FxWirePro: AUD/CAD lower IV likely to form either long legged doji or spinning top - bearish sentiments intensify

If AUDCAD monthly chart is plotted, we arrive with a long legged doji at current levels of 0.9339 with days spare in this month. With IV of ATM contracts of this month expiry being marginally inching higher (at around 10.40%) we don't think any dramatic movements would disrupt this formation of doji on monthly pattern which would set a new stage for bear run from here onwards.

In addition to this observation, on daily charts, it is seen that slow stochastic curves went above 80 levels and %D crossover in this oversold region signifies the selling pressures are intensifying and in order to boost this view RSI oscillator is also positively converging with price dips which suggests prevailing short term dips may prolong upto 0.9305 levels. If this happens within 5 trading days leftover in this month, then we anticipate to form a spinning top pattern on monthly charts. Otherwise, it would certainly be a long legged doji fortified by low volatility in this pair.

The most noticeable point while drawing long term stance is that observe the current prices that is well below moving average curve this would reveal the long term bearish directions.

We had earlier advocated the below strategy that was executed a fortnight ago, the premiums from deep out of the money puts with shorter expiry would have been certain profits. We had then stated that the short term uptrend would prolong maximum up to 0.9500 levels so that long side would not get disrupted and after that anytime bearish call may be generated. Now look at the daily price movements and rest all is history.

Refer for further readings:

http://www.econotimes.com/FxWirePro-Certain-returns-on-deep-OTM-puts-in-AUD-CAD-put-ladder-%E2%80%93-use-upswings-for-new-positions-bearish-trend-to-resume-87206

Wherein we had advocated short put ladder strategy in our earlier post, now short sides seem to function as per our expectations as the pair rallies onto 0.9519 levels and making dips from that point, so that those shorts with smaller expiries, let's 3D, 5D or 7D fetch a certain yields and long puts are on the job.