Thursday, 26 September 2013

Looking for Trading Patterns That Repeat

Ralph Shell, Excel Analyst

Quite often there are trading pattern that seem to repeat, not precisely, but in a similar pattern.  The catalyst may or may not be a repeat.  Sometimes it is a false signal, and it will need volume and price action to confirm a movement is about to commence.

Excel Markets EQUITY : DRAWDOWN Demo Account ContestRemember, we are dealing in currencies whose values are determined by their relationship to another currency.  Often, the difference between the two currencies is subtle, especially if the two countries are located very close to each other.

Further, we must be careful not to jump to a quick, but a wrong, conclusion.

For example, this week Calgary, Canada-based Husky Oil, in conjunction with the Norwegian energy firm Statoil, announced the discovery of an oil field which is thought to contain 300 to 600 million barrels of recoverable oil in depths of about 1,100 meters.

We can only guess the quality of this crude which we would think to be more like the North Sea Brent currently worth about 110/barrel rather than the 77 the Western Canada Select coming from Alberta on the spot market.

There are continued new production technologies being introduced.  Earlier this year, Chevron announced:

" oil discovery at the Coronado prospect in the deepwater U.S. Gulf of Mexico. The Walker Ridge Block 98 Well No. 1 encountered more than 400 feet (122 m) of net pay. The well is located approximately 190 miles (308 km) off the Louisiana coast in 6,127 feet (1,868 m) of water and was drilled to a depth of 31,866 feet (9,713 m)."

This is amazing!

The point is, the news is exciting for Canada - but the market does not care.  An ample supply of oil should be available for exportation from Canada for many decades but what does that do for the loonie now?

Click to Enlarge USDCAD Daily Currency Chart

Currently, there is global calm, a situation that usually comes with a very short-term guarantee; however, the global economic recovery seems to be a dud.

This is not a situation where the bold animal spirits or entrepreneurship is encouraged.  Commodities and currencies are not in favor.  The loonie, back to the 105 handle, seems more likely than not to return to the 101 price.

Click to Enlarge USDCAD Weekly Currency Chart

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1 comment:

  1. Patterns are a huge trap imo. Anyone can recognize a pattern. I mean, even toddlers recognize patterns, so just because you look at a graph and see a pattern doesn't mean your some trading genius. You have just as much of a chance of getting it right when act based on a pattern as you do of getting it wrong.

    Fred @