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Originaly posted by Michael Hodges.


The S&P 500 is Sitting on Strong Supporting

S&P 500
Call/Put = Call
Entry = Below 1690
Expiration = One Week

The S&P is sitting on strong support. Regardless of taper fears the U.S. economy has been recovering and growing. The expectations are for that growth to continue and expand in the second half of the year, the half of the year we are in now. This support can be seen in many ways. One is in the record amount of inflows reported for U.S. equity funds last month. Another is in the convergence of support indicators found on the charts.

The SPX is currently trading right round 1690. This level has emerged as support over the last month. The index first traded above that level in mid-July and has since consolidated and bounced from it. This consolidation has produced a 4 week sideways trend in the index that has relieved overbought conditions and helped to produce a short term bearish peak in momentum. I am trading calls on this index with a target entry below 1690 and one week until expiratio.



Germany Will Grow in the Second Half

DAX
Call/Put = Call
Entry = Below 8350
Expiration = One Week

The German index has been consolidating along the 8200-8300 level over the past few weeks. This move is similar to the one observed in the SPX. The German markets are preparing for the expected growth spurt predicted for the second half of the year. So far economic data from the greater EU region is promising and points to the expected rebound. The data may still provide some near term volatility but the longer term looks bullish for this index. I am trading calls on the DAX with a target entry below 8350 and one week until expiration




Japan May Need More Stimulus

USD/JPY
Call/Put = Call
Entry = Below 97
Expiration = One Month

The Japanese government released 2nd quarter GDP figures that were not what the market was expecting. The Abe plan is working, growth is improving, but not as quickly as he and others may have hoped. If they are to reach their targets it may be necessary for Abe and Kuroda to increase QE efforts. Regardless, the market believes that something else is coming, the USD/JPY is winding up into a nice triangle. This wind up has been building for over a month and has a potential target over 110 yen per U.S. dollar. I am trading calls on this pair with one month until expiration and a target entry below 97.