Trade Strategy 08.11.15


After a run of poor economic data, including weak trade figures, China’s central bank surprisingly devalued its tightly controlled currency today to help jump-start its stalling economy. The PBOC set Tuesday’s midpoint at 6.2298 per dollar, compared with 6.1162 on Monday, changing the way it calculates the figure to reflect market makers’ quotes and the previous day’s closing price. Following the news, China’s spot yuan fell nearly 2% to 6.3270, its biggest one-day loss in decades.

Today’s Economic Calendar

6:00 NFIB Small Business Optimism Index
8:30 Productivity and Costs
8:55 Redbook Chain Store Sales
10:00 Wholesale Trade
1:00 PM Results of $24B, 3-Year Note Auction


Prior session saw price gap higher to continue its rally which began Friday, surpassing our most optimistic Cycle Day 3 projection, 2095.50 by a comfortable 5 handle margin. Price is currently trading down approximately 14 handles in response to China’s devaluation of the yuan. Today begins a new Cycle, which typically begins with some price weakness.

Today is Cycle Day 1 (CD1)…Normally is SPILL DOWN…Odds of Decline >10 = 72%; Odds of Decline > 20 = 42%; Average Range = 18.75; Max Average Range = 22.00; Possible HOD = 2111.50 based upon penetration of CD3 high; Possible LOD = 2078.25 based upon Average Range Decline on CD1.

***Note: The odds highlighted are NOT predictions or trade recommendations, rather a guide based upon historical observed occurrences.

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Today’s Hypotheses: September (U) Contract

*****The levels outlined below are more general framework within a larger range…They are to be used are reference prices from which to consider trade opportunities, not hard trade levels.

Scenario 1: Price is currently below 2091.50 “KEY SPOT”…Buyers will need to recapture and convert this level and then convert 2096.00 handle to continue the rally from previous Cycle. IF price clears and converts PH (2100.75), THEN upside measures 2103.50, 2108, with Penetration Target 2111.50.

Scenario 2: Odds (72%) favor a decline of greater than 10 handles, which has been fulfilled in pre-cash trade…Violation of 2091.50 SPOT and failure to recapture and convert, places continued downside pressure on price. Lower targets to be mindful of are 2086.00, followed by 2083.25 – 2081.25 3D CPZAverage Cycle Range Decline Target measures 2078.25.

Trade Strategy: Our tactical trade strategy will simply remain unaltered…We’ll be flexible to trade both long and short side from Decision Pivot Levels. Continue to focus on Bull/Bear Stackers and Premium/Discounts. As always, remaining in alignment with dominant intra-day force increases probabilities of producing winning trades.

Stay Focused…Non-Biased…Disciplined  ALWAYS USE STOPS!

Good Trading…David

“Knowing is not enough, We must APPLY. Willing is not enough, We must DO.” –Bruce Lee

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