Trade of the Week starting 11 July: short Dow Jones

[MongiIG]

In this week’s Trade of the Week we look to go short the Dow Jones Industrial Average with a stop and reverse order at 31,510 and a downside target at 30,400. We also look at last week’s trade, which was long GBP/JPY.

 

 

 Axel Rudolph | Market Analyst, London | Publication date: Monday 11 July 2022 

Last week's trade: long GBP/JPY

Hello and welcome to this week's Trade of the Week for the week starting Monday 11th July.

Now, last week's Trade of the Week was a technical trade on the British pound against the Japanese yen. Little did we know the developments surrounding the Prime Minister, Boris Johnson, and him resigning with regards to the Tory Party leadership. All of this political turmoil led to our trade being stopped out.

And last week we went long the British pound against Japanese yen at ¥163.85 with a stop-loss below the previous week's low, just below here at ¥161.55. Unfortunately, we got stopped out and then the currency pair started to rise again.

So, for those of you who haven't been stopped out on this trade, there might still be a possibility to go back in at the previous level, where our trade was made last time around. And this time, what you would need to do if you wanted to go long here is basically put a stop-loss below last week's low at ¥160.40. So that was last week's Trade of the Week.

Trade of the Week: short Dow Jones

This week's Trade of the Week is to go short the Dow Jones Industrial Average, and there are several reasons for this.

First of all, we are quite worried in Europe that today's maintenance, which will last ten days, of the Nord Stream 1 pipeline, which is the largest pipeline pumping gas into Germany, might not be reopened by Russia after the 10-day maintenance period has ended. And therefore, this could obviously negatively impact the European economy and also European stocks.

And in the US, we have the start of the second quarter (Q2) earnings season with the large American investment bank, JPMorgan , reporting second quarter earnings on Thursday. And also, all throughout the week, we have sentiment, inflation and industrial production data out of the US.

So, all of this could have a negative impact on equity markets and therefore we want to go short on the Dow Jones Industrial Average at current levels at 31,185 with a stop and reverse order just in case we are wrong.

So we would not only stop our short position out, but also go long above last week's high at 31,510. And our downside target would be the previous week's low, just above there, let's say, at 30,400.

So this week's Trade of the Week is to go short the Dow Jones Industrial Average at 31,185 with a stop and reverse order at 31,510, and a downside target at 30,400.