BarroMetrics Views: Summer Doldrums
In years gone by, my stats shows that my worst results tended to be the July-August period. I realised that the US school holidays tended to produce, for the markets I traded, thin, choppy markets that made it difficult to make money in the timeframe I trade (18-day and 50day swings). I changed the results by looking for more confirmation prior to entering the trade.
Take the ‘Gabby’ for example. It was moving along nicely for either a ‘shortened test’ (bounce off 1.7062 to 1.7048) or ‘successful 6-16’ bar test at 1.6995 to 1.6950 (See Figure 1, 5-day swing). Then today, we saw the confirmation of a ‘shortened test’ (buy signal) and an Upthrust Change in Trend Pattern (sell signal), all in one 290-min bar! Looking for more confirmation saved me a few dollars. On the hand, greater confirmation does mean increased risk because of less favourable entry price when I do get set. That’s trading!
So what do I make of the price action?
The favoured scenario is the the conflicting signals probably mean we are seeing the establishment of a new trading range. If that’s the case, we’ll see more chop; I’d wait to see what happens after a downside breakout to confirm I’d still like to be buyer at the test zone. There are two other alternatives:
- The CIT pattern will fail and we shall see more upside today.
- The CIT pattern is valid and we’ll see a strong downside breakout in the next 2 days.
All in all, looks like another year of July-August chop. Be extra careful out there.
FIGURE GBPUSD 5-day