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Daily Analysis: Dollar Rally Continues amid Fed Chair Confusion

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Tuesday Market Recap

Asset Current Value Daily Change
S&P 500 2554 -0.09%
DAX 12995 -0.07%
WTI Crude Oil 51.53 -0.66%
GOLD 1287.00 -1.22%
Bitcoin 5652 -0.86%
EUR/USD 1.1751 -0.38%

Yesterday’s trends are mostly continued in financial markets, such as the low-volatility levitation in stocks and the slightly more active trading in currencies with the apparent Dollar strength. The Great British Pound continued to be under pressure amid the amplified Brexit-related worries, but most of the other majors also lost ground to the Greenback.

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The Dollar rally has been fueled by the rise in the odds of some of the hawkish Fed Chair candidates, while overall, the “race” for the positions looks more chaotic than ever. Interestingly, the long-end of the yield curve is refusing to follow the short-term moves, and without the effects of the Fed’s QE program, the yield curve would probably be inverted by now, signaling strong recession risks.

Dollar Index (DXY), 4-Hour Chart Analysis

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The major stock indices are virtually unchanged yet again and even the previously surging Nikkei entered a consolidation, adding to the unusual October lull. Commodities have been quite active thanks to the Dollar’s vigor, with crude oil and gold both turning lower. Oil gave back most of yesterday’s gains as the Iraqi-Kurdish conflict turned out to be less violent than previously feared, and the brief rally fizzled.

WTI Crude Oil, 4-Hour Chart Analysis

Cryptocurrencies

The major coins are having a mixed session at best, as yesterday’s rebound wasn’t durable, and most of the coins turned back lower again. That said, despite the recent choppy price action, the total market cap of the segment is close to its all-time high, even as only Bitcoin is trading near its own record price level.

The optimism regarding Ethereum major Byzantium upgrade wasn’t enough to lift the second most valuable coin today, and the price of the ETH token retreated below the key $330 level after touching $350 yesterday after the upgrade’s lock-in. Ripple and NEO have been among the most active majors today, but with opposing performances, as Ripple fell significantly after yesterday’s break-out attempt, while NEO defied gravity and jumped above the $30 level after a corrective period.

BTC/USD, 4-Hour Chart Analysis

Technical Picture

The S&P 500 is grinding higher despite the overbought short-term momentum readings, and the benchmark is trading very close to its all-time high. The 2550 level is still in focus, but until volatility remains near record lows, the minuscule moves are unlikely to change the technical setup. While a sudden drop in prices could quickly negate the recent break-out, the consolidation could very well lead to further upside, as bulls remain firmly in control, despite the lofty valuation levels.

S&P 500 Futures, 4-Hour Chart Analysis

Key Economic Releases on Tuesday

Time, CET Country Release Actual Expected Previous
02:30 AUSTRALIA RBA Meeting Minutes
10:30 UK CPI 3.00% 3.00% 2.90%
11:00 GERMANY ZEW Sentiment 17.6 20.3 17
12:00 EUROZONE Final CPI 1.50% 1.50% 1.50%
15:15 US Industrial Production 0.30% 0.40% 0.20%
15:15 US Capacity Utilization Rate 76.00% 76.20% 76.10%

Featured image from Shutterstock

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.5 stars on average, based on 231 rated postsTrader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.




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Trade Recommendation: Verizon Communications

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verizon

As U.S. markets are moving lower, Verizon is one of the few stocks that are expected to move higher irrespective of the broader markets’ next move.

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Technical Overview

  • After breaking from a double bottom pattern in 2010 (lows – violet trendline; breakout above pattern’s interim high – first blue arrow), the stock has climbed higher, finding support at a long-term trendline (green trendline and arrows).
  • Since 2013, the stock has stalled in the $53.70 – $55 range on multiple occasions (resistance range – red horizontal trendlines; retests – red arrows).

Figure 1. VZ Weekly Chart

  • Zooming in, the stock broke above a 2-month resistance (orange horizontal trendlines in Figure 2) on the heels of reporting strong Q1 earnings.
  • Since mid-March, a short-term support has carried prices higher (purple trendline).

Figure 2. VZ Daily Chart

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Implications

  • Filling the up-gap will give a bullish K-Divergence signal. While, on average, almost 85% of gaps get filled within 2 months of occurring, the stock’s strong price action during a broad market sell-off is constructive and this particular gap may remain open in the foreseeable future.
  • The stock is expected to find support within the $47.50 – $49 area if today’s up-gap is filled.
  • Nearest major resistance is at $53.70 (lower boundary of long-term resistance range – lower red trendline).

Outlook

  • Bullish as long as the stock remains above the purple trendline.

 Trade Recommendation

  • Buy half a position at current levels ($49.67 at the close on April 24). Buy another half if the up-gap gets filled and the stock remains above the short-term support (purple trendline, currently at $47.35, rising by roughly 17 cents/week).
  • Target: $53.70
  • Stop: A close below the short-term support (purple trendline).

 Benefits of Recommended Trade

  • A favourable risk-reward profile (roughly 1 : 2). Even more favourable if the up-gap gets filled and the average entry price is lower (due to averaging down).
  • An upward-sloping support used as a stop, resulting in an improving risk-reward profile of the trade as time goes by.

Disclosure: No position but may initiate a long stock/call position at any time.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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Analysis

Technical Update: NASDAQ and S&P 500 Approaching their Intermediate-Term Supports

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Technical Overview

  • After breaking their short-term supports (white trendlines in Figure 1, 2 & 3) on Friday (April 20), U.S. indices continued sliding into this week.
  • Given the lack of any major support levels within the range spanning from the low on April 2 to the high on April 18, U.S. indices moved sharply lower on Tuesday (April 24).

S&P 500

  • Next major resistance – the trendline connecting the January & March highs (orange trendline in Figure 1, currently at 2,736).
  • Next major support – the intermediate-term support (ITS – violet trendline, currently at 2,605).

Figure 1. S&P 500 Daily

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NASDAQ

  • NASDAQ’s intermediate-term support (ITS) is of extreme importance as it overlaps with the neckline of a large H&S pattern (tops – red ellipses in Figure 2). A break below the ITS activates a target of 6,000 (vertical yellow trendline). Note, the pattern is tentative until the neckline is broken.
  • Next major resistance – the trendline connecting the March & April highs (orange trendline, currently at 7,265).
  • Next major support – the intermediate-term support (violet trendline, currently at 6,885)

Figure 2. NASDAQ Daily Chart

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DJIA

  • Today’s decline intensified after the index broke back below its 2018 Resistance (red trendline Figure 3).
  • Next major resistance – 2018 Resistance is expected to continue serving as resistance after today’s move below it
  • Next major support – Feb & April lows at roughly 23,350 (green horizontal trendline).

 Figure 3. Dow Jones Industrial Average Daily Chart

Implications

  • Breaks of the intermediate-term supports for both S&P 500 and NASDAQ will carry significant bearish implications, with downside targets of at least 10 to 15%.
  • NASDAQ’s monthly chart depicts why a potential break of the ITS may lead to declines sharper than the ones observed in February and mid-March. Since June 2016, the index has marched higher, in an almost vertical fashion. Upward movement implied by the steep slope of the intermediate-term support is unsustainable in the very long run (violet trendline in Figure 4). Eventually, once the ITS is broken, the index is expected to retest its long-term support (dark blue trendline).

Figure 4. NASDAQ Monthly Chart

Outlook

  • Neutral with a bearish bias. While price action points to a likely retest and potential break of the intermediate term supports, outlook is not outright bearish until confirmation is received.
  • Short- and long-term bearish if S&P 500 and NASDAQ break their respective intermediate-term supports.
  • S&P 500 and NASDAQ need to hold their intermediate-term supports and break above the orange trendlines for outlook to shift to bullish, at least in the short-term.

Featured image courtesy of Shutterstock. 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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Analysis

ICON versus TenX: What You Should Know

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There are so many cryptocurrencies out there.  As the flow of ICOs continues, more tokens are added almost daily.  It may be some consolation that more the 80% of these tokens use the Ethereum platform and that means their value is connected to the mothership.  It may also help to remember that there are plenty of crypto exchanges that will unload your coin once the ICO is complete.

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That’s fine, but this takes time not to mention the fees that get tacked on along the way.  And if there has been a proliferation of currencies, now about every Fortune 500 company wants their own blockchain.  Instead of putting all of our efforts on figuring out who has the smartest contracts or which is the best crypto, maybe we should look for someone to connect all these dots.  My guess is this notion will be a big feature of Gen IV crypto technology.

Here Are Two Prospects

Of the most successful ICOs in 2017, two are really eye catching for their vision of connecting cryptocurrencies and networks.

TenX claims they will make all cryptocurrencies spendable through a debit card ranked. That vision made them $64 million during their token sale, enough for the tenth spot on the list of largest intakes. 

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The ICON project will be building one of the largest decentralized networks in the world. The total raised of $43 million was good enough for the #13 ranking of top 2017 ICOs. Before going deeper, let’s first take a look at TenX.

TenX Could Be a 10

TenX has an audacious plan to connect digital currencies and in the process disrupt one of the biggest financial monopolies in existence.  They are out to create a massive payment channel dubbed COMIT which stands for Cryptographically-secure Off-chain Multi-asset Instant Transmission network.  How does their white paper describe COMIT? It looks just like the Internet.

In simple terms, TenX is out to get a banking license, then use their own debit card running on the COMIT network to challenge the MasterCard, Visa, American Express monopoly.  The beauty of TenX is the ability to use any coin or token to buy goods and services with one card.

Even if a merchant doesn’t happen to accept crypto, no problem, TenX converts the crypto to the fiat currency.

This is the future of cryptocurrencies.  As bitcoin leads the way with some 10,000 mostly online merchants acceptance of other cryptos will follow. However, the amount of time involved in winning the game will be considerable. We are talking about a startup company attempting to capitalize on mass adoption of crypto as a medium of exchange.  So far fewer than 1% of all transactions fit that category.

Around the year 2000, online merchants accounted for 1% of all retail sales.  Some 18 years later, it amounts to just under 10%.

ICON: Connecting Networks

For those who really enjoy digging into the technical detail, here is how their whitepaper describes the project.

With ICON, numbers of blockchains are connected around Nexus via Portal. Nexus is a loopchainbased blockchain. Nexus is a Multi-Channel blockchain comprised of Light Client of respective blockchains.

Tokens called ICX (ICON Exchange) are embedded in Nexus and the interconnected blockchains can use ICX to transfer values. As a blockchain itself, Nexus can be connected to another Nexus, allowing different blockchains with different governance structures to execute transactions and exchange values.

For us simpler folks, think of the earliest days of the Internet.  Over 30 years ago, the Internet consisted of a bazillion independent networks throughout the world.  Then somebody came up with TCP/IP and presto, the modern Internet was born.

Use cases for ICX go beyond connecting currencies – they connect blockchains and that means doing something akin to TCP/IP.  So we are talking about things like connecting separate health systems and much more.

Just like TenX, the question for ICON is how long their plan will take and will $43 million be enough to deliver the bacon. However, for those investors looking for a Gen IV play, ICON is a candidate.  

Like about every other currency, ICX came down hard from its $9.95 price on January 30 to a $1.89 low earlier this month. Since then it has bounced back and is hovering around $4.30 at the time of this writing.  Raising $43 million may not be enough to get ICON to the promised land but it shows that a lot of serious investors did their research and bought the promise.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.4 stars on average, based on 63 rated postsJames Waggoner is a veteran Wall Street analyst and hedge fund manager who has spent the past few years researching the fintech possibilities of cryptocurrencies. He has a special passion for writing about the future of crypto.




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