The Canada and Crude Go into Distribution

Here comes the chop…Both the dollar-canada and crude oil are going into a distribution cycle on their respective daily charts.

The USD/CAD has formed a triangle chart pattern and as it bounces around the market cycle has transitioned into a “two to four o’clock” market cycle.

cad 1-27-2009 7-07-23 PM.gif

This blog is called “Chartology” for a darn good reason…we’re going to look at a lot of charts. The goal here is to allow you to marry price action and fundamentals in such a way that you can confirm not only the broader market psychology but also relevant data and economics. Remember there is always more than one story that is affecting the market…out job is to figure out which is baked in to the cake!

So here’s the chart pattern that often accompanies the sideways, distribution market cycle:

cad_daily_2009-01-27_1847.png

Since the canada is a comm-doll then it’s only natural we look at it’s commodity sidekick, crude oil. There are a few ways to do this. The best is a direct look at the front month contract of crude:

cl daily 1-27-2009 7-09-32 PM.gif

Another option is to look at the “USO” symbol which is the ETF for light, sweet crude oil:

uso_daily_2009-01-27_1850.png

So what’s the play amongst these longer term, “big picture” charts?

First of all, since we know that there is likely to be continued chop as the market distributes, the best place to look is on the intraday charts. So keep an eye on the 60 minute USD/CAD for a momentum play (breakout/breakdown) or the 240 minute chart which is heading lower in a downtrend. For the downtrend, look for corrections (bounces) and look for shorts within the 1.2295 to 1.2320 resistance range.