Probable mean reversion
In this review we would like to present you the BRENT_RUB personal composite instrument (PCI) on the daily time frame. The instrument implies quoting Brent oil with the Russian ruble. In January-May 2015, fuel and energy commodities accounted for 65% of Russian export. That is why the ruble exchange value depends heavily on global oil prices. On the chart, it looks like the PCI intermittently reverses to the 200-day Moving Average. At the beginning of the year, Russia launched the so-called “tax maneuver.” It involves simultaneous cutting import fees (in order to make them consistent with Eurasian Economic Union) and raising mineral extraction taxes. We believe it may support Russian oil prices, expressed in rubles.
On the daily chart, the BRENT_RUB PCI has been trying to cross up the downtrend. MACD and Parabolic have shaped bullish signals. Bollinger bands® have narrowed, indicating low volatility; the lower Bollinger line has been trying to reverse up. RSI-Bars has formed a bullish divergence but has not yet reached 50. A bullish momentum may develop if the price closes above two latest fractal highs and the Parabolic signals at 3330. A stop loss may be placed below three latest fractal lows, the Parabolic signal and the Bollinger band at 3150. After pending order activation, the stop loss is supposed to be moved every day to the next fractal low, following Parabolic and Bollinger signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. The most cautious traders are recommended to switch to the H4 time frame and place a stop loss there, moving it after the trend. If the price reaches the stop loss without triggering the order, we recommend to cancel the position: the market sustains internal changes that were not considered.
Position Buy Buy stop above 3330 Stop loss below 3150