(Partial video transcript)
Last week’s trading result
Chris Beauchamp: Hello and welcome to the “Office of the Week” for Monday, October 27. Firstly, we will return to the result of last week’s “Trade the Week” on Monday, October 20, where we took long positions on the DAX 40.
Now this has been a good start to the week. But, while US indices, Japanese indices and UK indices hit all-time highs, the DAX is the one that gets a little left out. It seems I chose the wrong index to trade last week. We have had one that has gone up. I think it’s up for the week so far and it’s certainly not close to the top. But it is not showing the same breakneck performance that we have seen in markets like the United States and Japan.
So, I think maybe five out of ten for this “Trade of the Week” from last week. It’s still holding on. I think if there is a global market rally, there is an expectation that the DAX will at some point join it. There may be some uncertainty following this week’s European Central Bank (ECB) meeting. And the fact that you don’t own big tech stocks isn’t directly affected by US-China trade talks, maybe?
Anyway, whatever the reason, it has found a bit of resistance around 24,400, but it is still well above where we were at the start of the week. And obviously our stop is all the way down the chart. So there is nothing to worry about at the moment. We could let this one work. We have rising stochastics, which suggest that momentum will push higher at some point.
We may be about to see a bullish moving average convergence/divergence crossover (MACD) here, which would reinforce the bullish view and still give us room for it to return to these all-time highs which, lest we forget, were only about three weeks ago. So, nothing too spectacular from the DAX this week. And as you can see, a little bit of a weak start in the early trading of the index.
This week’s trading opportunity
Let’s get to this week’s trade for Monday, October 27. With some trepidation because we could get run over by this one, but we are going to be short on US crude oil. This is an interesting question because “selling the rally” has been the name of the game for weeks in crude oil, if I had done it myself. Since late July, every time there has been a decent rise in crude oil, it has given way to a decline.
So in the spirit of doing what the trend tells you to do, we’re going to go short because it’s had this bounce over the course of the last week from $56.00 to $62.00. Decent bounce in crude oil, but as you can see, it has started to lose steam. So the fact that we tried to get back above the 50-day moving average, we did try to get back above the $62.00 level and neither of them were successful.
So this is our bearish view given form, if you will, because the last time we did this in early October, a short-term bounce hit the wall again at $62.00 and was broken. The expectation is, I shouldn’t say hope because hope is not a trading strategy, but the expectation is that $62.00 will continue to hold as resistance.
And we have a possible renewal of the downward movement. This downward trend, as can be seen on the chart, with the moving averages pointing down, lower highs and lower lows appearing, means that we have a reversal on our hands and that, perhaps, should be confirmed by the stochastics in due time. But we have a second day down in the first operations. So at least our bearish view remains, somewhat, in place.
This week’s trading summary
So for this week, we are looking to sell US crude oil with a target perhaps as low as last week’s lows, below $56.00, and a stop, we will put it at $62.50 per barrel of US crude oil.
