Based on a long-term analysis of historical data, the average positive and negative daily returns are approximately 1.25% and -1.20% , respectively. The estimated daily return in both directions based on their probability of occurrence is 0.63% and -0.58% . Friday´s return was -1.49% , which is slightly less than the 1st standard deviation. Our scoring is currently neutral (0 ) for the month-on-month change and 0 for price indexation. This means that we are in the very last negative phase of the cycle. Both scorings range from -3 up to 3 . The development of the estimated cycles based on our analytical systems is shown in the following chart.
Different moving averages (MAs) help us better identify trends across multiple time frames. We use 3 basic MAs to find out which sentiment dominates each horizon. The purple line represents the monthly , the green line the 6 months and the yellow line the annual moving average. In the case of monthly MA, XCU/USD is clearly in bearish sentiment. The 6 months MA could be support for the price. The annual MA still supports bullish sentiment.
Since the beginning of the year, we have witnessed more upward trends that did not exceed 6 consecutive days. The total maximum in the measured period (last 3 years) is 11 days. Downward trends in recent months have not exceeded more than 2 days. The total maximum for the last 3 years is 12 days. We could use the average annual ATR (Average True Range) obtained from daily data (1.79% ) to estimate Stop Loss orders for our positions. The current value is 3.57% , which is almost twice the average. Approximately 90% confidence interval (return between -2.5% and 2.5% ) is shown in the histogram below by a red rectangle.
We could use the last decile of low to high returns (3.00% ) to estimate Profit Targets, as shown in the chart below.
The basic technical analysis shows short-term bearish sentiment, as the price of the commodity has been declining dynamically since the beginning of May. Above average volumes have also occurred in the last 4 days. XCU/USD is currently in the demand zone (green rectangle), where are also the psychological level of 4.0000 and the Fibonacci retracement level of 23.60% . However, the divergence between price development and the RSI could motivate bulls.