Go Away in May, Come Back and Sell Today …
We’re sure you’ve heard this before: “Sell in May and go away!” It’s the media’s cute way of explaining the relatively low interest and falling prices during the summertime. Mostly because they believe anybody who’s anybody is off sunning themselves on the beach or out at a ballgame somewhere.
Well, we’ve got a new little ditty for you: “Go Away in May, Come Back and Sell Today!”
More specifically, we’re talking about the U.S. Dollar versus the Japanese yen – USDJPY. Leading up to May currency traders were supporting this pair – buying dollars and selling yen. And then all through May it was pretty much a snooze-fest. The price of USDJPY to start the month of June is roughly the same as at the start of May.
But now may be the time to come back to this pair and do some selling. Besides bumping its head at key overhead resistance, we’ve noticed a divergence that may be worth paying some attention to …
The RSI, or Relative Strength Index (the blue line at the bottom of the previous chart), is a momentum indicator that measures the size of a security’s gains versus its losses. If the indicator is heading up then the buying of the pair is relatively strong; and vice versa.
In this case, despite the fact that RSI is heading up, it topped-out back at the beginning of May even though USDJPY just touched new high on Friday (circled in the above chart). This divergence catches our eye. It’d be wise to remain open to a trend change.
Regards,
Black Swan Capital
Posted by: fred h wissler on Thursday, July 31, 2008
please explain the difference between a put and a call. thank you.