EURUSD—How much longer is this going to last?

I finally shorted the Euro after I blogged yesterday, picking up some pips, but I closed and went long after the dip near support appeared to hold. The support was also at polarity, a level that has served as support and resistance in the past. Finally, the pair’s RSI was also climbing out of oversold. All reasons to go long so who am I to argue?

The pair fell out of its “broadening” formation that I wrote about yesterday, before its completion. I suspect it will find resistance at the lower line of that formation and plan to lighten my long there if not close it entirely. I may even short. If it makes it back into the pattern, I still believe the pair has formed a top and will turn again. But regardless of my “belief”, the pair is in an overall uptrend that has not yet been definitively broken—the daily uptrend line from March is coming in at around 1.4750. This was the reason I bought on the dip. Here’s the three-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.

AUDUSD—Still in an uptrend

It has been a while since I’ve blogged about AUDUSD. I’ve been in and out, mostly long. I bought two positions on yesterday’s dip. That’s a no-brainer, right, to buy a dip in an uptrend? In any case, I’m profit stopped just above breakeven and while the pair doesn’t seem to be robust, it’s also not giving clear signals that its uptrend from March is over.

A look at the three-hour chart shows it formed a hammer (seems to be the candle du jour) which held the dip. (My two trades, represented by the triangles, are blocking the view of it). The four candles at the low all had longish, lower shadows, terminating at the same level, which hint the pair is rejecting prices at that lower level. Hammers are stronger signals if they form at support. This is near the blue support line I drew.

I still have calculations showing this pair could make it to .9720/50 but it is having a bit of a struggle. As usual, we’ll have to see. By the way, I noticed this is my 100th post on the blog. I guess by the time you do something a hundred times, it's a habit. Here’s the three-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.

USDCAD—Long trade paying off

Was it difficult for me to take the long trade late Wednesday when it looked for sure as though the USD was tanking? Of course it was. This is after a few years of taking hundreds of trades like this—they look solid technically, I can write out my reasons—but psychologically it still feels as though I’m jumping off a cliff. Sometimes, even after being careful, the trade stops me out anyway. This leads to my clenching my jaw but this is why you want and need tight stops. Losing is part of trading.

Another challenge for me in this trade is that I’m under the weather with some sort of virus. I don’t think it’s the H1N1 flu but I generally feel crummy. This takes you off your game in trading. I noticed that even in the trades I haven’t been blogging about that I’ve let good opportunities get away from me, missing signals that I routinely pick up on. Fortunately, I’ve had no catastrophes but that’s because I insist on giving myself reasons for trades and I keep stops small. My point is that any kind of stress, tiredness, or illness can make trading more difficult than it already is. For me, it adds a level of pessimism that makes it hard to even take a trade.

Regardless, I took the long at 1.0435 on Wednesday for the reasons I cited in yesterday’s blog. Yesterday, I took some profits at 1.0557 (122 pips). It’s up 95 pips as I write this at 6:34 AM EST.

Where to now? Obviously, with a profitable trade I’m going to leave it on with a profit stop in place. Let’s see if it can get any legs and run. There are things I don’t like on the charts but there’s no reason to believe I should give up at this point, either.

On the three hour chart, the pair encountered some resistance at 1.0577, an area it also found resistance at on October 22 during its previous ascent. It has fallen off a bit, building what could be a small bull flag which, if it turns out to be true, would target 1.07, another resistance area. One thing that bothers me is that last time it was at this level in October, momentum was higher, as reflected in RSI. It’s even higher than it was when it was at this level on the way down. But that’s not enough to close longs. The candle prior to the one currently forming was a hammer after a small uptrend. As long as it doesn’t close below that hammer’s low (1.05), that’s positive. The candles are getting smaller—I’d prefer more robust ones—but it is at resistance and, as we saw on the way down, small candles don’t mean an end to something.

The only thing to do is continue to watch the chart, both on this time frame and smaller ones. 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.

USDCAD—Now that’s a bounce!

I blogged yesterday that if my Elliott Wave (EW) count was correct then USDCAD should not dip into wave 1 territory which would have put the low at 1.0430. The low yesterday was 1.0418. Do I toss the EW scenario? Or do I look for a sniveling way to preserve it, such as, “It’s only 12 pips.” Forget that question. I also blogged yesterday that I wasn’t sure I had the stomach for a long but I was looking at it. I did go long at 1.0435. My reasons were:

1) The pair looked like it had completed a five-wave move down which would have completed leg C of the ABC correction
2) Basing is a process as I’ve said many times. I was comfortable with my calculated correction levels from last week. This meant a tight stop was possible.
3) The pair broke above the downward RSI trend line. You’d really want to wait for price to confirm this but I believed we were at a low—no doubt the erstwhile EW count as in my head. Is anything perfect after all? Also, I’ve been tracking this pair closely the last 30 days. It “felt” as though it was ready to move up. (The “just had a feeling” factor which is normally dangerous but, hey, I’ve been in bed with this pair and if you can’t trust your bed partner…Oh, never mind.)
4) USD looked as though it was gaining on Euro (see my prior post on the Euro)

We’ll have to see how this plays out. I’ve moved my stop to over breakeven since I’m up 102 pips as of 7:45 EST. Here’s the three-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.

EURUSD—Are we going anywhere yet?

If blustering is the art of making loud, empty threats, the Euro seems to have it down pat. Once it touched 1.5048 yesterday, the bulls were psyched and those who thought the top was 1.5063 were, if not quaking, clearing their throats and making noises along the lines of maybe the correction was going to take a bit longer. Then, as Emeril says, Bam! Two long, black candles on the three hour chart took price down to 1.4954. OK! Perhaps the bears were right, after all. Re-establish shorts. And up she goes, touching 1.4979 before sagging to 1.4927 early this morning. My long trade stopped out at plus ten pips during this bouncing around. And it’s not as though these moves are leading to serious pips. What is going on? More important, where do you place your trades?

A look at the three-hour chart shows the pair is in what could turn out to be a broadening pattern in classical technical analysis (TA) speak (should break downward) or an expanding triangle in Elliott Wave (EW) speech (should break up). Pick your poison.

This is what makes TA so damn hard, right? What is the pair going to do? And, by the way, could it just do it? Get it over with?

But this is the way trading is. Traders go back and forth, prices go up and down, dust is stirred up but there’s no definitive move. We just have to wait it out. So let’s look closer at the chart.

You can see the possible broadening pattern, a sign the market is undecided. We need five reversal points before it completes. At this point four are in place (1.5021 down to 1.4930, up to 1.5048, and down to 1.4927 on the three-hour candle that just closed). Ideally, there’s a Fibonacci relationship among the touch points--.618, .786, 1.0, 1.272, and 1.618. After point five one should see a general decline and it should never again exceed point five. So you’d short. But if the pattern fails you’d want to immediately look for an entry in the direction of the failure, in this case a buy. Flexibility is the key.

If it’s an EW triangle during some sort of funky correction, then you’d expect prices to break upward. There’d also be five touch points within the triangle, but whereas the broadening pattern uses the top of 1.5021 as the starting point, EW would use the first touch down at 1.4930 as the starting point. In both cases the next move would be up.

Momentum, as seen in RSI, is holding at bullish levels so far. But, the last time RSI was at this level, price was higher so that in itself reflects a loss of momentum. My bias is to short rallies

Here’s the three 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.

USDCAD--Is this a correction or what?

My two USDCAD longs were stopped out on Monday, incurring a loss of 59 and 76 pips respectively. The pair broke its uptrend line at 1.0548. RSI has moved to oversold. It has been moving downward since November 3d. Fie on the USD!

Do I still believe it may be basing? What I believe is that I made a case for it doing so over the last few weeks. I also took 944 pips off the table in profits while I was making this case. I won’t know for sure I was wrong until it drops and closes below 1.02. At that point, Timmy and Benji can make the case for why a weak dollar is good for the US. I will be happily shorting.

In my Elliott Wave (EW) analysis I posted last week, I wrote it couldn’t go below 1.0430. Below there would violate a rule that says wave four cannot enter into wave one’s territory. This morning’s low was 1.0433. Close, but not yet a cigar. Staying within EW guidelines, it’s still within the rules and guidelines for a zigzag correction and should be completing.

Looking back at the correction levels I posted last week (sans EW), the last one I considered “logical” was 1.0378. It’s not there yet.

I’m not sure I have the stomach for another long at this point but I’m thinking about it based on the very tight stop I can set if I want to believe my EW analysis as well as my last level of 1.0378. A close below here would point to a short. We’ll see. 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.

EURUSD—Still struggling with 1.50

The Euro hasn’t fallen yet and it’s within hailing distance of getting above the 1.5060 area that would invalidate the Elliott Wave (EW) analysis I posted on Friday. As I wrote very early yesterday morning, its momentum is still good.

I was out of town on business earlier this week and haven’t had a chance to do a lot of trading. But before I left for the airport yesterday morning, I took a look at Euro’s 15-minute chart. I decided to buy a small position at 1.4978. I then had to log off and didn’t get a chance to look at my account until last evening. At that point the trade actually looked a bit anemic to me. But I had no reason to close so I left it open. It finally rallied in late Asia, early European trading and I moved my stop to above break even this morning.

These were my reasons for buying on the 15-minute chart even though there was a lack of clarity on the 3-hour chart I’d posted earlier yesterday morning.

First, even after a series of bearish candles, the pair held above a prior low. I’ve placed an arrow on the chart below to show that. Second, was the momentum as measured by RSI. The positive momentum had been bugging me all weekend and into Tuesday morning. Why wasn’t it dropping? Third, on the five-minute chart (not shown) it had pulled out of a double bottom formation. Finally, sentiment was bullish about the US equity market. This sentiment may be misplaced but it’s there. For me, all this meant I could risk a buy.

I then had to leave for the airport and never checked it until early yesterday evening when it looked sort of blah. So I missed those three, long black candles that most likely would have made me believe I had been wrong. But notice the RSI still held its bullish readings—it wasn’t dropping into oversold. It barely missed my stop.

The pair climbed smartly this morning and is now in a range of 1.5019 to 1.5048. I moved my stop earlier to plus 10 pips profit. What it does during this correction will lay the foundation for its next move. The 1.5060 is a “sexy” target since so many would be proven wrong. It will have to definitively hold above there to be meaningful.

Here’s the 15-minute 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.

Euro--Back to its struggle with 1.50

On October 21, I blogged about how Euro was finally reached 1.50. Now, here it is again, touching a high of 1.5021 yesterday, then falling back, and now struggling again.

Looking at the chart, it may indeed make it past and reach a new high for 2009, just as the US Stock market did yesterday. Those holding shorts from last week that didn't have tight stops are not very happy. Elliott Wave people are not very happy (I looked around after my post yesterday--a lot of interpretations expect that 1.5060 to hold). Those who theorize the global financial collapse is coming aren't very happy. So who's happy? Obviously, anyone long the Euro that didn't get taken out in the dip overnight.

Based on the three hour chart this morning, the pair is clearly uptrending. The long shadow two candles back show it rejected lower prices. However the candle just before the current one is a doji that hints at indecision and uncertainty. No clarity there.

The RSI has dropped out of overbought. What this could mean is that it's regrouping for another run at the top. One thing I realized over the weekend is that on the daily chart, momentum, as measured by a simple Rate of Change (ROC) indicator, has not dropped lower than its June lows. This means there is still some energy behind the pair. It could keep it climbing. If the RSI drops below its trendline and if the price also drops below its trendline (thus confirming each other), then we can say the pair is exhibiting weakness. Until then it's not clear and I'd stay out of shorts. If price does drop back to the trend line and depending on what else is happening, it might be worth trying a long.

Here's the three 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.

USDCAD

It's no surprise that as the Euro and Cabble climbed this morning, USDCAD slumped. It dropped below one of its uptrend lines which is not good news. However it held above the round number of 1.0600 again, as it did last week. If it closes below that level, and particularly below the 1.0580 level I identified last week, the trend line off the low will be exposed.

Nothing like waking up on a Monday morning and seeing your trade that was healthy on Friday be slightly underwater. This is why you have to have tight stops--it can't go too much below where it was to stop me out. In any case, once the pair held above 1.06 on the lower time frames, I opened a new long. Live by my analysis; die by my analysis, LOL. The market will tell me soon enough if I'm wrong.

Why didn't I move my stop to breakeven on the trade on Friday when it was 60 or 70 pips up? I could have, maybe should have. Anyone who reads this regularly knows I do often move to breakeven as soon as I can. I was in meetings most of Friday, though, and didn't watch the trade. Volatility being what it is, though, I'm not completely surprised by the move down again, especially if the pair is, in fact, basing. I'm comfortable with taking the loss if I have to do so.

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.

GBPUSD—Monthly Chart

The cable’s price movement has baffled some people. Many consider the UK’s economy to be as bad as that of the US so why is the pound pulling ahead of the USD and going up in price? I think that question is largely unanswerable. In any case, what does it have to do with traders, especially those looking for shorter term trades?

The pair definitely was in an overall uptrend until late 2007. It then, first gradually and then sharply, fell to a low of 1.3503 in January. Since then it has achieved a high of 1.7045. Is there still more upside? Or is this the top before it heads down again? To get any sense of an answer we have to look at the charts.

The first thing I noticed on the monthly chart below is the broadening formation over the last five months. I’ve outlined it in black lines. These form after a pair has been trending up. They’re often bearish. The reason they’re bearish is that they suggest an excited market that may be somewhat out of control. If it’s to be what’s known as an orthodox broadening top, it should have 3 peaks at successively higher levels with two lows between them. This would allow for quite a bit more movement in this pair, up and down, before something definitive is detected by a breakout. A breakout direction can sometimes be detected by the failure of a rally to go quite as high or a reaction to go quite as low.

Regardless, if it stays within this formation for a while the possible range is 1.5583 to 1.7660. I actually like the 1.7660 level for other reasons and if, by chance, the pair should get there then it would be a short opportunity. But I don’t expect that within the next few days anyway. There’s a hint of a possible top around 1.6750/6850 as well. The probability of that seems much greater than the 7660 level.

The pair could also be in a symmetrical triangle (I drew the top line of that in red). If Elliott Wave enters into this discussion, then the breakout is upward from triangles.

The next thing I noticed was the steepness of the two uptrend lines which I’ve drawn in blue. It broke the first so I drew a second. But RSI has not yet broken its uptrend line. If the price breaks both (you need both for confirmation), it would be an indication of weakness. It hasn't happened.

A look at the candles show that the last three (the current one is still forming) have upper and lower shadows. So there’s indecision about the price. This indicates that regardless of the prevailing uptrend since January, the pair isn’t in a strong uptrend at the moment.

We have some conflicting clues here. But when you consider the length of the preceding downtrend—seven clear down candles versus the four clear up candles—the tendency is to lean bearish.

Obviously, this morning's rise hints that there is more upside. Closer analysis of the short term charts is necessary. Here’s the long term, monthly 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.

EUR and Pound climbing this morning

Like ponies out of the gate at their first race, the pound and Euro are both charging ahead this morning with steep, upward climbs on the shorter term charts that seem unsustainable. But what seems to be, doesn't matter. Price action is reality.

As I posted Friday, if Euro climbs above 1.5060--ideally more than just a peek above it but a close of some sort--then the Elliott Wave (EW) analysis I posted on Friday is invalid. This happens with EW (or with any technical analysis approach). I'm watching both Euro and the pound closesly and will post more later.