Wednesday, February 14, 2007

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.

10 comments:

Cire said...

love it kevin, ill be logging into my forex account tonight

Cire said...

btw im still looking forward to that weekly oil chart update that shows the commercial buying :)

Mike said...

Kevin, would the Canadian Dollar Trust, FXC be a good way to play this? Thanks.

Kevin said...

Hi eric,
The position of the commercials is updated weekly but it doesn't change that much from week to week. If I see a significant change I'll post it.

Hey Mike,
FXC woould be a good way to play this but there is no volume. I guess the best way is to play this is through Forex unless there is a fund that correlates well with the Canadian dollar.

Cire said...

should this be played vs the dollar or is there a currency we can count on being even weaker vs the CAD

Cire said...

forget my last post, sorry.

Unknown said...

Kevin, I work for a company that syndicates blog & news content. I'm currently working on acquiring financial blogs and would like to get in touch with you. If you're interested, please email me. I'll respond from my work email address with the contract & licensing information.

If any of your financial blogger friends are interested, I'd be willing to send information to them too. I promise we're not spammy. I wouldn't have used your comments if I could find an email address.

Cris said...

Kevin,

Check this out...


http://www.atimes.com/atimes/Global_Economy/IB16Dj01.html

CEW said...

do you've a oil chart? can you put a link to my blog http://tradingdashboard.blogspot.com/. I can put yours on my blog too.

Chris LaBossiere said...

Kevin:

Great analysis. I hate to be a canadian company, selling in USD, as I suspect your analysis is bang-on. Time to hedge some USD trades to cover our a**.

Linked to your blog from mine at www.richfulllife.ca

Cheers!

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