Tagged "consolidation"

Yesterday Recap: Pretty good day of trading yesterday as 3 trades were triggered as I capitalized on the tightening consolidation pattern of the pair. First was the aggressive sell triggered by the bearish break of 1.3580, which dropped for a quick 30 pips to rising support. That activated the primary long at 1.3550 which rose for 100 pips.

Daily Outlook: Despite the large up and down swing the daily outlook didn’t change a bit – the pair continues to consolidate in a tight triangle pattern with the overall downtrend still intact. I will look for a false breakout to occur to the topside, possibly even challenge the stronger falling trend resistance on the daily charts (you can just see the top of it – its the top blue line) currently around 1.3700.

Trading Idea: Not as aggressive today as we are running out of room to maneuver in this pattern. Primary trade is a short on a signal under 1.3700 resistance, with targets at 1.3670, 1.3640, 1.3605 and eventually 1.3560. Secondary trade is a bearish break of 1.3620 support could trigger a run to the trend support again (currently at 1.3570).

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12-17-09

Email update: Server upgrade for signals is complete, but it has to be phased in for reasons out of my control so about half of you should have received an email letting you know there was a new signal, and about half of you didn’t receive anything. Almost everyone should get tomorrow’s signal and everything will be working smoothly by this weekend I promise :).

4:40a GMT – If you braved the news the yesterday’s signal yielded you good pips – no matter which trading idea you used (sell at 1.4580-1.4600 or sell on break of rising support) all targets would have been hit for over 100 pips. I did open 1 short on the initial jump to 1.4580 and took profit on first lot but second was stopped out at break even for no profit/loss.

Dollar gained heavily against the Euro yesterday, establishing a new low of the quarter amidst Bernanke’s words that the job situation was stabilizing. Traders see job data as the key factor in determining when the Fed will begin raising interest rates, and coupled with the positive non-farm payroll data from a week ago this makes rate hikes much more likely in the early part of 2010. Does this mean the dollar will continue gaining until next year? Of course not. The market will attempt to find a ‘fair value’ price for the pair. And in that fair value the Euro has the advantage because its interest rate is already higher than the dollar’s.

Daily Outlook: I am bearish below 1.4600 and will look for good areas to short around Fibonacci levels.  I expect to see a pattern similar to what we have seen over the past week where we have a long bearish flagpole followed by hours of bullish consolidation. As I mentioned before I am conservative in these thin-markets before the end of the year, so if I miss a trade there will always be another one.

Trading Idea: Shorts preferred below 1.4600, looking first at 61.8% fibonacci retracement around 1.4500. From this level short targets are 1.4455, 1.4420 and 1.4385. If 1.4500 is broken to the upside look for a re-challenge of 1.4600.

(click to enlarge)

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12-4-09

5:41a GMT – Yesterday’s signals produced a trade (which is still open) at 1.5050 (currently a little bit in the profit) though I have tightened the stop as 4h charts are leaning toward a bearish consolidation pattern. Another reason I have tightened the stop considerably is because on the daily chart a bearish shooting star was produced so today could be a bearish profit-taking day for the markets. The AUD/USD trade I mentioned in the comments produced good pips as well :).

As far as yesterday’s news went Bernanke again talked about protecting the dollar – but the markets have heard this many times from Bernanke and never have his actions matched his words. In fact his actions (historically low interest rates) have said the exact opposite: that he at the moment cares very little about the value of the USD. One interesting thing he did say at his Senate meetings was that he would consider using interest rates to “burst” asset bubbles before they got too big.

Daily Outlook: Even as I write this we are seeing a bit of a bounce in the EUR/USD, which is good for our trade, but the signals for today are a bit mixed. The bearish shooting star on the daily chart yesterday and the potential double-top at 1.5140 are signals for a potential return to channel bottom around 1.4880. I will keep my long open from yesterday with a tight stop, though a break of support at 1.5025 will open the short-term bearish challenge of 1.4970. If it reaches this level I will look for bullish candlesticks to buy on.

News Events: Be weary of the Non-Farm Payroll (NFP) data and the US unemployment data due to come out around 13:30 GMT. Markets are usually choppy around news events.

Trading Idea: On a break of 1.5025 look for a challenge of 1.4970 support, around which I will look for buying opportunities with targets at 1.5000, 1.5030 and 1.5065.

(click to enlarge)

Update Graph: Big drop today. Wanted to post this longer term chart to give you some perspective on the drop. Looks like a better buying opp as it approaches that lower trend support doesn’t it?

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7-16-08

1:49a GMT – Bad news for the US stock market, real estate industry and the economy in general have sent the USD sharply down across the board, blowing out stops across the currency pairs. The GBP/USD was no exception and we have seen the cable advance over 300 pips against the greenback. News for the British economy is not great either as they look to balance inflation with slowing growth and at a minimum I am looking for the pair to consolidate gains in the coming days as it crashes off the channel resistance (top red line below). The RSI also just recently crossed back from overbought (70) on the 4H.

Trading Idea: Short positions below 2.0175 are favored with targets at 2.0085, 2.0000, 1.9935 and 1.9850.

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6-12-08

00:33a GMT – EUR/USD just made some gains back on the dollar and is consolidating those gains currently after a horrible day for the US stock market. Look for the pair to complete its consolidation, perhaps dropping a bit to 1.5490 or even 1.5450 support depending on your risk appetite and the candlesticks signals that the pair gives at those levels.

Trading Idea: Long targets above support include 1.5600, 1.5665 and perhaps 1.5745. If support is broken look for more losses to 1.5385 and a challenge of 1.5284.

UPDATE – We had about a 100 pip rise after price action bounced off of support at 1.5400 and a nice bullish reversal doji confirmed the trade. Chart below.

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5-22-08

2:12a GMT – Mixed signals on the USD/JPY pair. Pair charged upward through resistance at 104.00 only to meet tougher resistance at 104.40 (the 68.2% Fibonacci retracement of the 105.4-102.7 drop). Pair bounced hard off that only to return to 104 and bounce off that as well. Two possible trend resistance lines were broken in yesterday’s upward charge but one remains (seen on chart below in blue). Bearish wick just bounced off this trend line making me lean toward bearish underneath it despite the upward pressure of 104.00.

Trading Idea: Mixed signals advise caution and to wait for a clear signal one way or another. I remain bearish under the blue trend line currently at 104.30. Beneath this look for 104.00 and 103.60 as targets. Above this trend line or off another 104.00 bounce look for 104.50 and then 104.90 as targets.

UPDATE – 6:19a GMT – To add to the mixed signals there is what appears to be a triangle consolidation pattern on top of the flagpole, which would indicate a bullish shoot upwards. Pattern and flagpole in yellow below:

Result: +70 pips

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5-21-08

6:29a GMT – Pair has broken below support level at 103.40 and is currently consolidating below that level. We will look for selling opportunities as the pair approaches now resistance at 103.40.

Trading Idea: Wait for a candlestick entry on a clear bounce off resistance to sell. Rising trend line is still currently intact from 5/9 lows and a major channel could be forming. Also, rising RSI trend line from that date is still intact as well. If the pair does not close below 103.40 today then look for buying opportunities above that 103.40.

Result: +70 pips

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6:18a GMT – USD/CAD has been consolidating in a tight horizontal channel now for the second day after the 100 pip drop from 1.000. Due to the declining trend lines, the declining RSI hourlies and the nice horizontal line that the candlesticks are forming along the 0.9900 support I expect the pair will break through. Look for .9975 and then .9950 as the next support levels ( support back in early March).

Trading idea: place an entry sell order 10 to 15 pips below the support level at 0.9900 with targets around the .9950 range.

UPDATE – 8:01a GMT – after a 31 pip decline to .9875 the pair rebounded sharply and produced a bullish engulfing candlestick all the way back up to .9920. This is why breakout orders on the USD/CAD make me nervous ;)

Weekly update – Pair did drop to .98770, a 31 pip decline from where the pair was at the time of analysis. ATR was about 15.7 with a 3 pip spread so a stop/L1 of 20 would have been sufficient, meaning this would have been a profitable trade of +20 pips at least. On this pair, in a strong downtrend I would much prefer buying on rallies though, as the trades have a much higher chance of hitting my L2 and L3 meaning the money management scenario is way better.

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5:54a GMT – AUD/USD pair is consolidating beneath .9600 after a 70 pip flagpole rise 6 hours back. My inclination is that the pair will shoot through the 0.96 resistance after consolidation but because the entry would be just below a large round # and because of the overbought hourlies I am not placing a signal or entry order on this one. A rising RSI trendline does confirm the direction.

UPDATE – Pair did rise 30 pips, hitting as high as 0.9615 which is a 20-year high. since then pair has retreated back below .9600 but has been unable to break support at .9570. Our overall bias is still up.

Weekly Review: Good no trade. Pair rose 30 pips before falling back down to .9560. A standard flagpole trade would have called for an entry at .9596. The pairs high before dropping back was .96170 so a 20 pip stop would have barely squeaked by while a 25 pip stop would have been a loser (remember first lot is equal to risk or the stop). The ATR was around 18 with a 3 pip spread so a 20 pip stop would have been acceptable (especially given the caution of the large round number) but a 25 pip stop would have been more conservative.