What is it? It provides valuable insight into the bank's view of economic conditions and inflation - the key factors that will shape the future of monetary policy and influence their interest rate decisions.
When? May 7th at 9:30pm Eastern Time.
Trading Tip: If the announcement will hint towards higher interest rates, you can expect the AUD to rise.
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What is it? It checks the number of individuals who filed for unemployment insurance for the first time during the past week.
Although it's generally viewed as a lagging indicator, the number of unemployed people is an important signal of overall economic health because consumer spending is highly correlated with labor-market conditions. Unemployment is also a major consideration for those steering the country's monetary policy.
When? May 7th at 8:30am Eastern Time.
Trading Tip: If the actual number is lower than the forecast, you can expect the USD to rise.
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What is it? It checks the change in the total value of new building permits issued.
It's an excellent gauge of future construction activity because obtaining a permit is among the first steps in constructing a new building.
When? May 7th at 8:30am Eastern Time.
Trading Tip: If the actual number is higher than the forecast, you can expect the CAD to rise.
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One of the most important concepts in technical analysis is that of trend. The meaning in finance isn't all that different from the general definition of the term - a trend is really nothing more than the general direction in which a security or market is headed. Take a look at the chart below:
Figure 1
It isn't hard to see that the trend in Figure 1 is up. However, it's not always this easy to see a trend:
Figure 2
There are lots of ups and downs in this chart, but there isn't a clear indication of which direction this security is headed.
A More Formal Definition
Unfortunately, trends are not always easy to see. In other words, defining a trend goes well beyond the obvious. In any given chart, you will probably notice that prices do not tend to move in a straight line in any direction, but rather in a series of highs and lows. In technical analysis, it is the movement of the highs and lows that constitutes a trend. For example, an uptrend is classified as a series of higher highs and higher lows, while a downtrend is one of lower lows and lower highs.
Types of Trend
There are two types of trend:
Sideways/Horizontal Trends As the names imply, when each successive peak and trough is higher, it's referred to as an upward trend. If the peaks and troughs are getting lower, it's a downtrend. When there is little movement up or down in the peaks and troughs, it's a sideways or horizontal trend. If you want to get really technical, you might even say that a sideways trend is actually not a trend on its own, but a lack of a well-defined trend in either direction. In any case, the market can really only trend in these three ways: up, down or nowhere.
Trend Lengths
Along with these three trend directions, there are three trend classifications. A trend of any direction can be classified as a long-term trend, intermediate trend or a short-term trend. In terms of the stock market, a major trend is generally categorized as one lasting longer than a year. An intermediate trend is considered to last between one and three months and a near-term trend is anything less than a month. A long-term trend is composed of several intermediate trends, which often move against the direction of the major trend. If the major trend is upward and there is a downward correction in price movement followed by a continuation of the uptrend, the correction is considered to be an intermediate trend. The short-term trends are components of both major and intermediate trends. Take a look a Figure 3 to get a sense of how these three trend lengths might look.
Figure 3
When analyzing trends, it is important that the chart is constructed to best reflect the type of trend being analyzed. To help identify long-term trends, weekly charts or daily charts spanning a five-year period are used by chartists to get a better idea of the long-term trend. Daily data charts are best used when analyzing both intermediate and short-term trends. It is also important to remember that the longer the trend, the more important it is; for example, a one-month trend is not as significant as a five-year trend.
Trendlines
A trendline is a simple charting technique that adds a line to a chart to represent the trend in the market or a stock. Drawing a trendline is as simple as drawing a straight line that follows a general trend. These lines are used to clearly show the trend and are also used in the identification of trend reversals. As you can see in Figure 4, an upward trendline is drawn at the lows of an upward trend. This line represents the support the stock has every time it moves from a high to a low. Notice how the price is propped up by this support. This type of trendline helps traders to anticipate the point at which a stock's price will begin moving upwards again. Similarly, a downward trendline is drawn at the highs of the downward trend. This line represents the resistance level that a stock faces every time the price moves from a low to a high.
Figure 4
Channels
A channel, or channel lines, is the addition of two parallel trendlines that act as strong areas of support and resistance. The upper trendline connects a series of highs, while the lower trendline connects a series of lows. A channel can slope upward, downward or sideways but, regardless of the direction, the interpretation remains the same. Traders will expect a given security to trade between the two levels of support and resistance until it breaks beyond one of the levels, in which case traders can expect a sharp move in the direction of the break. Along with clearly displaying the trend, channels are mainly used to illustrate important areas of support and resistance.
Figure 5
Figure 5 illustrates a descending channel on a stock chart; the upper trendline has been placed on the highs and the lower trendline is on the lows. The price has bounced off of these lines several times, and has remained range-bound for several months. As long as the price does not fall below the lower line or move beyond the upper resistance, the range-bound downtrend is expected to continue.
The Importance of Trend
It is important to be able to understand and identify trends so that you can trade with rather than against them. Two important sayings in technical analysis are "the trend is your friend" and "don't buck the trend," illustrating how important trend analysis is for technical traders.
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Japanese markets are closed till Thursday due to public holidays, however, China stocks are trading lower as concerns over the current economic outlook continues to weigh on sentiment. China released more negative data early this morning showing that the HSBC Services PMI expanded less than expected, with a reading of 52.9, analysts had expected 53.1. The Hang Seng closed 0.41% lower and the Shanghai Composite dropped 0.55%. Despite negative reports from Australia, the AUD rose against the Dollar as traders digest a number of negative reports out of the U.S., The Australian Retail Sales for March showed rose 0.3%, lower than the expected figure of 0.4%.
During the European session, the GBP rallied against the Dollar following positive data from the UK. The ServiceS PMI indicated expansion within that sector with a reading of 59.5. The Euro also rose against the weaker Dollar after a number of mixed European reports and concerns over expectation of a interest rate hike in the United States.
Following a number of negative reports from the U.S., the Dollar is lower against a basket of major currencies. Yesterday, the Trade Balance and the Service PMI both showed worse than expected figures and more reports released today showed that the ADP Nonfarm Employment Change increased less than expected with 169k more employees, analysts had expected 200k. This negative data may course the Fed to further delay an interest rate hike. Fed Chair Janet Yellen is currently speaking and so we may see high volatility in the markets.
U.S. Oil is currently trading at its highest level since December following a report showing that the inventory levels of crude oil fell 1500M, furthermore, the EIA Crude oil inventories also showed a decline with 3.882 less barrels held by US firms, down from an increase of 1.5M the previous week. A decline in stock of the commodity affects supply and thus rises prices.
Binary Options traders are now awaiting the release of the Nonfarm Payrolls this Friday. Analysts expect that the number of people employed during April rose by 224,000, if the actual figure is lower than this could weaken the Dollar further in the short term.
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What is it? It checks the percentage of the total work force that is unemployed and actively seeking employment during the previous month.
Although it's generally viewed as a lagging indicator, the number of unemployed people is an important signal of overall economic health because consumer spending is highly correlated with labor-market conditions.
When? May 6th at 9:30pm Eastern Time.
Trading Tip: If the actual number is lower than the forecast, you can expect the AUD to rise.
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What is it? It checks the change in the number of employed people during the previous month.
Job creation is an important leading indicator of consumer spending, which accounts for a majority of overall economic activity.
When? May 6th at 9:30pm Eastern Time.
Trading Tip: If the actual number is higher than the forecast, you can expect the AUD to rise.
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What is it? Fed Chair Yellen is due to participate in a panel discussion about finance, governance, and society at the Institute for Economic Thinking conference on Finance and Society, in Washington DC.
As head of the central bank, which controls short term interest rates, she has more influence over the nation's currency value than any other person. Traders scrutinize her public engagements as they are often used to drop subtle clues regarding future monetary policy.
When? May 6th at 9:15am Eastern Time.
Trading Tip: If the announcement will hint towards higher interest rates, you can expect the USD to rise.
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What is it? It checks the estimated change in the number of employed people during the previous month, excluding the farming industry and government.
Job creation is an important leading indicator of consumer spending, which accounts for a majority of overall economic activity.
When? May 6th at 8:15am Eastern Time.
Trading Tip: If the actual number is higher than the forecast, you can expect the USD to rise.
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Here are 4 tips for today's trading. This will help you decide where you should invest and what to look for:
1. Crude creeping up
Oil prices continue to push higher Wednesday. Crude futures are currently rising by about 2% to trade around $61.80 per barrel.
The price of a barrel topped $60 on Tuesday, hitting its highest level so far this year.
We could also see brisk trading later this morning when crude inventory data from the U.S. is released at 10:30 a.m ET.
2. Earnings
Anheuser-Busch InBev (AHBIF), SodaStream (SODA) and Wendy's (WEN) are reporting ahead of the open.
After the close, markets will hear from 21st Century Fox (FOX), Tesla (TSLA), Whole Foods (WFM), Transocean (RIG) and Keurig Green Mountain (GMCR).
Shares in BMW (BAMXY) are steady in Europe after the automaker reported its latest quarterly results.
Shares in British grocery chain J Sainsbury (JSAIY) are declining by about 1.5% after the firm reported worse-than-expected results and cut its dividend by 24%. The company, along with rival Tesco (TSCDY), has been suffering from a fierce price war and the cost of writing down its real estate portfolio.
3. Stock market overview
U.S. stock futures are all looking solid ahead of the open.
European markets are mostly rising in early trading. They seem unfazed by Greece's continuing negotiations with international creditors over its debts and economic reforms. The European Central Bank will discuss funding for Greek banks later Wednesday.
All major Asian markets ended with losses. Australia's key index dropped by just over 2%.
Looking back at Tuesday's trading action, the Dow Jones industrial average lost 142 points,the S&P 500 dropped 1.2% and the Nasdaq closed with a 1.6% loss.
4. Economics
The key report to watch this morning is the ADP employment report for April. It comes out at 8:15 a.m. ET.
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Japanese markets are closed till Thursday due to public holidays, however, a number of Asian stocks traded lower over fears of a slowdown of growth in China. The China HSBC Manufacturing PMI for April showed a reading of 48.9, this figure indicates that the manufacturing economy is declining, and has continued to decline for a second consecutive month. Furthermore, the Reserve Bank of Australia cut its interest rates for the second time in 4 months as the country struggles with the slowing Chinese demand. The Hang Seng Index was down 1.31%, closing at 27,755 and the Shanghai Composite dropped 2.81%.
During the European session, the British pound traded higher against the weaker Dollar despite negative data from the UK. The Construction PMI for the month of April showed a reading of 54.2 which indicated expansion, however, lower than the expected figure of 57.5. The Euro also traded Bullish following the European Commission’s quarterly forecast, the board raised its expectations for the growth of the economy from 1.3% to 1.5%.
The Dollar dropped against a basket of major currencies following a number of economic reports from the U.S., The ISM Non-Manufacturing PMI for April showed a higher than forecast reading of 57.8, however, the Trade Balance and the Service PMI both showed worse than expected figures.
Later today, New Zealand will release the first quarterly Employment Change, if the actual figure is lower than the forecast figure of 0.8% then the NZD could decline for the short term. Currency traders are also awaiting a number of economic reports taking place tomorrow from Australia, the United Kingdom and the United States.
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Charts vs. Financial Statements
At the most basic level, a technical analyst approaches a security from the charts, while a fundamental analyst starts with the financial statements.
By looking at the balance sheet, cash flow statement and income statement, a fundamental analyst tries to determine a company's value. In financial terms, an analyst attempts to measure a company's intrinsic value. In this approach, investment decisions are fairly easy to make - if the price of a stock trades below its intrinsic value, it's a good investment. Although this is an oversimplification (fundamental analysis goes beyond just the financial statements) for the purposes of this tutorial, this simple tenet holds true.
Technical traders, on the other hand, believe there is no reason to analyze a company's fundamentals because these are all accounted for in the stock's price. Technicians believe that all the information they need about a stock can be found in its charts.
Time Horizon
Fundamental analysis takes a relatively long-term approach to analyzing the market compared to technical analysis. While technical analysis can be used on a timeframe of weeks, days or even minutes, fundamental analysis often looks at data over a number of years.
Trading Versus Investing
Not only is technical analysis more short term in nature than fundamental analysis, but the goals of a purchase (or sale) of a stock are usually different for each approach. In general, technical analysis is used for a trade, whereas fundamental analysis is used to make an investment. Investors buy assets they believe can increase in value, while traders buy assets they believe they can sell to somebody else at a greater price. The line between a trade and an investment can be blurry, but it does characterize a difference between the two schools.
Can They Co-Exist?
Although technical analysis and fundamental analysis are seen by many as polar opposites - the oil and water of investing - many market participants have experienced great success by combining the two. For example, some fundamental analysts use technical analysis techniques to figure out the best time to enter into an undervalued security. Oftentimes, this situation occurs when the security is severely oversold. By timing entry into a security, the gains on the investment can be greatly improved.
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What is it? It checks the change in the total value of sales at the retail level.
It's the primary gauge of consumer spending, which accounts for the majority of overall economic activity.
When? May 5th at 9:30pm Eastern Time.
Trading Tip: If the actual number is higher than the forecast, you can expect the AUD to rise.
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What is it? It checks the percentage of total work force that is unemployed and actively seeking employment during the previous quarter.
Although it's generally viewed as a lagging indicator, the number of unemployed people is an important signal of overall economic health because consumer spending is highly correlated with labor-market conditions.
When? May 5th at 6:45pm Eastern Time.
Trading Tip: If the actual number is lower than the forecast, you can expect the NZD to rise.
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What is it? It checks the change in the number of employed people.
Job creation is an important leading indicator of consumer spending, which accounts for a majority of overall economic activity.
When? May 5th at 6:45pm Eastern Time.
Trading Tip: If the actual number is higher than the forecast, you can expect the NZD to rise.
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What is it? It checks the level of a diffusion index based on surveyed purchasing managers, excluding the manufacturing industry.
It's a leading indicator of economic health - businesses react quickly to market conditions, and their purchasing managers hold perhaps the most current and relevant insight into the company's view of the economy.
When? May 5th at 10:00am Eastern Time.
Trading Tip: If the actual number is higher than the forecast, you can expect the USD to rise.
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What is it? It checks the difference in value between imported and exported goods and services during the reported month.
Export demand and currency demand are directly linked because foreigners must buy the domestic currency to pay for the nation's exports. Export demand also impacts production and prices at domestic manufacturers.
When? May 5th at 8:30am Eastern Time.
Trading Tip: If the actual number is higher than the forecast, you can expect the USD to rise.
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