The U.S. Dollar Index is acting like it has made a potentially important low as the March futures approach an 80.250 target. The target derives from a classic pattern, and if it is reached, a much larger and equally classic pattern will have been activated by a print at its ‘X’ entry trigger. The larger pattern projects to a midpoint of 81.825 and a ‘D’ target of 85.220. If the 80.250 target is surpassed, the next order of business will be to take out important prior highs at 80.505 and 80.635, which would intensify the bullish picture. Dollar skeptics can risk a small $30 (plus commissions) by shorting the 80.250 target with a sell order at 80.235 and a stop at 80.265. Bulls with futures accounts will have to find a camouflaged opportunity to get long, but bulls with access to the stock market can trade the large-scale pattern using the ETF with symbol UUP. To do this, get yourself stopped into a long position at 22.29, and if filled, use a stop-loss at 21.83, just below the “C” point of the pattern. The midpoint is at 22.73 and the “D” target is 23.62. (Posted by Doug “harry” McLagan) _______ UPDATE (1:25 p.m. EST): Despite our general bullishness on the dollar, we decided to specify a short-side trade for skeptics, based on the gorgeous shorter-term pattern and its “D” target. Traders taking the trade were filled on the short-sale and not stopped out. The decline in the futures from the 80.240 high has thus far reached a low of 79.520, worth $715 per contract from the recommended 80.235 short-sale. If we add about $10 for commissions and fees to the $30 risk, we come out with a maximum eighteen-bagger on the trade, and it might not be over yet. Those who took the UUP trade are now long and 13 cents underwater. With the stop-loss 33 cents below the current price, UUP traders should hold the position in anticipation of renewed upside action. _______ FURTHER UPDATE (12:00 a.m. EST, February 20): Traders still short the Dollar Index futures should either enter a stop order at 79.640, good ’till cancelled, or exit the position now for a gain of more than $1000 per contract. Traders with multiple contracts should consider taking partial profits now while using the 79.640 stop for the remainder. _______ FINAL UPDATE (7:00 p.m. EST, February 22): The 79.640 stop is where anyone still short the futures should exit this trade, if not at a lower level, as we remove it from the actionable category.
