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360-289-9441(March 12, 2000) CURRENCIES: U.S. DOLLAR INDEX--The June Dollar Index future is still bullish since mid-January, but the past two weeks have seen little real action; a trading range of about 140 points marks the extent of price movement from 105 to a bit over 106.25. The pullback from the contract high of 106.28 was sudden and fierce; a 79-point drop in three days tested the trend, but it has proven to be nothing more than a three-day classic correction and a "return day" Friday with a 32-point gain. Theoretically, this leads to a entry at the close of the return day, at 105.40 or Monday morning at the open. We will follow. Bullish, but with bearish stochastics are present; RSI below 60%; direction and momentum are positive in all time frames and 9- and 18-day moving averages well "crossed" in the buy mode. Technically, the bull trend is intact.
CANADIAN DOLLAR--June Canadian Dollar is forming an expanding trading channel. This could mean added volatility and expanded ranges. Cycle trading worked once in the past ten days using 35 points as a standard. A buy at the close 2/24, selling at the close of the next day, with or without a reverse stop, would have yielded a gain of $260 less commission and fees. One signal every ten days is not earth-shattering, only "interesting." The downtrend call continues, but intermediate- and long-term stochastics are bullish; directional and momentum indicators are positive in the 9-day mode. 9- and 18-day moving averages are in the "buy" zone--OK, everything looks positive but the trend "call"; we need to close above .6950.
AUSTRALIAN DOLLAR--June Australian Dollar poked its nose above the upper trendline Friday, touching .6170 and closing at .6158. The ADM is a good candidate for "cycle theory"; buying or selling at the open of the following day if the differential between the low or high of day is "sufficient." To be sufficient is to satisfy a standard that you set yourself: I would suggest at least 50 points and perhaps 100 points be used as a standard. For example, on 2/25 the high was .6208 and the close .6163; the different of 45, not quite satisfying the minimum standard. On 3/1 the high of the day was .6136 and the close, .6052. The difference of 84 points might ring a bell for you. Selling at the open of the following day, at .6052 would be stopped out at .6152 (since I have not yet told you of the 100 point stop-loss to be used with a reversal coda: that is, with a short position, it is a "buy two" and with a long position, it is a "sell two" stop-loss 100 points distance from the "fill." A stop-out at .6152 would be accompanied by a short sale at .6152, closed out at the close of the following day .6027. That day signaled a buy at .6026, the following open and an exit on a "stop" on 3/9 with a new short at .6126--working on a 32-point open loss and an overall gain of 93 points for these past 10 days, or $930.00, as the crow flies less 3 commissions and fees. I am not sure that works for you, but I would suggest that you paper trade a currency or financial index using this simple strategy. In the meantime, we shall have to see if the June Australian Dollar will go higher, following the classic "breakaway" pattern.
Martin B. Miller
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