“I got into trading in college. The first stock I purchased cost me $2.89/share; 10 months later it hit a high of $7.79/share. That’s a 170% appreciation per share. I worked for a couple of firms then decided to branch out on my own because I didn’t want to be assessed based on how much money I brought into the firm, I wanted to be graded on how much money I made for people. I enjoy conducting independent research, generating independent ideas, and monetizing those ideas in the markets. I also possess a passion for business. I like watching things become something out of thin air. I’ve experienced and continue to experience what it’s like to start a business. I’ve also experienced what its like to start fresh at investing or trading in Stocks, FX, Futures, etc. So, I created this site to re-experience these things with others”

                                                                                                                                           Lamarcus R. Coleman, MBA

Leave a comment

October 18, 2012 · 9:39 pm

NZD/CAD..247 pip drop…Now What?

As of late, the Kiwi has been the weakest currency against the majors. The Kiwi rallied last year as it led the way for interest rate expectations. As we all know, the RBNZ is pretty straight forward about its intentions. The RBNZ, this week, raised its OCR by another 25bps to 3.5%. Yet, the Kiwi got hammered against currencies like the Aussie and CAD. This is most likely because the market had already priced in the rate hikes. Ergo, no surprise data, no continuation for the Kiwi.

In a prior post, I showed a short entry in the Kiwi vs the Loonie. I got short on last Tuesday at .94344 going into CAD event risk. Since, then the NZD/CAD has broken down (fell 247 pips from entry) but is now nearing another key support level. I attribute the move to the CAD CPI figures in conjunction with Aussie CPI, and better than expected PMI data out of China. The Aussie has been the strongest currency this week. It also strengthened 228 pips vs the Kiwi  this week . This is followed by Euro which strengthened 221 pips, the Greenback which strengthened 167 pips, CAD which strengthened 154 pips, and the Yen strengthened 130 pips this week against the Kiwi. The Pound was the leader of the majors against the Kiwi and strengthen by 270 pips. It has since then traded slightly lower, but is still near the week’s highs.  I would venture to say that the strength of the Aussie on CPI and China data exacerbated the decline in the NZD/CAD coupled with the overall weakness of the Kiwi. The fact that the only CAD data we received this week was retail sales on Wednesday, during which time the CAD traded within a 26 pip range  strengthens this claim. Also, note how 92% of the 248 pip move lower occurred this week. Notice that the only currency in which the CAD gained more against the Kiwi was the Yen. My initial observation was that if the pair could close below the .93270 area, I wanted to be short. We fell into this area earlier this week, but the Kiwi retraced and closed higher Wednesday after CAD data.

NZDCAD...Short Entry 7/15

Short Entry on Tuesday, 7/15 at .9344

Thursday we gaped down. I’m now giving the pair time to show short term upward momentum. Over the coming days, if we fail to break resistance of the gap bar, I’ll be targeting the .89600 area. A break and close below the .9164 area is another way to enter or add to the trade.

 

NZDCAD Breakout of Rising Wedge

Kiwi weakened 247 pips from entry led post CAD CPI last Friday, and the RBNZ rate hike this week.

 

The Kiwi rallied some 1500 pips against the CAD from the beginning of last year until April of this year, thus there’s a bit of room for a retracement. I think the CAD has the potential to strengthen to within the .8820 area. The U.S. is on pace to rap up QE ahead of schedule, and the economy is strengthening. This bodes well for the CAD. If the risk theme shifts, this could potentially accelerate the Kiwi’s decline.

Leave a comment

Filed under Investing, Trader Development: Strategy Development, Trading

Risk Theme: Aussie & Yen Crosses

The Aussie has been really buoyant as of late. I thought that AUD/NZD could possibly test the 1.0900 area but was expecting failure around this level which would have confirmed the H&S pattern that was developing. The fact that the pair extended I think is a testament to the market’s current view of risk. The S&P 500 has consistently moved higher which is a great gauge of risk themes. This bodes well for “risk on” currencies like the Aussie.

Another view of the market’s risk theme can be seen in the Yen crosses. Right now a number of the yen crosses are trading withing bearish wedges, flags etc, yet I believe the yen won’t gain strength until the market’s risk theme changes from risk on to risk off. The better than expected PMI figures out of China should provide continuation of the market’s current theme.This is probably why pairs like the USD/JPY, CAD/JPY, AUD/JPY, have been consolidating. USD/JPY has broken slightly out of the bearish wedge formation but has struggled for follow through. The EUR/JPY is at a pivotal support level in the 136.330 area and may be the first of the Yen crosses to show some follow through due to the fundamental backdrop of the EU. The AUD/JPY is a direct gauge of risk trends in the FX market. The AUD/JPY is near the highs around the 96.479. If we break this level to the upside, I think we could test the 98.304 level. However, the pair has consolidated within a bearish formation. Until risk themes change, any breakouts lower in these pairs may come with little if any continuation.

The EUR/AUD has been a good pair to short over the past couple of months. The pair broke out at the 1.5052 area in early April and has since continued lower (850 pips). There’s significant downside potential if we break these levels. I think we could test the 1.36108 area if we break and close below the 1.41330 area.

The Aussie in the short term is showing a lot of strength against pairs like the Kiwi. However, if we look back to the beginning of 2013, even at current levels the pair is down 1700 pips. This means that AUD/NZD could continue to run as it is relatively still at the lows and just gaining traction after bottoming out at the 1.05387 level. Also the fact that we gapped up tells me that a lot of traders went in heavy on the short side and the Aussie CPI figures along with China PMI figures not only brought in more buyers but also triggered the shorts stops, hence a gap up. From a technical standpoint, the pattern almost couldn’t been better which is what led to a lot of traders probably entering prematurely. Once the Aussie broke the 1.0900 area, which where a lot of stops should’ve been, then we were off to the races. Over time, we could very well test the 1.16086-1.1840 area as long as the market’s current theme remains in place.

 

Leave a comment

Filed under Competitive Advantage, Investing, Trading

Aussie Kiwi Short Potential

The Aussie rallied 40+ pips yesterday on inline CPI figures. Later today we’ll get the rate decision from the RBNZ. I’ve been eyeing the AUD/NZD. From a techincal standpoint we appear to be rounding out the top of the 2nd shoulder in a head and shoulders pattern. Earlier in late May early June, we completed a break out of a rising wedge formation which was the precursor to the head and shoulders.

Fundamentally, the RBA still feels as though the Aussie is high by historic means. In contrast, the RBNZ has been the only major central bank to raise rates, and to do so consecutively.

I would look to get short around the 1.0900 area which is prior resistance of the 1st shoulder, or catch a breakout below the 1.08500 area. The 1.06330 area or neckline is a good place to either take profits or cut half of the position. Ultimately, over the coming months, I would target the 1.0860 area.

AUD/NZD H&S FORMING

Leave a comment

Filed under Investing, Trader Development: Strategy Development, Trading

Watching NZD/CAD Going Into Kiwi CPI, CAD Rate Decision & CPI

I’ll be watching how the NZD/CAD responds to this week’s event risk. KIiwi CPI is on tap Tuesday. The RBNZ has raised interest rates three times, more than any other major central bank. The RBNZ stated in its last policy statement that the Kiwi has yet to adjust to the decline in commodity prices but is expected to do so. The bank also stated that the Kiwi is not sustainable at current levels. Upward momentum has been slowing in the Kiwi versus other majors as of late.

The Bank of Canada will make its monetary policy decision on Wednesday and we will receive CPI figures on Friday. The Bank stated in its latest policy report that it continues to see strength in the country’s fundamental drivers. Its view is highly contingent upon continued growth in exports and investment. With the U.S. continuing to expand and on pace to end QE earlier than expected, the Loonie should benefit.

From a technical aspect, multiple Kiwi pairs (USD,JPY,CAD) are trading within rising wedges. Momentum is slowing in the Kiwi. In order to get the proper follow through, technicals must align with the fundamental drivers. I feel that NZD/CAD could possibly see the biggest move of the NZD/USD, NZD/JPY, and NZD/CAD this week based on this week’s event risk.

 

NZDCAD

NZD/CAD DAILY CHART RISING WEDGE

 

If the Kiwi does rally, I would be looking to get short around the .96403 area in anticipation of failure at resistance and a breakout to the downside. My profit target would be in the .89607 area. The Kiwi could possibly pullback going into CAD event risk after CPI figures on Tuesday. One could wait for a break of the .93275 area to get short in anticipation of follow through to the downside. If the NZD/CAD doesn’t hold the .94252 area, I will be looking for a short entry. With an initial target at the break point of .93275 and my stop at the .94850 area. If this area holds I will cut half of my position and move my stop to break-even on the second half with the .89607 area in view. If we break the .93275 area, I’d be looking to hold and move my stop just above the .93275 area to eliminate my risk on the trade. Risk on this trade is 60 pips. Reward is 465 pips for a 7.8:1 reward to risk ratio.

 

Leave a comment

Filed under Investing, Trader Development: Strategy Development, Trading

AAPL: Apple Should Pullback….Go Long on the Dip

Investors have had quite a ride in Apple (AAPL) since September of last year, at which time the stock began its massive decline from $703 to bottom out in the $385 area in April of this year. Apple later retested this area in late June, forming a double bottom pattern before rallying to this year’s highs. Apple appears to have completed the transition from a growth play to a value play. In prior years, Apple was sought after due to its continued innovation. Once the firm began maturing and new product innovation slowed, traders switched their bias and the stock became a value play.

Apple continues to look good fundamentally. The stock is trading at 14 times earnings. With a dividend of $12.20, at current levels, Apple has a yield of 2.20%, above its industry average. The company had no debt from 2009-2012 and even at its current leverage, the firm still has a debt/capital ratio of 12% which is well below the industry average. The firm’s quick ratio is also below the average of the industry indicating that the company will have no issue servicing its debt. Apple’s ROE and ROA 31% and 19% respectively, are both above the industry average. Net and Operating Margin also exceed that of its industry.

While Apple looks good fundamentally and as a long-term investment, the stock is just 3.5% off of its 52 week high. Apple, while leading the industry in revenue growth over the trailing twelve months, lagged the industry in revenue growth in its most recent quarter. EPS growth in the most recent quarter and trailing twelve months have also declined.

With the Fed likely to Taper within the coming months, this could present a key opportunity to scale into or add to an existing Apple position. I expect the Fed to Taper in December. However, March is the latest that most traders and economist expect Tapering to begin. Tapering, while beneficial to the broad economy, will result in a pullback in the equity market as traders price in the effect of less financial stimulus. After a significant correction, investors should begin to buy up stocks trading at advantageous multiples. I feel that Apple should be one these stocks.

I would look to begin scaling into Apple around the $495 area. Applying Elliot Wave Theory, Apple is currently ending the 3rd Wave. The stock experienced a Fibonacci retracement of 50% in the 2nd Wave which is not minor, but also not a typical retracement in the 2nd Wave. Applying the rule of alteration, I would expect Apple to pullback in the 4th Wave to somewhere within the $495-$510 area. This should be a good spot to begin scaling into a position.

AAPL Daily Chart

AAPL Daily Chart

(click to enlarge chart)

Based on the projected retracement, we can draw channel lines to determine the impending chart pattern set-up. Based on the chart below, it appears that Apple could form a rising wedge in the coming months which would indicate that the stock could fall below the $495 area to bottom out possibly near the $450 area. To confirm this pattern, the 5th Wave to the upside would have to fail to exceed the top of the 3rd Wave. If the stock trades to  the 38.2% Fib. retracement area in the 4th Wave and holds, I would reconsider my original target and begin scaling into a position at the $520 area with a profit target in the 5th Wave of $610.

AAPL Possible Rising Wedge Projection

AAPL Possible Rising Wedge Projection

If Apple does trade above the 3rd Wave, the chart pattern developed could be that of a flag which will signal a continuation higher. We can use Fibonacci tools to project our price target.

AAPL Possible Flag Projection

AAPL Possible Flag Projection

Taking the fundamental data and technical analysis into consideration, as well as the likelihood that the Fed will Taper in the coming months, I feel that Apple should sell off to the at least to the $510 area and later extend higher. One could play this trade in the options market by collaring a current position (collar=long put and short call) to hedge the short-term downside risk. The long put, out of the money, should be bought around the $540 area. I would then sell a call against it at the $595 area. Another strategy that one could use once the 4th Wave down was complete, to preserve capital, is to put on a synthetic long position, or sell a put and buy a call at the same strike price. With implied volatility exceeding historically volatility, options premiums will be higher on the Feb595Call which would generate a credit of about $12  Price would have to exceed the $595 level by Feb. expiry for you to lose your credit which I feel is unlikely. The market is pricing in a pullback which is why implied volatility on puts exceed that of historically volatility, thus elevating premiums. On the Collar’s long put at the $540 area, for Feb. expiry it cost about $22 for a net debit of $10 for the trade. If the stock falls to $510, the trade would profit $325 for a 3:1 risk/reward. If the stock falls to $495 by Feb expiry, you would have a $443 profit and a 4:1 risk/reward ratio.

As a risk management precaution, if the Apple breaks the 3rd wave high of $573, trading up from current levels, I would close the trade at a loss of about $125 and reassess the environment.

Leave a comment

Filed under Market Outlook

Market Wrap 12/17/13

Stocks open trading lower, giving back some of the gains from Monday. The US 10year is trading higher, with yields falling to 2.87%. The USD has strengthened overnight against the currencies of other major economies. German Bunds are higher as yields fall to 1.83%. U.K. yields are 2.8% while Japan’s 10 year gains sends yields to 66bps.

In Asian trading, stocks finished the day mixed with the ASX and Nikkei in the green and the Shanghai Composite and Hang Seng in the red. In Europe, stocks are down across the board even as German ZEW figures blew past expectations. The Stoxx is down 50bps, CAC -1%, DAX-40bps, & FTSE -50bps. Canada’s TSX is practically flat, just in the green 3bps.

Downward pressure in the EUR sends EUR/JPY and EUR/CHF lower. The markets appear to be trading with somewhat of a risk off sentiment as stocks fall, and the USD and Yen strengthen. Commodities are also down as we begin the first day of the FOMC meeting. WTI is slightly higher at 50bps, Brent Crude is down -55bps, Gold -50bps, Silver -60bps. Nat. Gas is also trading lower. The VIX is trading higher up 3% in early trading.

The Euro, Pound, Loonie, Kiwi, and Aussie all weakened in overnight trading while the USD/JPY is mostly flat. The Aussie is trading near a key support level of .8900. This is the same level in which we formed a double bottom back in August and September before we had 800+ pip rally into mid October. Since then, in November, we formed a head and shoulders pattern and broke below the neckline to arrive back at this key support level. On this trade, my short entry target was on a break beneath .92963 with a ultimate profit target of .8900 with a short term profit target of .9200 to test whether or not we would get a break at that level. Once we did, stops could have been tightened. If you followed suit, you picked up 400+ pips over the last month. If we break key support on the AUD/USD, the next key area of support will be the July 2011 bottom at .8200.

U.K. inflation also came in at 2.1% vs 2.2%. The US inflation rate came in at 1.2% vs 1.3%. Core inflation was inline posting 1.7%. The current account deficit in the US also narrowed.

Next Key Support is the July 2011 bottom of .8200

Next Key Support is the July 2011 bottom of .8200

 

Leave a comment

Filed under Market Outlook

HOW TO CREATE A TRADING PLAN

In this video I illustrate how to properly design a trading plan.

Leave a comment

December 10, 2013 · 5:14 pm

A December Taper: EUR/USD Provides Clues

In this video, Lamarcus R Coleman recaps a prior video’s setup that profited over 154 pips and shows how the EUR/USD could be providing clues into a December Taper.

Leave a comment

December 8, 2013 · 5:36 pm

HOW TO TURN 2,000 INTO 10,000 TRADING FX

In this video Lamarcus R Coleman exposes the scam of get rich quick trading and pay for education prop firms. He also demonstrates how you should trade if you want to turn a small FX account into a larger account.

Leave a comment

November 26, 2013 · 6:31 pm

Retail Active vs Passive Investing

Leave a comment

November 23, 2013 · 6:39 pm