Canadian Dollar: Big Rally Coming

OK..Last month I posted the above charts for the Canadian dollar because I felt a significant buying opportunity was nearby. I also said we have to wait for some kind of trigger to get us into the trade. A very simple entry method which I like to use is the highest high for the past 4 weeks. Today a 4 week high was made triggering a buy. In my opinion I believe this could be the beginning of a significant rally.

The top chart is a weekly chart of the Canadian dollar. Notice the accuracy of the 10 month cycle. Every significant low on the above chart occurred 10 months apart except for one which came a little early. The 10 month low is due now and in my opinion we made that low just days ago.

Also notice when the stochastics move below 20, the Canadian dollar tends to make significant moves up. As you can see the stochastics are in such a position right now.

In the lower chart is a weekly Canadian dollar chart along with the position of the 3 market players, the commercials, the large traders and the small traders. I'm only interested in the red line which represents the commercial traders. As I've often discussed on this blog, I believe the commercial traders to be the smart money and I want to follow them as much as possible. As you can see whenever the commercials build a net long position of at least 20,000 , the Canadian dollar bottoms out and then rallies. We saw this happen in May of 2004 and May of 2005. The commercial traders are now holding their largest net long position of over 80,000. I consider this VERY bullish.

So I have three reasons why I am bullish on the Canadian Dollar. We have a very accurate cycle due now, the stochastic oscillator is at a level where rallies develop and most of all the commercial traders are very long.