British pound futures (CME.BP) has rallied over the last three consecutive days and, as a result, with a closing price of 197.81, its five-day average crossed above its 20-day average on Monday. The two most recent rallies came on 'Extra high' and 'Very high' volume respectively. In the most recent Commitment of Traders Report for the pound, hedgers shifted their net position from net long to short, and remain 'extremely short' along with the small traders leaving hedgers as the lone longs.
Q: How has CME.BP performed in the past when, in the first quarter, its five-day average crosses above its 20-day average on 'high daily trading volume'?
A: According to the 10 previous occurrences of this event, omitting repeat occurrences within 10 trading days, CME.BP has shown a somewhat bearish edge that peaks three trading days after the event. Thus, the projected date for the peak of the bearish edge relative to the most recent occurrence of the event (Monday, Jan. 28, 2008) is Thursday, Jan. 31, 2008.
CME.BP declines in 80% of the cases (8 of 10) by an average of -1.0% relative to the close on the event date. The average of the two rallies is 0.3%. The overall return of the 10 cases is -0.7%, which, based on the close on the event date (197.81), provides a target price of 196.43.
If you would like to see more details of this historical edge, go to www.markethistory.com
Ryan Soudan is an analyst with MarketHistory.com.
