Friday, December 4, 2009

EURUSD—Will it find support?

One can begin making a case for at least lightening up on or covering shorts, if not taking a long, because of the following:

1)It just touched support, an up-trending line from August on the daily chart.
2)Price is still in an overall uptrend from March. Say what you want about how it’s top-heavy (and I have), say what you will about Elliott wave counts (and I do), but the fact is that this pair keeps on hanging on. Euro bulls are fierce! I love my husband and kitty cats the way Euro bulls love their Euro. It’s incomprehensible that this little setback in reaction to NFP is going to cause them to give up. Of course, when they fall, they fall big. It’s as though they use all their energy keeping the pair going, not letting it have normal rest and potty breaks, so they have nothing left at the end.
3)On the 5- and 15-minute chart there is bullish divergence (OK, I’m groping a bit here) but I bet traders are going long as I write.

What I don’t like is the oversold reading in RSI. It’s lower than any reading on the three-hour chart since October. Gulp. Conservatism would have one wait until the RSI pulls out of oversold on the hourly chart. The trend line will hold or it won’t. I can go long if RSI starts to recover on the hourly chart. That would be a closed candle, hopefully bullish, with RSI above 30.

There’s reasonably good support at 1.4800/30 if this up-trend line doesn’t hold. Next best support after that is at 1.4620/37.

Here’s an hourly 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—Movin’ on up for now

Ooh-la-la, how did you like that zippity-doo-da dip down to 1.0435 this morning? Sure, sure, job news improved so let’s pound the dollar. Yes! Makes sense, if you have none, and those who shorted on the news now have fewer cents. In any case, yesterday I wrote that I was leaving the rest of the position at breakeven so my trade from 1.0413 is still on.

Had I been around I would have added to my long position but I wasn’t. Oh well, some get away.

© 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.

GBPCHF—Still long

Obviously, I didn’t get profit stopped out of my long that is now up 183 pips (as of 9:52AM EST)and clearly, 1.67 didn’t hold as resistance. I took at bit more off the table at 170 pips. As I wrote earlier this morning, one had to watch price and RSI around that level before deciding what to do. The candle bodies became longer on shorter-term charts and RSI surged up into overbought. RSI is not yet overbought (although it’s close) on the three-hour chart. Now we have to see if 1.6785 will hold but as of now, it looks as though it might.

© 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.

GBPCHF—Maybe another short coming up

The market is largely in the doldrums ahead of NFP today. As though that will make a big difference but everybody seems to be a tad nervous over what to do next so it’s as good an excuse as any..

GBPCHF is a pair I trade on and off and yesterday it looked as though it was ready to drift upwards again so I went long at 1.6568. The trade is up 80 pips this morning and I took partial profits. It looks as though it may be moving back to resistance at 1.6690 where it may prove to be another short. Depending on how you calculate your Fib levels (and I don’t always run mine off the extreme highs and lows), the 1.67 area is also .382 retracement from the November highs. This level is also polarity (it has served as prior support and resistance). If it does close above it, after the brouhaha that may take place around NFP, additional resistance is at 1.6785, 1.6990, and 1.7103. Support lies at 1.6530 and 1.6468.

Much will depend on price and RSI behavior as to whether it proves to be a good short. When I say price, I mean to look at such things as candle behavior. For example, if the candles start displaying upper shadows and small bodies, it can be a clue that the market is rejecting higher prices. This isn’t always true but at resistance, one can be a bit more confident. With RSI, it’s interesting to watch if the indicator moves into an overbought condition and is dropping out of that or if it fails to achieve 62.2 (the high prior to this).

You need to exercise great caution when trading around major news events such as NFP. I normally avoid trading because the markets can be volatile for no good reason. 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.

Thursday, December 3, 2009

USDCAD—Nice move

Hope some of you went long a couple of days ago when I did at 1.0413 as the trade has finally moved up to 160 pips profit. I’ve taken a bit more off the table but will now let the last third run if it’s going to run. It now has to fight its way through some resistance.

© 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.

USDJPY—Short setup?

Flipping through my charts this morning, USDJPY caught my eye as a possible short. Looking at the 3-hour chart, it’s been in a robust downtrend. It has bounced and is currently approaching resistance at 88.64, the downtrend line on this chart from October 26. It’s also at a prior support level on the daily chart and that should reinforce resistance here.

However, I’m holding a bit before I short the pair. First, I’d like to see it touch that trend line. Second, RSI has just moved into overbought and seems to be overtaking the levels achieved in October so momentum is still building. At this point, I’ll begin watching the hourly chart to see if RSI falls off. I’ll also watch candle behavior. If RSI drops, it might be a reasonable short. The stop needs to be tight as there is more resistance overhead at 89.70 (downtrend line from July) and 94.03 (downtrend from March).

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—Coiling

There’s not a lot new to say about this pair. Most of the Forex market seems to be stuck in narrow ranges. My long is up 88 pips this morning but I’ve left the stop near breakeven. I removed another portion of the trade to take profits at 84 pips. It’s coiling inside its triangle. The pair pounded out a tentative support at 1.0463 over night but the up-sloping line is the more significant support at 1.0417. We’ll just have to see what happens. 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.

AUDUSD—Upward Wedge

My short stopped at breakeven and I did not pile back in. The direction is still not clear but it will emerge eventually.

Looking at the 3-hour chart you can see the pair within a rising wedge. The steepness of the angle (just like on the monthly chart) and the maturity of the trend suggests it may resolve downwards. Regardless, it doesn’t have that much more to go before it breaks out. At this point, I’m waiting for a move one way or the other. 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.

Wednesday, December 2, 2009

AUDUSD—Short, Part 2

At this point, the pair is approaching support at .9235 (the horizontal line) and additional support lies at the uptrend lines. I’ve moved my stop to breakeven and may take some partial profits soon. If my stop is taken out I may short again, depending on market behavior. We’ll see. 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.

AUDUSD—Short

Based on the behavior of price and RSI on shorter time frames and based on my suspicion about the angle of uptrend and its maturity on the longer time frames, I’ve gone short at .9270. A move back up with a close above .9300 could be a stop and reverse signal.

© 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—A reader’s question

A reader emailed me that he had tried to comment but the comment did not appear. First, thank you for reading and thanks for trying to comment. My blog settings are set so that anyone can comment. In order to comment, it seems you must 1) click on comments below the blog post you wish to comment upon, 2) write your comment in the box that appears, and 3) click on the Post Comments button. You may also have to select from the profile box where you can select anonymous or Google account or whatever. I hope this works because I would welcome more comments.

In any case, the question was about the AUDUSD and this reader wrote last night, “Now after today, I am wondering if it will take out the recent 0.94047 Hi on 11/16. Or is it about to go down as H1 chart shows divergence, plus the daily has given a head and shoulder type top (do you see it as a "failed H&S?).”

On the daily chart, I’ve marked the head and shoulder pattern (H&S). You usually see this pattern at a top but it can also occur during a consolidation. If it forms during a consolidation, it often fails. The reason the reader asks if this one has failed, is that the pattern is confirmed when price dips below its neckline. In this case, the up-sloping neckline (which I drew in blue) was at .9141. Price dipped below (as well as below the daily uptrend line) but quickly returned, dipped below again and has now returned to the extended neckline. My opinion is that it’s not possible to definitively say if it has failed. because it had a nice close (the black real body of the candle) below the neckline and the candles since have been indecisive. Always remember that topping (and bottoming) is a process. It doesn’t occur in one great burst of a candle (usually) but takes its time, wandering and meandering along until you just want to shout, “Get it over with, already!” Alas, the market’s time line is not our time line. A successful trader is patient.

Tom Bulkowski in his book, Encyclopedia of Chart Patterns, writes that pullbacks happen in H&S formations between ½ and 2/3 of the time. So this pullback is not alarming although yesterday’s candle is definitely bullish and the lower shadow of the candle before that marked a nice little support level.

Will it take out the November high? Well it that happens then we know the H&S failed for sure, right? A failed H&S is also a powerful signal. Given the strength of the trend to date in AUDUSD, higher highs could be coming. I still have a potential price target of 97 from some point and figure calculations. But before anyone starts piling on longs and stacking up their deposit slips, it’s important to remember this is a mature trend at a severe angle on the monthly chart (see yesterday’s post). We need a definitive breakout to buy.

RSI on the daily chart causes me concern about buying willy-nilly as well. It needs to climb well above the down-sloping line.

This reader is smart to be looking at multiple time frames so let’s drop to the hourly chart. I don’t really see divergence here but what I do see is that RSI has dipped below the RSI trend line. If price should follow and close below its trend line at .9233, things could get interesting. Below .9106 (the last dip low) would also be telling. Breaking upward with a close above the narrow band it has been trading in for the last 24 hours (.9300) would hint at more potential upside movement.

The real question is, let’s face it, should one go short or long here. The real answer requires waiting a bit longer to see what price action does. The candles with their small bodies and upper and lower shadows are indecisive. Be patient until better clues are available. .

Here are the daily and hourly charts:




© 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—Miasma

It would be easy to develop a bad attitude towards this pair, wouldn’t it? Is it going to start up again or just wallow in the miasma within which it seems to be stuck?

Yesterday it dropped to a low of 1.0407. I blogged that I was looking at going long because it appeared to be dropping to a November support level of 1.0418. I made my buy at 1.0413.

Do I like buying when a pair is dropping? No, I hate it. I can’t imagine ever liking it. I could not have done it if I hadn’t been closely following this pair for some time. It fell to a support level I had previously identified as being significant. So what am I supposed to do? Throw out all my analytical work because of an emotion? No. I can’t trade that way or at least I can’t trade and make any money that way. I bought. Let’s face it. Because I’m fanatical about my entry points, my risk was small because I could set a tight stop. If the decline continued, I would be out. Would I have tried again at the next support level? Possibly, depending on the current price action.

In any case, I took some partial profits off the table this morning at +50 pips and have my stop slightly above breakeven.

I’m not thrilled with yesterday’s behavior since it broke the daily uptrend line. On the three-hour chart, I’ve left the old line in a lighter color and drawn a new one in black. One can see the pair is (or was) coiling inside a symmetrical triangle. This is great news as far as I’m concerned because when it breaks out of here (and it will at some point) there can be a large move. Unfortunately, false breakouts can occur before this large move but that’s the nature of trading. It’s impossible to know, at this moment, whether yesterday’s move below the trend line was a false breakout or a harbinger of further declines. It’s encouraging the RSI didn’t plunge too badly—on the three-hour chart it became only mildly oversold at 29.96. When it does break out, a throwback or pullback is not uncommon. (Throwback if it breaks upward; pullback if it breaks below). Within the triangle, though, it’s accumulating the energy for a move. I, for one, will welcome it, in either direction. For now, yesterday’s low of 1.0407 (which formed a nice hammer on the one-hour chart) serves as near-term support. 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.

Tuesday, December 1, 2009

November Trade Results—Up 2,054 pips

In October, I started posting my trade results from trades I’ve mentioned on this blog. I don’t blog all my trades (I’d never have time to trade if I did so) but I do touch on many here as I tend to follow different pairs for a period of time. For the month of November, the results are a net gain of +2,054 pips. This compares to a result of +1,994 pips in October. In some of the trades, I took partial profits. I’m not sure about the best way to report those so I just lump them together, e.g. if I closed out half at 50 and the rest at 100, I count 150. I also had some trades I blogged about that stopped at breakeven. I didn’t count these in the trades I list.

It was another good month. The market again presented many, clear opportunities. It’s not that I’m a great trader. It’s that the market provided me some great clues. My role was to stay alert to them. I also do a tremendous amount of analysis. Trading is hard work. Anyone that says it isn’t is either (a) delusional; or (b) lying.

I’ve had losing months in the past and will no doubt have them again. I don’t have crushing losses because I keep tight stops but even tight stops add up if a bunch of trades go against you. I’ll also tell you that the first year I traded I blew through 60% of my trading account; the second year I “only” lost half of what was left. (Big improvement, right?) Finally, things turned around and stayed flat for a while. After that, things began to improve. The moral is, if you’re just starting out, trade ultra small positions and manage your risk. You’ll still lose but it won’t hurt so much. If you keep at it, studying the markets, keeping an open mind and not trying to put your own spin on things, and journaling your trades, you’ll eventually make money.

When I do have a losing month, you’ll see it here because in this blog I show you real charts with the trades on them. You can look back through the month and find the trades I mention below. So many people out there, so-called gurus, tell you how much money they made. However, you never see their trades as they go—it’s always in retrospect and they’re always showing you old charts. Phooey on that. Don’t give them your money so they can “teach” you.

Anyway, I don’t expect these results in December. It’s always a slower month for me as the holidays approach but of course if I see opportunities, I’ll take them.

Here’s the detail:

Currency Pair, Net Gain or Loss in pips, and number of trades with pips
AUD/USD +501 6 trades at +63, +80, +128, +110, +50, and +70
EUR/USD +304 4 trades at +10, +125, +107, and +62
GBP/JPY +100 1 trade at +100
GBP/USD +383 3 trades at +100, +225, and +58
USD/CAD +766 3 trades at -28, -59, and -76
10 trades at +61, +197, +10, +122, +60, +120, +50, +199, +100, and +10

AUDUSD—Monthly analysis

RBA did the Australian dollar the favor of another rate hike last night so what’s with the tepid response? Of course, last month the initial response to the rate hike was tepid as well. Well, I’m not going to trouble myself with fundamentals since they often don’t help with intraday trading (besides causing knee jerk reactions that are usually quickly retraced once they’ve taken out the trader’s stops).

Last night, I ran my monthly charts. Looking at AUDUSD, you can see that it has almost entirely retraced its fall from the ’08 highs of .9851, reaching a high of .9402 just this past week. In the process, it blew past all manner of Fib retracements and prior resistance levels. You go, girl, as they say, although I actually don’t know any of the vague, inchoate they who actually say that but I live a very cloistered life what with my charts and all.

Anyway, a very impressive performance during the last ten months. That’s right, ten. Let’s drop the Elliott Wave (EW) talk about wave two corrections (although this won’t not be proven that until it bubbles on up above .9851) and talk Dow Theory for a moment which has, I think, much to say about macro trend movements. Dow Theory talks about three trends—the primary one, a secondary or intermediate one, and a minor one. The primary one lasts one to several years, the secondary one lasts three weeks to three months and can retrace 33 to 66% of the primary gain, and the minor trends last a few weeks.

AUDUSD was in an uptrend from 4/2001 (at a low of .4775) until 2/2004 with a high of .8010. It then corrected for three months, reaching a low of .6774. Sounds like an intermediate correction of three months that retraced 38% of the overall uptrend. For nine months, it headed up to .7991. Following this it dropped back to .7015 over the course of 11 months (That’s a long correction but did anyone tell AUDUSD about Dow Theory?) This entire, almost two-year move, looks eerily like a, dare I say it, EW zigzag correction. Wait! Dow Theory states that secondary corrections often follow a three-wave structure. Who got what from whom?

The pair then began to climb in earnest, with one minor correction, to 7/2008. One would have to say this was an overall uptrend despite the long corrective period that lasted almost two years, well beyond the Dow Theory standard of three months. In 7/2008 it plunged, dropping to .6007 in four months. I guess it wanted to get the 75% retracement of the overall uptrend from 4/2001 done with! During this plunge, it violated a serious trend line that it has since regained. It has also retraced, over 10 months, over 90% of that fall.

So what’s the overall, primary trend? One, groaningly, still can’t definitively say. If you try to say up, you have to confront the fact that the plunge from 2008 went well below the prior correction. This is a lower low. When you have a lower low, you no longer have an uptrend. It also violated old tops and all the rest of that stuff. Yet, if you say that’s it, kiddos, it’s down, you’re assuming the current rally isn’t going above the .9851. If it does, all will be forgiven, she just got a little tipsy and let her petticoat slip down below her dress, and, oh, never mind. You go, girl, and all that. Alas, there’s no proof of that yet, either. What am I thinking? I blush to think anyone would care but I’m thinking rally in a primary trend that has changed direction based on some other things I look at. I won’t bore you with what.

Unbelievably, I do this monthly analysis on each chart but of course, I won’t post them all. I usually just jot these thoughts on the chart itself in cryptic little notes. I suggest that even intraday traders pull back and do this once in a while. It gives you a great perspective.

Note, on the monthly chart below, the long upward shadows of the last two monthly candles. They’re different from the prior candles in that regard. Also, note RSI. A long divergence (but this is a great example of why you don’t trade divergence in and of itself—you’d go broke waiting for it to pay off. You have to combine this kind of thing with specific techniques in shorter periods). Note, too, the steepness of the uptrend line. The steeper they are, the less sustainable.

Let’s go back to EW theory for a moment and say the big move down was a wave four correction that ended at .6007. Then we’d be in a wave five and it could go above .9851, the wave three high. It could break parity! Long, long, let’s go long! Hold on. First, it’s been underway a while now. Second, one of the three inviolate rules of EW theory is that wave three can’t be the shortest. It doesn’t have to be the longest but it can’t be the shortest. So that would mean that this wave five, if that’s what it was, could not be more than 2,836 pips (the distance from .7015 to .9851). Wave one (under this hypothesis) would have been 3,235 pips from .4775 to .8010. Add 2,836 to the .6007 low and you get .8843. No, it can’t be wave five. The most logical EW count on a monthly chart is a correction. I’ve labeled it as such on the monthly chart below and that is what I’m sticking with for now.

If I think the primary trend has reversed though, why wouldn’t this be a wave two? It could be, but what difference does it make? The next major move would be down, regardless. The point, though, of this monthly analysis is to provide some perspective. For me, that’s what it has done and I hope it has done so for any readers I may have who haven’t yet dozed off with this treatise.

Here’s the 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—Up and down and round and round

I blogged that I bought at 1.0550 yesterday, took partial profits at 1.0585 for +35 pips and moved stop to breakeven. Am I glad I moved my stop to breakeven? Well, yeah, I guess. This pair is a jumping bean, lately. It has gone as low this morning as 1.0425 which is only 7 pips above the November 11 low I cited as a support area yesterday. Am I thinking about buying? You know I am. Off I go to analyze the charts… will post shortly.

Monday, November 30, 2009

USDCAD—Long

Bought at 1.0550; took partial profits at 1.0585 (close of 5-minute candle on high) for +35 pips and moved stop to breakeven.

USDCAD—Need to see some legs

Last Wednesday I went long again in USDCAD at 1.0467, just above its lows for the days. As I pointed out that morning, support was at 1.0496 (the daily uptrend line) and 1.0418 (the Nov. 11 low). It went as low as 1.0450, both in the morning and in the afternoon and looked as though it was basing on the one-hour chart. Early Friday morning I peeked at the trade (since I was taking time off for the holiday weekend it was just a peek) and I moved my stop well above breakeven to 1.0614. Later that day the pair turned down and took out the stop for a profit of 118 pips. This is the story of this pair lately—up and down, up and down in some serious sideways action since November 6.

This morning I am looking to buy again. On the hourly chart, it has dipped to 1.0536, a general support area, but there was no great conviction to the low. What I mean by that is that RSI wasn’t plunging into an oversold area and the candles were throwing off lower shadows. Lower shadows hint that the pair is rejecting lower prices. I didn’t find last week’s lows discouraging because I felt there was some holiday madness to them (i.e. low liquidity).

I’ve been mostly going long in this pair since mid-October and been heartily rewarded by it (+944 pips in October; I haven’t yet totaled November). I still “believe” the pair is basing but my readers know that I work hard not to get fixated on my beliefs. (I wrote about it basing in my November 17 blog at http://forexreflections.blogspot.com/2009/11/usdcadchop-chop-chopping-along.html)

Still, it is in an uptrend since October (but overall downtrend is down so one must be cautious and use tight stops). I also find it encouraging that RSI is staying well above oversold levels on the daily chart so a bottom may be in. However, the pair must start showing some legs. For one thing, it has to take out the last swing high of 1.0853 in a definitive, non-namby-pamby way. It also must get through this gruesome resistance area around 1.0750 that has capped it the last two times it has tried to climb. But, as I wrote last week, even if this is nothing but a consolidation before heading lower, it has offered up some lovely pips.

On the one-hour chart, there’s indecisiveness as evidenced by the upper and lower candle shadows. I may pick up a small position at the trend line (around 1.0551), depending on price action on short time frame charts. If not there, there’s support not far below that point. The support levels are:

1.0551—3-hour uptrend line
1.0476—daily uptrend line
1.0418—Nov.11 low
1.0379—Oct. 21 low
1.0272—going to the dogs low
1.0208—absolute bottom; if this doesn’t hold then it’s the bye-bye low

Here’s the one-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—Mucking about

On the weekly chart, AUDUSD is mucking about, with this past week’s high of .9328 lower than the prior week’s high of.9402. This is seven weeks of essentially sideways movement. Why is this interesting? For one thing, during the last seven weeks the demise of the USD has been a constant theme. For another, Australia is a strong commodity currency. It’s difficult to draw conclusions yet but this is something to tuck in the back of one’s mind as one examines price action on the shorter time frames.

The pair made a nice dip on Friday to .8947, a tad above the October low of .8916. Since I took the four-day weekend, I missed the long. In dipping, it broke below the daily uptrend line from March. This is a sign of weakness. It's important to remember, though, that a break on the lower liquidity Friday (US holiday weekend) is suspect. The pair has climbed back to its trend line, technically known as a pullback, but fallen away on the three-hour chart. Daily momentum is still good from my readings. However, price behavior is a bit squirrelly. Again, that could be from the lower liquidity of last week.

On the three-hour chart one can see that in the pullback the pair retraced .618 of the drop from last week’s high. OK, the plot thickens. Had I not been asleep when this happened, I might have sold. As I always say, some trades get away from you. One more sign of weakness, this time in a shorter time frame. If I want to short rallies, though, I’m going to have to drop down a bit further to the hourly or 15-minute chart. For now the one-hour chart shows the pair hesitating. On the three-hour chart, the most recently closed candle of just a few minutes ago shows a hammer, which may be bullish. Tonight is the RBA interest rate decision so a little mucking about will probably be the order for the day. Here is the three-hour chart:



© Dianne Fecteau, 2009