Coffee King's Cross buy signal may give a better sell price

June 2, 2015 02:45 PM

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Although I have a counter trend buy signal, I do not think the longer term overall trend has changed to up. This King's Cross buy signal is not my preferred trade because the 50-period moving average is pointing down.

I like the King's Cross indicator signals that are going with the longer term trend. I would look for a bit of correction to the upside and then look for a topping sell signal or a traditional trend sell signal. The last two King's Cross buy signal have gone through the 50 P M A then turned around with King's Cross sell signal that was with the longer term trend down based on the daily chart (below). It appears that coffee is rang bond between the Bollinger bands with a downward bias. If coffee closes below today's low tomorrow I will have a sell signal otherwise look for higher prices to get short.

Bearish Highlights

•                1. The daily chart trend is down

•                2. The weekly chart had a fresh sell signal two weeks ago and has been super trending down since the beginning of the year

•                3. The weekly chart shows good resistance at 135.00-137.00

•                4. The monthly chart continues to make lower lows and lower highs (bearish)

•                5. The weather scare seems to be over and crops are doing well

 

What is the King's Cross?

The "King's Cross" is a counter-trend trading strategy that I have honed during my 30 years in the futures industry. I developed the King's Cross to augment the traditional trending strategy I also employ.

The King's Cross is my attempt to account for why shortly after a change in trend a market often puts in its extreme. After studying the charts I realized that the trend had not actually changed, it was just an event that caused a correction. Whether it was a news event, short or long covering, etc. after this "event" the market would often turn around and resume its previous trend.

So I had to decipher a way to use a real time indicator to generate a signal. I call it a King's Cross because it involves the cross of the moving averages followed by a cross back and usually gives you the potential for a nice move.

I reserve my King's Cross counter-trend trading strategy for my clients and have developed a trade identification program that has been helpful in identifying the King's Cross signals, especially on the shorter-term time frame charts.

 

About the Author

Larry Baer is a senior broker with Zaner Group. He has been in the futures industry for 30 years and his prior experience includes a membership at the Chicago Board of Trade.  During his 10 years on the trading floor, he traded and managed a futures and options operation, which serviced both retail and institutional clients.  He is also the author of “The Trader's Tool Box.”  He may be reached at lbaer@zaner.com and  312.277.0112.