I did buy this pair yesterday at the bottom of its bullish, upward daily channel it has maintained since mid-June. This was at 1.4633. The pair stopped out overnight at -1.4583 for a loss of -50 pips.
Is this a trend reversal? It could be. A daily close below the uptrend line would be helpful and it would confirm the overall weakness. As regular readers know, I use point and figure (P&F) charts in my trading. I want to short the Euro but I lack a good sell signal on my three-hour and daily P&F charts. The hourly P&F chart gave a sell signal last week and I did have a short at 1.4822 that I blogged about December 8 but it has since closed.
In any case, the pair looks weak. Each successive downward move (from November on the 3-hour chart) has been sharp and the rallies have been weak. There could be support at 1.4481, the early October low. The pair is trading at 1.4530 currently (at 7:30AM EST).
Best to wait for a rally to short rather than try and catch a falling knife or wait for a definitive close on the daily chart. Here’s the 3-hour chart:
© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.