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Australian Dollar Futures 2012-07-02

Here we are going to look at Australian Dollar futures. I have been casually looking for a short sell in this market recently on a longer time frame. It appears as though I may have found the entry I've been looking for. We are going to look at a daily and a 60 minute price chart in the September contract for the Australian Dollar. First, let us observe the daily futures price chart for this currency futures trade.

What we see here is a an MACD divergence being formed as indicated by the redlines. It is important to note that although the price highs and the MACD histogram highs do diverge very nicely, there are a few problems with this picture. The MACD moving averages are not quite showing a lower high, in fact, they are still making a slightly higher high. Also, the MACD histogram and price are still trending upwards. I have found that with the Australian Dollar and many other futures, MACD divergence tops are formed more abruptly and less often with the indication of the MACD moving averages, than are MACD divergence bottoms. This causes me to be more willing to enter trades with less "well-formed" divergences.

Normally, I would not enter a trade like this based on this chart picture alone. In this particular case was sealed the deal for me was the simultaneous MACD divergence forming on the 60 minute chart. Let us observe the 60 minute chart for the September Australian Dollar futures contract.

Again, we see the MACD divergence being indicated by the red lines. In this case the MACD divergence is complete with both the MACD histogram and the moving averages. We see prices struggling to make significant new highs while the MACD just keeps teetering off.

I sold this currency short at 1.0200 at 21:07. As always a stop loss order will be used to prevent catastrophe. I will move the stop loss along as (and if) the trade moves in my favor to secure profits as they occur. However, in this particular case I will be keeping a looser trailing stop than I otherwise might as I am looking for a move into the mid-nineties. I will begin to look for signs of a possible early exit anywhere below 1.0100.

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