There’s been no denying the importance of the US dollar when it comes to evaluating risk appetite.
It’s been clear — the dollar has been the safe haven.
Not the yen.
Certainly not bonds.
When the dollar has been strong, crypto and equities have been pressured, and vice versa when the dollar’s eased off.
Just look at the last few sessions of trading: The dollar sold off, and equities quickly got back above their June lows, putting in a failed breakdown.
In fact, it’s not just the broad indices putting in these failed moves. There are ton of whipsaws out there this week.
One, in particular, that’s caught our interest is gold.
After running the stops below this support level, gold finds itself back in the high time frame range.
We can’t say it enough: We love these setups. They’re among the highest-conviction, highest-probability, and greatest momentum setups to trade — all factors traders dream of.
In essence, when price undercuts its former lows, stop-losses get hit and longs throw in the towel. At the same time, bears heavily jump in and enter short.
Then, as the market begins to rally back above those former lows, shorts are now underwater, and they’re forced to cover.
While they’re buying back their positions to unwind the trade, longs see price on a tear higher and fold into buying back their old position.
Momentum traders see these gains and jump on the bandwagon, too, forcing even more shorts to cover.
Long story short, it creates a positive feedback loop that can propel prices significantly higher.
It’s why we love this pattern so much around here.
So, here’s the play.Lost Password?