One more aspect about deciding on the future price direction of this mar-
ket was that the overall pessimism of analysts, traders, and the media was
high. Bullish Consensus and the Commodity Futures Trading Commis-
sion’s Commitments of Traders report revealed that large and small spec-
ulators were mostly short this market and that commercial traders were
long.
Here’s a summary of how a decision was made to go long or to buy call
options:
· The investment community was extremely bearish.
· The monthly long-term chart showed the current market price was dig-
ging into the area where the moving average lows (not price lows) had
occurred in 1998.
· The daily chart was demonstrating that prices were supported near the
7450 level.
· On a fundamental note, the Japanese Central Bank was intervening to
support the yen’s value, adding a strong buying force to the market mix.
Now you have a market that has made a significant decline back down
to an area where governments step in to provide price protection and the
speculating community was bearish after the fact. The daily candle charts
were signaling to me that the down move was subsiding. The third chart
shows what had happened on the June yen chart and why it
helps not to get too “bearish in the hole.” The fact that the charts from dif-
ferent time frames helped me conclude that a buying opportunity might exist
was also the correct call.
The move that occurred between the 7450 and 7950 levels resulted in a
short, sharp 500-point rally. Notice that it took this market nearly another
month to begin moving, but move it did! Of course, you might say, “Well,
that was too long to wait around to make money.” Fine. The important point
is that you can see that selling short would have been a bad decision with
prices near the 7450 area. This type of charting analysis may not have got-
ten you to buy the low and stay with the position, but I do believe that by
checking different time periods you would not have sold short either, risking
a lot of money.