Trade of the week: short Dow Jones
Inflation might creep back in to the US economy and push back rate cut expectations, and negative divergence accompanied the Dow’s Monday record high just below the psychological 40,000 mark.
We would thus like to go short the index on a bounce back towards 39,700 with a stop loss at 40,100 and a downside target at 38,550.
(AI Video Summary)
Previous USD/JPY trading outcome
In this week's "Trade of the week" video, Axel Rudolph starts by discussing a trade that he made in the middle of March. He believed that the Japanese yen would weaken against the US dollar (USD/JPY) because he thought the Bank of Japan would shift its stance. However, he was surprised to see the yen continue to weaken, and even though he'd set a stop loss, the trade is still not doing well because the USD/JPY pair is trading sideways.
Previous GBP/USD trading outcome
Next, he talks about a trade he made last week where he bet that the British pound would weaken against the US dollar (GBP/USD). This trade is getting closer to his target, so he's thinking about adjusting his stop loss to make it a risk-free trade. He's also considering whether to take profits or wait for the price to hit a specific target.
This week's trading opportunity
Then, Rudolph introduces his risky trade of the week. He's noticed that the Dow Jones reached a new high near the psychological mark of 40,000. However, he believes that this could be a sign that the market is about to reverse and start going down. He mentions concerns about higher yields and inflation in the US economy. He also notse negative divergence in the Relative Strength Index, which often indicates that the market will correct in the opposite direction. Therefore, he suggests selling the Dow Jones when it bounces back to around 39,700, with a stop loss at 40,100 and a downside targel goal of 38,550.
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