Trading the trend: long VIX
Since several US equity indices are displaying negative divergences on their daily Relative Strength Index (RSI) oscillators, a possible corrective move lower may lead to a spike in volatility.
This is why we would like to go long the VIX with a stop loss below the December low at 13.70 and an upside target at 16.50.
(AI Video Summary)
Previous USD/CAD and Nasdaq 100 trading outcomes
In this week's "Trading the trend", Axel Rudolph talks about his recent trading experiences and offers recommendations for future trades. He first discusses a trade he made on the USD/CAD. He went long on 14 February and was making a profit until he was stopped out last week. Despite this setback, he still believes that the trade has potential for gains and would continue with it if he hadn't been stopped out.
Next, he mentions another trade he made on the Nasdaq 100. He entered the trade at a good level and has seen the value go up. However, he noticed something called negative divergence, where there is a new high in value but the relative strength index shows a lower high. This indicates that there might be a drop in the value of the Nasdaq 100 in the next few days. Therefore, he recommends selling the trade and taking the profits before new information is released tomorrow that could affect it.
This week's trading trend suggestion
Lastly, Rudolph gives a new trading suggestion. He recommends going long on the VIX index. This means he expects the VIX index, which measures the volatility of the US equity markets, to go up if the markets decline. He sets certain levels to determine when to exit the trade, like a stop loss below a certain value and an upside target at another value. For this specific trade, he's set his stop loss below the December low at 13.70 and his upside target at 16.50.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
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