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Five Trade Setups for the Week of May 4th!

Updated: May 10, 2020

Happy new month!!! The month we left behind was spectacular and full of text-book setups where the majority of them played out accordingly without too much fuss. This week, we will review 5 new trade ideas based on technical patterns, wave formation and Fibonacci zones. Find last week's article here and review our previous forecasts!

  1. S&P 500 - Futures, CFD, ETFs;

  2. Dow Jones - Futures, CFD, ETFs;

  3. Gold - Spot, Forex;

  4. GPBJPY - Forex;

  5. AUDUSD - Forex.

ES/SPX 4H Chart - May 3rd

We had been tracking the up-move in major US indices for 3 weeks since April 5th here then here, another one here and last week's knockdown, and the target in SPX of 2930 is already met. The rising wedge pattern is confirmed and the reversal has already started. We are short-term traders and always flexible to changing our bias whenever new information comes from the market. The current pattern in SPX remains quite bearish for the short-term and as such, the following are our main hypothesis to trade with (we always trade with Hypo #1 unless stopped and necessary to trade the others):

  • HYPO #1 (bearish): Provide a bounce to 2860/80 range for us to short with stop above 2915 and target zone 2700-2500 respectively;

  • HYPO #2 (bullish): Hold 2800; provide a bounce over 2915, fail to trade below 2860 thereafter, new highs towards 3000.

S&P 500 Futures - Technical analysis and trade ideas

YM/US30 4H Chart - May 3rd

The same analysis is true for the DOW as that of the SPX with the only difference being the magnitude of the move and risk involved. The Dow didn't quite reach the 25,200 mark, which would have been text-book as SPX or Nasdaq, however, the pattern remains the same. On Thursday last week, we saw a steep reversal from the highs and if the wedge pattern keeps playing out, we need to be trading way lower this coming 2 weeks.

  • HYPO #1 (bearish): Provide a bounce towards 24k-24,300 which will give us the opportunity to short and hold for 22,800 - 22k and 21,500 respectively.

  • HYPO #2 (bullish): Break above 24,300 and rally towards new highs, the untested 25,200 level.

If none of the HYPOs play out then we will either scalp on the short idea or completely sit this out. For daily updates on these markets, you need to be with us live on the Trading Room.

Dow Jones Industrial Futures - Technical analysis and trade ideas

Gold/XAUUSD 4H Chart - May 3rd

Gold has been quite a difficult fellow to trade short-term in the past 2 weeks and that is why we haven't engaged in too many positions, total 3 trades in Gold for the past 4 weeks. For now, we are tracking a potential breakout trade towards new highs, initially at 1750 then shy of 1800 as per the Fib. extensions on the chart below. In Elliott Wave literature, Gold is known for its majestic extensions on wave 5s and explosive breakouts in either sides. We will remain bullish for this week as long as price does not break and hold below 1686 support.

  • HYPO #1 (bullish): Buy pullback near 1690 with stops below 1686 - only if it closes on the 1H timeframe below this mark. Targets are 1750, 1800 respectively but we will scale out accordingly in order to reduce exposure.

  • HYPO #2 (bearish): Pullback happens, 1686 is breached and it closes below this mark on the 1H. Therefore, we are stopped, market may drop lower towards 1640-1600 and invalidate the bullish scenario.

Gold Technical analysis and trade ideas. Week of May 4th

GBPJPY 4H Chart - May 3rd

We are tracking a classic Elliott Wave pattern on the short-term in this market - The normal Flat formation which targets at least 131.60 where WA = WC = 100%. The stop loss is pretty clear and the risk:reward seems to easily be 1:2 on this setup.

  • HYPO #1 (bearish): Give us a bounce towards 134.30-134.50 zone in order to short with stop 135.10 and target 131.60-130.60 respectively.

  • HYPO #2 (sideways/consolidation): Hold 133.00 then strongly rally over 134.50 but sellers' momentum is dried out and therefore the pattern morphs into a triangle giving us a difficult range between 134.30-133.00 to trade with.

We cannot turn bullish in this market and expect a full breakout above 135.50 unless 131.60 is tested at least once, hence we will attack it on the short side.

GBPJPY Technical analysis and trade ideas. Week of May 4th

AUDUSD 4H Chart - May 3rd

The Aussie has finally topped after 5 weeks of remaining in a strong up-trend. We believe that as long as AUDUSD does not cross over 0.6500, the price needs to spend some time in a corrective fashion testing at least "Support Area#1" at 0.6260.

  • HYPO #1 (bearish): Sell bounce near 0.6460/70 with stop/risk slightly above 0.65 and target 0.630-0.6260 respectively.

  • HYPO #2 (bullish): Hold support at 0.6370 and bounce higher above our sell-entry (0.6460/70); spend time trading above this mark and continue with new highs.

AUDUSD Technical analysis and trade ideas. Week of May 4th

Should you have any questions, do not hesitate to contact us. We love to share our trading plans and analysis since trading is a lonely journey most of the times and interacting with other like-minded individuals makes it more fun.

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