A Random Chart Walk

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Charts have predictive value for this reason: Large and informed buying and selling can't be hidden; they show up in market movements. In this issue I'll share with you some predictive chart techniques and present some interesting charts of certain commodities that represent potential trading opportunities.

I've found volume spikes (volume in one day at least 50 percent greater than the 30-day volume average) almost always take place at important price points. Take a look at the example of the Australian dollar.

June Australian Dollar

Source: Commodity.com

Note on the above chart how the volume spike took place nearly at the bottom of the move. The market then proceeded to trade above the rectangle drawn on the chart, with additional confirmation on the move above the 50-day moving average, represented by the green line.

In other words, three chart indicators came together recently and predicted a profitable trade here, a buy of the Australian dollar.

Let's take a look at another recent example, this time in the soybean market.

May Soybeans

Source: Commodity.com

The soybeans formed a bullish bottoming pattern, termed a “head-and-shoulders.” When the market broke to the upside, the head-and-shoulders predictive move from about 890 to 940 was met (and exceeded) in only three trading days.

To summarize, here are some chart patterns to watch for:

• Volume spikes;
• Breakout above (or below) a rectangle formation;
• Breakout above (or below) a head-and-shoulders formation;
• Breakout above (or below) a significant (for example, the 50-day) moving average.

Now that you know what we're looking for, here are a few trade candidates.