NASDAQ 100: Bullish
The tech-heavy index overperformed the rest of the U.S. equities this past week, adding +1.89% or 139.9 points and closing the week at the highest value (8416.9 points) in history. Such an impressive performance was achieved in three trading days as the market players were off on Thursday for Thanksgiving Day. The trading volume and volatility were also low, while geopolitical concerns did not stop equity investors to keep the buying pressure on the NASDAQ index.
The technical sentiment is in favour of the bulls on the long-term perspective, while short-term retracements are possible. Williams Alligator is in the eating mode meaning that all its lines are placed in the correct order to proceed with the uptrend. MACD trend indicator is also bullish as the histogram is in the positive territory. There could be a concern about potential bearish divergence as MACD lines charted lower highs, but it’s not consistent as the histogram used to cross the line of zero when the divergence occurred.
Another signal, which should hold the bulls from the further rally is that the RSI oscillator is heading south. If the indicator went out of the overbought zone, then a sell-signal would occur. In that case, the index could retrace to the support range indicated by the Alligator’s lines on the price chart. After a bullish by-the-trend bounce, the index would be attractive to open fresh long positions with an aggressive approach. Conservative traders should wait for a deeper rebound before entering the markets with new longs. Short positions are too dangerous given the recent bullish sentiment.
The Swiss Franc showed weakness versus the greenback this past week. Although USD/CHF gained only +0.28% on a weekly basis, an important event happened from a technical point of view. The pair closed the trading week above the parity of the U.S. dollar and Swiss Franc for the first time in six months. That might be a precedent for the bulls to continue lifting the pair North. If USD/CHF was able to overcome defensive barriers at 1.0063 and 1.0081, then the road to 1.0111 will be open.
Technically speaking, the pair finished the consolidation as the exchange rate crossed the upper band of the sideways range from below. The sequence of higher lows on the daily chart below allows analysts to draw an ascending channel with the resistance trendline coming at around the resistance level mentioned earlier. The current rate is placed in the bullish channel of the Bollinger Bands indicator, which should point to a continuation. On the other hand, the lack of a significant breakthrough above the upper band might lead to a bounce-back towards the Bollinger Bands’ middle line. Fast and sensitive Stochastic RSI might or might not signal a bearish retracement as well. It is placed in the overbought territory but the lines did not cross each other yet. A bearish confirmation of the signal might come in when the oscillator crossed the overbought threshold from above.
Based on that, two trading strategies might be applicable for the week ahead. First, aggressive traders should consider the breakthrough strategy with postponed buy-limit orders above the recent high of 1.0023 francs for one dollar. Another option is more conservative and it suggests waiting for a bearish retracement and uses the buy-lows trading method.
The British pound was the stronger currency versus the U.S. dollar among majors this past week. The fundamental background helped the Sterling bulls to lift the exchange rate higher as political news and positive Brexit expectations lead to an additional demand for Sterling. As a result, GBP/USD and USD/CHF were moving in the same direction, which caused a spike of the cross-rate. GBP/CHF jumped +1.08% or 138 pips, which allowed the bulls to renew the highest rate since May 2019. What’s more, the pair is heading closer to 1.3000 psychological round-figure handle, the breakout of which could cause the uptrend acceleration in the week ahead.
Technicals are in favour of the bulls. Fibonacci retracement levels with the basic downtrend in May-August 2019 shows that the 32.8% Fibo resistance was breached several weeks ago and the market players eye the next target of 23.6% Fibo at 1.2993, which is slightly below the round-figure mark of 1.3000 mentioned above. There is also a long-term median line connecting the lowest weekly close rate when the Sterling bottomed out after the shocking Brexit decision in October 2016 with several lows during the uptrend. That green dashed line divides the long term weekly chart by half and it represents the real long-term target for GBP/CHF - 1.3200. The buy-and-hold trading method is attractive for the cross-rate.
Another lucrative pair might be GBP/JPY in the week ahead. Several technical signals came in from three indicators on the daily chart below. All of them are bullish. Ichimoku Cloud trend indicator has a positive surplus, while both lines are placed in the uptrend mode. What GBP/JPY did last week was the breakout of the COnversion line, which acted as the resistance during the consolidation period. Next, the Average Directional Index increased the bullish surplus, while the mainline remained above the threshold, pointing to a comparatively strong momentum. Although it’s headed south, the lowering strength might be related to the low volatility during the consolidation. Once the bulls get back to a normal trading range of GBP/JPY, the ADX will reflect the upwards movement. Finally, the BullBearTrend indicator with 13-days period has a clear buy-signal in its window, which confirms all of the previous suggestions. Long positions for GBP/JPY could bring a decent profit in the week ahead, especially if the fundamental environment helped the Sterling bulls. Another condition is for the global equities to keep edging higher as the yen’s weakness traditionally reflects the overall risk-appetite in the financial markets. The mid-term targets are placed at 146.38 and 148.30 in extension. So the bullish rally might bring 500-700 pips counting from the current exchange rate.
WTI Crude Oil: Neutral
The price of oil charted the largest daily drop since September 17 but remained in the ascending channel. WTI Crude also managed to maintain the sequence of higher lows as the Friday’s close price was 12 cents above the recent bottom charted on November 19. As a result, both fast oscillators Williams %R and Commodity Channel index reflected the downswing and dropped to the oversold territory. However, True Strength Indicator remained bullish, slightly changing the angle of its lines. The nearest horizontal support is placed at $54.10 and if the sellers were able to push the price of the black gold lower, then the bullish formation would be in danger of reversing. On the other hand, the bullish channel suggests long positions right on the Monday’s open because every time the bears tried to accelerate the selling pressure, the bulls used to step in with heavy-volume long positions. Both options are possible, so we’d stay away out of the oil until a more clear signal occurred on the technical background.