FxWirePro: EUR/AUD Whipsaws on 7DMA and Shooting Star Signal Reversal - Covered Puts for Aggressive Bears and Futures
Reversal signal is generated from series of bearish candles at whipsaws on 7DMA.
Shooting star candle patterns are occurred quite frequently within the whipsaws range (see circled areas within sideways.
For now, we could also observe price behaviour from last couple of days was holding at 7DMA, current prices are now slipping below DMAs which is a serious weakness in this pair.
In addition to that, there is an attempt of 7DMA crossing below 21DMA, which is again a sell signal.
While, leading oscillators converging the above views forming lower lows to signify weakness to prolong in this pair.
In the past, at 1.5223 levels on monthly plotting, more bearish swings were evidenced as a confirmation.
Robust volume build ups are conformity to these downswings.
We think, bears' intensity is strengthening as there is no signs of strong buying sentiments so far.
Both leading and lagging indicators indicates bearish momentum by converging downwards to these price dips on daily charts.
RSI: Currently, RSI (14) is clearly converging downwards to the prevailing price dips on daily that signals more selling pressures.
Stochastic: This leading oscillator has approached oversold territory but still evidences bearish crossover. %D crossover at 30 zones that conforms to these price dips with intensified selling momentum.
Daily MACD also signifies the ongoing downtrend to prolong further.
Those who want to aggressively short this pair in spot market, can add covered put option strategy.
Options trading strategy involving the writing of an (1%) OTM put options with shorter tenors while shorting the obligated underlying spot FX of EURAUD outrights. By doing so. the maximum return is equal to the premiums received for the options sold and let underlying FX tumble.
Alternatively, the trading recommendation would be good to go short in near march 2016 futures contracts for an unlimited targets below 1.5343 levels with strict stop loss at 1.5479. The short futures position is also used by a traders to lock in a trading price of a FX that he is going to sell in the future. Please be noted that as the expiry period approaches, the futures price converges to the spot FX of EURAUD.
To initiate this short position margin requirement is needed, Initial Margin % would be the % of amount required to trade in any futures contract. Lesser the volatility of the pair, lesser is the initial margin and higher the leverage benefit and vice-versa.
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