Mastering Market Trends: Using CPI Data and the 21-Day Moving Average for Profitable Trading

Good evening, everyone!

I’m delighted to be here with you all at Diamond Ridge Financial Academy. Together, let’s explore cutting-edge investment knowledge. I hope tonight’s session inspires you and provides valuable practical insights.

Last night, we explored the impact of the CPI on the economy, discussing how it serves as a key measure of inflation and significantly influences global economies, monetary policies and market fluctuations. We also analyzed how CPI data directly affects financial markets, impacting asset prices like stocks, bonds, exchange rates and commodities.  

Through these discussions, we gained a deeper understanding of how CPI guides central banks’ rate decisions and its broader effects on global capital flows, dollar exchange rate volatility and regional economic balances. For instance, when CPI remains elevated, central banks often raise interest rates to curb inflation. However, this also increases borrowing costs, dampening consumption and investment and potentially slowing economic growth. During such periods, defensive assets and inflation-resistant investments like gold and BTC tend to stand out, showing strong performance in high-inflation environments.

In the broader economic context, the ultimate goal of all economic and monetary policies is to support and serve economic development. Yet, economic data trends are shaped by both the long-term forces of technological revolutions and short-term impacts from policy adjustments.  

For example, the rapid growth of the AI industry continues to drive job creation in related sectors, but this growth can also face temporary disruptions due to shifts in trade policies. Therefore, when making investment decisions, it’s crucial to first identify the long-term economic trends, then combine fundamental and technical analysis to develop specific trading strategies.  

Tonight, we’ll continue learning about the use of the 21-day moving average to help you spot specific patterns in price movements. Before we start, let’s briefly review the current market conditions.

Impacted by yesterday’s global tech stock downturn, the UK stock market continued to weaken during the morning session. After selling pressure was further released, the market began to stabilize. In the afternoon, led by a group of blue-chip stocks, the FTSE 100 Index saw a rebound, eventually closing at 8,301 points, up 0.25%. This aligns with our morning forecast, once again demonstrating our precise ability to predict market trends.  

Notably, the previously underperforming energy, mining and aerospace sectors also rebounded, further boosting market confidence. This matches our earlier analysis: energy stocks and traditional industries tend to be highly volatile in the short term, rising sharply before falling and vice versa. Meanwhile, aerospace and high-tech sectors have vast future growth potential, making pullbacks an excellent buying opportunity.

Among individual stocks, Lloyds Banking Group (LLOY) was undoubtedly the standout performer, with intraday gains exceeding 5%. This wasn’t just a market rebound but was driven by solid positive news. Earlier, a court ruling declared Lloyds’ car finance commission model illegal, which had impacted its stock price. However, today the Supreme Court allowed an appeal, meaning Lloyds might avoid paying billions of pounds in massive compensation. With risks reduced, the stock price naturally surged.  

This case once again highlights that major events can cause sharp price fluctuations, but they also present significant arbitrage opportunities. The key lies in our ability to identify these events accurately and make timely, precise decisions.

Of course, today’s market sentiment was largely driven by the US CPI data. As mentioned in our earlier analysis, the CPI result directly influences whether the Fed will cut rates again in Dec.  

According to data released by the US Department of Labor at 1:30 PM London time, Nov CPI rose 2.7% year over year, slightly higher than Oct’s 2.6%. Excluding volatile items like food and fuel, “core” CPI rose 3.3% year over year, in line with market expectations. After the data release, market expectations for a Dec Fed rate cut further strengthened.  

Since Sept, the Fed has cut rates by 75 basis points. The market widely anticipates another 25 basis-point cut during the Dec 17-18 policy meeting. This policy path shows the Fed's aim to manage inflation while supporting economic growth through mild monetary easing, offering liquidity and investment opportunities to markets.

Driven by US inflation data, early trading in US markets saw all three major indices rise. The Nasdaq led the charge, with AI-related tech stocks, spearheaded by Nvidia, fueling a sector-wide rebound.  

If you followed our content last night, you’d notice today’s US CPI data results matched our predictions exactly. On top of that, we used the analysis to guide you to buy tech stocks, crypto and other assets in advance. This included stocks related to the digital economy and AI industries we previously discussed, all of which saw a strong rebound today. Many of you who acted on the advice achieved significant gains.

For instance, TeraWulf (WULF), which we recommended buying again yesterday at $6.75 and today its intraday high rose by more than 5%. The logic behind the buy was straightforward. Let’s briefly revisit its trading history.

On Dec 6, before the market opened, we recommended WULF at around $7.85. After the US stock market opened, the stock’s intraday high jumped over 16%.

However, during the next two trading days, it dropped sharply due to US, China trade tensions, with China announcing sanctions on Nvidia, leading to a tech stock selloff. WULF also declined.  

We pointed out that this negative news was temporary and wouldn’t derail the trend of technological innovation. With strong support around $6.50, WULF presented a compelling buying opportunity.  

Today’s rebound in WULF validated our judgment, further proving the effectiveness of our trend and fundamental-based investment strategy.

Besides tech stocks, crypto and gold also saw strong rallies after the CPI data release. Let’s use BTC/USD’s 5 minute candlestick chart as an example to analyze the relationship between economic data and price movement.

According to the chart, BTC’s trend can be divided into two phases:

1.Before the data release (before 1:30 PM London time).

Before the CPI data came out, BTC’s price rose slowly, showing signs of early buying activity. This early buying often reflects the market’s expectations that the CPI data would support BTC’s price movement, with funds gradually entering to secure lower prices.

2.After the data release (post 1:30 PM London time).

After the data came out, BTC’s price quickly broke above the 21-day moving average and surged past the day’s high, entering an accelerated uptrend. As the CPI data met expectations and bolstered rate cut forecasts, more funds flowed into the market, pushing BTC’s price even higher.

From this trend, it’s clear that BTC, as an asset with both hedging and speculative properties, often sees price movements closely tied to economic data. Here’s the core logic:

The pre-data rally stems from investors betting on the data outcome and entering long positions early. This reflects how prices incorporate market information, with BTC rising as rate-cut expectations solidify.

Post-release, the CPI data reinforced the Fed’s rate-cut outlook, which is generally bullish for inflation-resistant assets like crypto and gold. Especially for BTC, with its hedging and tech appeal, significant inflows drove the price to a sharp short-term rally.

From the chart, BTC’s rapid rise after breaking the 21-day moving average highlights the moving average as a key dynamic support and resistance indicator, effectively capturing trend shifts. The blend of data-driven sentiment and technical patterns further accelerated the rally.

In last night’s session, we already discussed how today’s data would benefit crypto and similar assets. From this analysis, it’s evident that the rules for trading data-driven moves are straightforward and clear.

Before the data release, we can use technical patterns to confirm prior fundamental analysis. If prices show an uptrend before the release, it often indicates the market’s early reaction to bullish expectations. At this point, we can establish small positions based on technical and fundamental alignment.

After the data confirms a bullish outcome, traders can add to their positions to capture the short-term upside. This strategy relies on the high confidence in market reactions, offering lower risk.

Taking today’s BTC trend as an example, going long after the bullish data release, prices surged, with a single BTC netting over $2.5K in gains. This data-driven trading showcases the potential for quick, efficient short-term profits.

The strength of data-driven trading lies in its high certainty and short-term profitability. While it may not yield long-term gains, it provides a reliable way for traders to secure stable returns in a short time. By combining fundamental analysis with technical validation, we can position ourselves smartly before the data and scale up after confirmation, seizing the best short-term opportunities. This approach suits traders who are market-savvy and quick to act, making it a key tool for enhancing short-term profitability.

For using technical analysis to capture data moves, the 21-day moving average is a simple yet effective tool. Whether you’re a beginner or a seasoned investor, this indicator can be a valuable part of your trading system.

Many experienced traders have tried various technical methods but still feel they lack a simple, efficient system for consistent profits. The strength of the 21-day moving average lies in its “price trend theory” support, helping traders identify trends and key support-resistance levels with precision. It’s a practical tool in real trading.

For beginners, the 21-day moving average is an excellent starting point. Its simplicity and clear logic make it easy to understand. Once mastered, it provides a solid foundation for delving into other indicators or even quantitative trading systems. That’s why we prioritize teaching the 21-day moving average, it’s highly practical and broadly applicable for most traders.

We’ll use the chart above as a technical analysis example. From the chart, we can clearly see the price movement divided into four phases.

Before Point 1, the market was in an uptrend. But after the red candlestick at Point 1 engulfed the green candlestick, the price turned downward as the 21-MA curved down, forming a downtrend.

Before Point 2, the price was in a downtrend. However, after the green candlestick at Point 2 engulfed the red candlestick, the trend flattened along with the 21-MA, and the price entered a sideways trend.

Before Point 3, the price moved sideways. But after the green candlestick at Point 3 broke through the range, the trend turned upward as the 21-MA curved up, creating an uptrend.

In Point 4, after a period of adjustment, the price stayed above the 21-MA. A green candlestick then engulfed the red candlestick, leading to an accelerated uptrend.

Looking at the chart, you’ll find technical analysis is very simple. By following the 21-MA, you can accurately predict price trends.

Tonight’s explanation of data-driven moves and the basics of the 21-MA ends here. Next, I’ll use real trading examples to show how to accurately identify buy and sell signals, helping you better combine theory with practice. I hope tonight’s session helps you deeply understand the trading secrets of data-driven moves and gradually achieve more stable profits.

At the same time, I look forward to more investors joining our online investment courses. Here, you’ll not only get systematic professional knowledge but also real-time market analysis and trading guidance. Additionally, you’ll have the chance to participate in next month’s beta test of our Quantitative Trading System 5.0. This newly upgraded system, based on years of model optimization and data training, excels in data-driven moves and adapts to multi-asset trend tracking and efficient trading. Join us to explore smarter, more effective trading strategies and reach new heights in investment returns!

Through tonight's session, please think about:

1.What is the significance of analyzing economic data?

2.What are the characteristics of data-driven market moves? How can we capture stable profit opportunities from them?