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 -0.88% , well below the first standard deviation. Our scoring is currently negative (-1 ) for the month-on-month change and -3 for price indexation. This means that we are in the very first 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.
Source: WALFIR
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. XCU/USD has risen above short-term and medium-term MAs in recent weeks. Therefore, as we can see in the chart below, all MAs support bullish sentiment.
Source: WALFIR
Since our last analysis, we have witnessed more upward trends that did not exceed 4 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 3 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 (1.77% ) to estimate Stop Loss orders for our positions. The current value is 1.34% , which is below average. Approximately 90% confidence interval (return between -2.5% and 2.5% ) is shown in the histogram below by a red rectangle.
Source: WALFIR
We could use the last decile of low to high returns (3.00% ) to estimate Profit Targets, as shown in the chart below.
Source: WALFIR
The basic technical analysis currently supports short-term bullish sentiment, as the commodity price has been rising dynamically since mid-July. However, volumes increased only slightly. The XCU/USD is currently approaching the important psychological level of 4.6500 , which could be resistance to the price. The divergence between price development and the RSI could also motive short-term bears. However, the price could be supported by a short-term moving average. In the event of a further decline, the demand zone (green rectangle) could be important for bulls.
Source: TradingView
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