEN again? Mainly because so many people were talking about shorting the YEN pairs. I was even showed a video of a T/A guru telling all his followers to short the YEN pairs. I smiled and thought I must remember do the opposite to that when the time is right!

 

All I need is timing, good management and the right YEN pair plus an understanding of the right time to jump off, the rest is pure profit!

 

When the time comes to short the YEN pairs I will be on it but as I said its not yet. No matter what analysis is done by over analytical people who keep telling us what we should do.

 

This is one type of reason why people know how to trade but can’t make money. All of us that do trade for a living end up bumping into the over analytical brigade but we manage to steer through and focus on our trading rather than listen to their views.

 

usdjpy-daily.gif

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It goes with out saying that the EURO is in play, so I'd just keep following it across the board. The YEN is still weak so anything strong with it is a winner.

 

Do you see how many commentators technical analysis last weekend and Monday to short the YEN pairs seems so ridiculous now and how it was price action intra day that blew all their views out of the water!

 

That's the big problem that people have in being successful in their trading, there are so many people who dont trade giving old fashioned T/A ideas, the crowd follow them because their analysis seems reasonable and then get burnt to a cinder when price action does something different.

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Never mind the analysis we need to think about ourselves and also whats happening.

 

Most of us have made significant profits this week on the EURO and I still think its strong.

 

However if you have been on the YEN you can see how the weaker currencies are starting to struggle slightly.

 

We have to be picky now and understand what has relative strength and what is showing relative weakness against the YEN.

 

When you are euphoric after big gains your rationing can be out of sync whth whats happening.

 

Its at times like this you can suddenly get big moves against you and your mind can make you freeze.

 

Better that you rationalise things in advance in your mind and be prepared if something big happens that you dont expect. Like end of the week profit taking.

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Apple isn’t dead it’s just pulling back

 

Hi Alan,

 

Where did you go?

 

I bought into Apple big time like you recommended, but now I'm underwater on the trade.:doh: Should I sell now or try and get out at break-even?

 

Please help!!!

 

BlueHorseshoe

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Hi Alan,

 

Where did you go?

 

I bought into Apple big time like you recommended, but now I'm underwater on the trade.:doh: Should I sell now or try and get out at break-even?

 

Please help!!!

 

BlueHorseshoe

 

DEyjZF4.jpg

 

aapl looks like it is supporting itself on the support line well enough

 

rJhVpa1.jpg

 

and it looks like it could have a nice rally to its resistance at 485-95 by the indication of the depleting volume.

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Alan - please come back!?!?!

 

I thought you were different from the other vendors and put my trust in your predictions for Apple . . . And then you just disappeared!

 

Now I've lost 39% of my pension on this nightmare trade and my wife is going to kill me when she finds out! Please come back and advise me as I don't know whether to swallow the loss or hope the stock moves back to breakeven. Please help!

 

BlueHorseshoe

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Blue I didn't say buy Apple I said its pulling back...

 

Feel free to draw a 50% retracement from the highs to lows....

 

I figured even you would be able to see that?

 

"Very interestingly the pivotal area made over the last few days on Apple is right at its 50% retracement point in the weekly chart."

 

spooky2.gif

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After todays economic news the Dollar strengthened.

 

But what if its just part of the US Dollars continued rollover?

 

In the chart attached I have shown what the Dollar index is doing and put the fib grid on the last leg down.

 

I’d watch the Fib grid area to see if it can’t get through them.

 

If it starts stalling at the highs of the rollover just as the USDJPY did recently then we could get another drop.

 

See what you think.

 

suppose.gif

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I know what I have said in the past about Gold but watching it in the short term it just doesn’t want to stay down.

 

The last sell off was just a pullback. I may very well buy a small position in it and place it in my portfolio in case there is more to this bounce in the daily charts than I think.

 

gold345.gif

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