This week has seen some more great trades play out, following the setups that we first featured in our Trading Club. I specifically want to share with you how our Checklist process helped us to remain on the right side of the action in GBP, gold and equities (on a long term basis) as a proxy for the business cycle. Lets get to it!
First up is our Business Cycle Checklist, which remained positive (+4) as we began the month. Contrary to the dramatically negative price action in equity indices during the fourth quarter, fuelled by fears of a recession and peak in risk markets, our process told us to ignore the noise and remain focused on the bigger picture...
As you can see, equities (green line) – a good proxy for the business cycle – have returned to their long term moving average (red line) following the correction that presented itself as a potential buying opportunity for long term investors. For traders following the tape day by day during the period, the 3 months that were spent below the red line must have felt like an eternity! Yet for those who observe the market less frequently and over a longer horizon, their portfolios would have benefitted from adding to positions each month.
Next, lets take a look at the pound (GBP). With the absolutely deafening noise about Brexit, its easy to get caught up in the action and trade on sentiment rather than facts. With a Checklist score of +5 as we began February, it told us to remain constructive on sterling and look for buying opportunities this month.
Following a very strong rally last month, we noted the correction that we were seeing play out earlier in the month, contrary to the +5. Watching patiently for the negative momentum to weaken, we noted how a succession of oversold RSI readings (below 30) and Fibonacci retracement support could be about to set up our long trade. Regardless of whether you entered early at 1.29 (38.2% fib), or nailed the low around 1.28 (the ‘classic’ 50% FX fib level you know I like!), then you made a nice turn as cable ripped higher to punch through the 1.30 level once again.
Finally, we’ll conclude with a look at the shiny stuff we seem to either love or hate - gold. Following a similarly strong rally throughout December and January, it appeared to be taking something of a pause around $1300. Our gold Checklist however remained positive, indicating that it may be premature to take profit with further gains a likely possibility.
And that’s exactly how it played out. Despite being around a key psychological level, gold managed to breakout to new highs and rise to as much as $1342 per ounce. The lesson for gold bugs – the trend is your friend, until it bends, and ends!
I hope you found this round up of our ideas generated by our Checklist process interesting. As frequent readers of this blog (and of course, our Trading Club members) will know, this is no ‘flash in the pan’ performance lately. We continue to generate high quality ideas with our process week in, and week out, and make them available to our premium members in real time. There’s no BS ‘systems’ that have been backtested to fit redundant historical examples, or hiding from the occasional but inevitable surprises that the market seems to throw up – just an honest and proven approach that we employ and teach to students of the Academy. If you would like to join us for our full analysis including new insights each week, or learn from the ground up with online tuition from Lex in our MDT online course, then head to lexvandam.com and take your financial knowledge to the next level right away!
Have a great weekend,
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