Friday, December 11, 2009

AUDUSD—Ranging

AUDUSD is stuck in a narrow range of .9116 to .9196. I’m still in my short from .9152. Is it worth staying in? Have things changed since I entered based on a general, overall weakening and the gravestone doji on the three-hour chart? Don’t forget that because the Australian dollar pays much more interest than the USD, I’m paying interest on this trade. The interest isn’t a big deal with small positions but the larger the position the more significant it becomes.

The answer is unclear. One thing I keep mentioning in the blog is that usually pairs don’t suddenly plummet down from a top. Topping and bottoming is a process that takes place over many hours and even days and weeks. During that period, the action can be whippy. If you look at the three-hour chart you see indecision in the form of the candles—they’re small or have significant upper and lower shadows, interspersed with some longer ones.

What hasn’t changed is that the pair is exhibiting weakness. It certainly isn’t in the robust climb that it has exhibited through much of the spring, summer, and fall. However, while the pair is heading for the bottom of the range after a day of hovering about in the upper third of the range, there’s support here that may hold. As of now, I’ve lightened my short at +20 pips and have moved the stop to breakeven. I’m winding down for the week so I may not get to do much more with any pair before Monday. If the pair should make it down to the trend line at .9050, it would be an interesting place to assess buying. A break above .9200 would hint at returning strength.

Remember, liquidity is shrinking as we approach the holidays. This can result in exaggerated moves that don’t make a lot of sense. 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.

EURJPY—Bounce

I’ve been short EURJPY forever it seems (since Tuesday, the 8th, at 133.03 which gives you some sense of how time can be distorted when trading). However, for me to stay in a pair is unusual unless the pair is strongly trending. It never reached the bottom of the range and I should have probably closed it out but I’ve taken partial profits several times at +43, +180, +264, and +360, so I’m not too concerned about the small position left which is profit stopped at +120 pips.

It’s hovering in the middle third of its range. This range is from 126/127 on the bottom (with one dip down to 124.38) to 138/139. On the hourly chart, it looks as though it’s rebounding and is approaching the 50% retracement of its recent dip. It’s going to have to push through current resistance at 131.50/80. 132.50 and 133.23 are the next resistance levels. Support is at 129, then 127. I believe there will be another opportunity for a short at some point, although perhaps not today. Here’s the daily 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 10, 2009

EURUSD—another day of little action

It would have been a good morning to go holiday shopping. Nothing much is happening with currencies in general.

Looking at the daily Euro chart, I’d say there’s more probability of it breaking down than up although the latter isn’t impossible, of course. The first thing to notice is the broadening pattern at the top. Some traders believe that the more horizontal the tops (and these are), the more likely it is to see prices break downward. Notice, too, that the third peak didn’t quite reach the top line of the formation. This is also bearish, hinting that price will break downward. Before it does so, it could try one more run to the top of the pattern (1.5230).

Another thing to look at is RSI. Notice here that the level to which RSI has dropped is lower than it has done since April. I’ve drawn a red support line under RSI to illustrate this. In addition, buyer interest hasn’t pushed RSI above 63% since October. This is quite different from the forays into overbought readings that were taking place throughout the year.

Finally, Euro has broken and closed below the daily uptrend line from April.

From these hints on this daily chart, it looks as though the Euro is weakening. That said, though, there could be another bounce up as I mentioned above. If it’s going to drop further, I’d love to see a close below 1.4627, the November 3 swing low (I’ve placed a red arrow there). If it does rally, I’d short again near the top of the broadening pattern and/or on candle weakness. For a rally, note the potential double bottom that’s forming. It requires a close above 1.4860, to confirm this. A close above the prior high of 1.5144 would be super-encouraging to bulls.

Here’s the daily 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.

Another note on AUDUSD

I consider the doji invalid if there is a close above its high. So far, on the 1- and 3-hour charts, this hasn’t happened. However, I’m getting a bit annoyed with this pair. My trading experience tells me that when a pair, especially one that has been bullish, hangs about at resistance, it often is getting ready to break above it. If it does, my short may become a stop and reverse. We’ll have to see.

© 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.

AUDUSD—slight bounce

What was left from my long trade from two day’s ago profit stopped out at +5 pips in yesterday’s dip.

As I wrote yesterday, the pair looks a bit weaker than it did. After a few days of lower highs and lower lows, yesterday had a slight higher high and higher low. This may have been just a minor correction before another push upwards. It needs to break above .9406 to know for sure.

Both the three- and one-hour chart formed some interesting doji candles this morning. Doji candles can indicate trend reversals after an uptrend, even a small one such as what we saw overnight. For that to be the case, though, additional candles must confirm its signal, the market should be overbought, and the doji should be relatively rare on the chart. It’s important to remember that even if all three of these conditions exist, it doesn’t guarantee a trend reversal (there are no guarantees in trading, alas). It might only signal that the market is going to move sideways a bit.

On the three-hour chart, you can see a gravestone doji. After such a long bullish candle before it, I would have liked to see the third candle complete an evening star formation but it didn’t do so because it didn’t penetrate deeply enough into the bullish candle’s body. It should have looked like this:



Instead, as you can see, the third candle, while somewhat bearish was not very long. So far, no candle has confirmed the signal from the doji. However on the one-hour chart, there is what looks like the possibility of an evening star when the candle completes at 8:00AM.

Neither is the market overbought or oversold. What is interesting is that momentum seems sluggish as measured by RSI. It’s not shooting up on this small price rally so there doesn’t seem to be a lot of interest in the pair.

There aren’t numerous doji candles on the chart so one should take note of this one, however. One thing that reinforces it is that the market is at resistance. This means the stop can be tight, just above the doji high. I’d be a little careful with this since there’s an upper shadow that extended to .9188, several candles back but the stop can still be tight. Price is also at a fib confluence zone that I’ve indicated with the purple line. This reinforces resistance. Because of this, and given prior weakening signs I’ve written about, I decided to try a short position as you can see. 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.

Wednesday, December 9, 2009

Euro—kind of a boring day

Not a lot of price movement, today. Euro has been trading in a rectangle since yesterday afternoon of 1.4668 to 1.4782, with most of that action confined to north of 1.4692. If you weren’t already in a trade, you could have been in and out today for small pips but that’s a hard way to make a living and not a lot of fun, either. I’m still short Euro from 1.4822.

The pair will likely drift down to the bottom of the range. There it will either show signs of a rally, break below, or stagnate. That’s so definitive, isn’t it? Alas, that’s honestly all there is to say for now and you can’t force a signal where one doesn’t exist. We’ll just have to wait and see.

Meanwhile, perusing some blogs and websites yesterday, I’m reminded yet again of how many ways there are out there for traders, especially new ones, to be separated from their money. Things such as “can’t fail” systems, automated signal providers, useless webinars, and on and on it goes. Remember the old saying? Those that can, do; those that can’t, teach. There are far too many “teachers” out there who want to charge for their products and services and who have no verifiable history of being able to make money in the market consistently. Don’t fall for this stuff. Everything you need to know is in books that are available for far less than the $99 to $9,999 price range and with blogs such as mine there is a lot of information available for free. Secrets of the ages or RSI, etc. It's all hooey.

AUDUSD—a tentative long

Yesterday I went long at .9041. I took some profits this morning at +50 and have moved my stop to breakeven +5.

As I’ve pointed out earlier this week, this pair is showing some weakness. However, given its strong, bullishness, I wouldn’t expect it to just roll over without a fight. After the low early yesterday morning, it looked as though it was trying to stabilize, Note, today, that it seems to have backed away from resistance at .9114. The candles developed upper shadows. This hints the market was rejecting higher prices. If you study that line on the hourly chart, I’ve placed arrows where price has touched it and retreated from it several times. It’s polarity. It’s also the .618 retracement of the recent move down. Let’s see if it holds as resistance again. If it does, a short might be in order. This means I may reverse when stopped at breakeven, or earlier, if other clues present themselves before then. However, remember we’ve had four down days so a bounce may be at hand.



© 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.

EURJPY—putting this move in context

This pair has lost 579 pips since Friday. If you do short-term trading, there’s a tendency to look at any move over a couple of hundred pips as huge. It’s helpful to look at longer-term charts to put any given move in context.

On the weekly chart for EURJPY, you see that it has been in a trading range for several months, largely bound by 126/127 on the bottom (with one dip down to 124.38) and 138/139 on the top. It’s a honey of a range—there have been good opportunities to make money since April.

The declining price of the last few days has brought the pair down to the bottom of the range. One thing to keep in mind is that we’re at year-end. People are taking profits; there’s less liquidity. You want to be careful as this can lead to moves that are quick and sometimes exaggerated. Another issue is that the yen is strengthening which of course will drive down the yen crosses.

That said, nobody has a crystal ball as to whether this range will hold. If they say they do, they’re delusional or lying. As traders, though, we don’t need to know that. We need to look at the probabilities and the probability says that unless this pair closes below 127, the bottom of the range is a place to look for buying opportunities. If the pair did close below 127, it would hint that the rectangle was breaking up and you’d want to look for a rally to sell. In either case, you must use tight stops.

As of now, my short trade from 133.03 is at +314 pips profit. I took some more profits off at +360 pips earlier this morning. What’s left is obviously profit stopped and I’ll either continue to trail that stop or reverse. Here’s the weekly:


© 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 8, 2009

EURJPY—May be slowing down

I just took some more profits on my short trade at 133.01 (+264 pips) as the pair may be slowing its descent. The last three hours haven’t seen the pair reach new lows. I’ve left the remainder profit stopped at +100 so we’ll see what happens next. In order to see a bounce, one would expect RSI to leave the oversold reading of below 30 on the hourly chart. It’s not doing so yet.

© 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—What’s with this pair?

I’ve ignored this pair the last couple of days although I’m still long. About the best that can be said is that my trade from 1.0413 is still up (currently +163 pips) after faltering a bit yesterday. The pair is coiling inside a symmetrical triangle. While it coils, it should be building energy for a subsequent move, up or down. Often, symmetrical triangles are continuation patterns and if we’re talking Elliott Wave (EW), practitioners believe that price continues in the same direction. If one looks at the downtrend since March, one would believe the breakout will be downwards.

However, if USDCAD is basing, as I’ve believed since mid-October, then the breakout would be upwards. Regardless, right now there is nothing to do with this pair except watch it. Here’s the daily 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—Daily and 1-hour chart

Perhaps this decline will show some strength, after all. On the daily chart, price is dropping down through its generally bullish upward channel and has crossed below an interim upward trend line that began in August. RSI is accompanying the decline. On the daily chart, RSI is at its lowest level since April.

Why did I sell in the middle of the channel? One reason was the breach of the trend line as mentioned. Another reason was RSI behavior on the 1-hour chart. It couldn’t seem to rally above a certain point and I considered that bearish, given its strength in recent months. A third reason was that the pair was top heavy as I had pointed out. In addition, when price rallied to the support that was now resistance, upper shadows appeared on the candles. This is a hint that the market is rejecting higher prices, particularly when it occurs at resistance. Finally, I had already been short (a trade I did not blog about and will not count toward monthly pips here) and had recently been profit stopped. I wanted to get back in on the slight rally. That’s not always smart but I could justify the trade based the factors above. Always be able to spell out your reasons for a trade. If you can do this, it’s a good trade even if it doesn’t make money.

The pair sat overnight and is still sluggish, showing only +64 pips so far. I’m going to move the stop to breakeven, take off a small portion of the trade at +64, and watch short-term price action carefully.

Here are the 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.

EURJPY—at least this pair has moved

EURUSD has been dead in the water over night but EURJPY isn’t disappointing.

As you can see on the daily chart, it has been in a slightly, contracting range since April. As a result, it has offered many good trades, simply by going short at resistance and long at support. This time it didn’t make it to resistance. The orange line I have drawn across the chart was significant to me based on various Fib calculations and other ratios. I was off slightly on the timing, entering a bit late at 133.03 but the trade is currently 189 pips in profit. I took some off the table at 132.60 (+43) and I just took at bit more off at +180 pips.

Keep an eye on this pair as it may bounce again from support in which case it would be a long. I’ll post about it here if it approaches that point. Obviously, price behavior is everything and one can’t trade only because a pair reaches support. There is some support on the hourly at 131.08. Here’s the daily 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.

GBPCHF—out of trade

1.6785 was the magic resistance number as I wrote last week and price has declined since then. It took me out at my profit stop of 1.6618 (just barely nipped it before turning back up) In any case, I took a bit more off the table yesterday evening at +200 pips and the remainder was at + 50 pips (bought at 1.6568; took partial profits at 80 and 200 pips—see 12/4 blog posts).

© 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.

Monday, December 7, 2009

EURUSD—Narrow range for now

Now that there’s been a bit of a drop, the pair is malingering, up, down, up, down, in a narrow 50-pip range for the last several hours, trying to find a direction. This is to say, traders are malingering, trying to figure out what next. Even if the pair begins to climb again, it needed this correction, if that turns out to be what it is.

Before believing that this is the beginning of a big plunge down, it’s helpful, I think, to look at a point and figure (P&F) chart of action on a 3-hour basis. Whereas in normal price charts, the passage of time causes change, in P&F charting, the chart doesn’t change unless price changes by some predetermined amount. This cleans up the picture of supply and demand and reduces “noise” on the chart. When looking at this chart, the column of X’s represents buying or demand; the column of 0’s represents selling or supply. The other reason I like these types of charts is that they tend to mute price extremes (which are also a form of noise in the market), if they’re constructed using close prices. For example, while the Euro reached a high of 1.5144 recently, this chart shows only that it exceeded 1.5080 since it didn’t close above that amount on a 3-hour basis. By varying the box size, you can make the charts more or less sensitive. You can also construct them on a high/low basis.

The chart shows that on a three-hour basis, price is still above the 45° trend line that began in March. Price would have to close below 1.46 for this trend line to be penetrated. A close below 1.4540 would break below the horizontal support line of this consolidation area. Until these lines are broken, it’s reasonable to assume the trend is still up. Here’s the chart:



Compare the P&F chart to a candlestick chart. My charting packages don’t go back to March on a 3-hour basis so obviously there is less history within which to place the current move into context. As a result, it looks as though the trend has changed since you have lower highs and lower lows, as well as a break of a trend line from a bullish channel. Note, too, there’s a bit of hidden divergence. This is usually negative and suggests the downtrend will continue.


Two more points about the Euro:

1) On the daily chart, the pair has fallen beneath the daily uptrend line from March (currently at 1.4814) and touched a low of 1.4757. However, it has not closed below the line and, until it does, we can’t really say it’s broken.
2) On the weekly chart, the 55 EMA is at 1.4757. As I’ve pointed out in the past, this EMA has served as support on several occasions and it’s the first time it has touched it since early November.

© 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—Weekly Chart

I forgot to post the weekly chart in the last post. Note that in addition to the sideways price action for the last eight weeks, the pair has also broken it’s uptrend lines, both in price and RSI, on this 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—Sideways on the weekly chart

AUDUSD declined during the latter part of last week but it still has not made a definitive move. The pair has been moving sideways, from .8905 to .9408, for the last eight weeks. It’s currently near the low end of the range with a low this morning of .9053. It may be headed back to test that low again. That point could be a decision time. Is this a more serious correction or is it a good place to go long?

If someone attempted a long at .9053, the stop should logically be placed below .8947 (106 pips) or below the range low which is .8905 (148 pips). That might be a bit much for some people’s taste. If so, then there are two other choices. The first it to wait to see if it drops to the bottom of the range, going long around .8945. The other possibility is to wait for an upwards breakout, probably above .9172. This is much safer than trying to call a bottom. It would obviously also require other confirmation. If it begins to approach that point, I’ll post.

For shorts, a break below .9053 might be worth a try. Alternatively, one could wait for a rally to .9108 and, depending on price candles and RSI, try a short there. The pair has been top-heavy and it has broken and closed below its daily uptrend line. 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.