EURUSD—Further drops?

The Euro has dropped sharply from a high of 1.5141 on December 3 to a low of 1.4304 today. For the last hour, it looks as though it may be trying to stabilize here but we’ll have to see. This would make sense since it’s a support zone. Next support is at 1.4192/4209 (late August, early September lows), 1.4141 (Fib confluence zone), 1.4008 (polarity), and 1.3728/48 (May, June lows). Resistance levels are 1.4412, 1.4590, and 1.4684.

I added another short at 1.4385 this morning. I’ve since moved my stop to +10 over breakeven. However, it’s not realistic to expect the pair to continue to just freefall. There must be a bounce in here somewhere. 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.

EURCHF—is the SNB finally crying uncle?

I haven’t traded this pair much this year for the simple reason that the Swiss National Bank has been intervening to prop it up since March. Each time it has approached 1.50, "Bam!", as Emeril would say. The central bank jumped in to prevent the Swiss franc from appreciating too much.

Since October 2008, the pair has been coiling in a symmetrical triangle but there has been mostly sideways movement recently. Finally, though, probably in response to a rapidly weakening Euro, the pair broke through the horizontal support line from May and the triangle. Has the SNB finally cried uncle? Perhaps. After all, as the British central bank found out in the 80s, central banks can’t prop up a currency that’s aching to fall.

So how significant is this break? First, I don’t have a lot of confidence in moves that take place in the low liquidity days surrounding holidays. The pair did drop as low as 1.4579 in early March of this year before the SNB started its intervention so I’m not certain it has given up. If it does intervene, the pair will jump quickly. Let’s see, low liquidity that can cause exaggerated moves and the still present danger of intervention. Those two things shout to set tight stops if a trader goes short. Fortunately, with this pair, that’s not difficult since its average range of movement is small and it is still near the breakout point of 1.50.

Symmetrical triangles are often continuation patterns and the trend was down when the pair entered into this triangle. Bulkowski, in his Encyclopedia of Chart Patterns, says that there needs to be at least two distinct touches each of the two lines and that the entire pattern needs to last at least three weeks. This one qualifies on those counts. There also shouldn’t be a lot of white space and I’m concerned that there’s a bit too much here but there has been intervention (which tends to fog signals). If this is a valid pattern and it is breaking downward, the price projection is the width of the widest part of the triangle added to the breakout if the direction is up or subtracted from if the breakout is down. In this case, a downward breakout would result in potentially hundreds and hundreds of pips of profit. Before you start breaking out the deposit slips, it’s good to point out that he also describes patterns that fail—it breaks in one direction, then reverses and goes in the other direction. As I said, if you decide to short, keep stops tight. Here’s the daily chart:



Bulkowski’s can be found at Amazon: Encyclopedia of Chart Patterns (Wiley Trading)

© 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—back at support

As I wrote in my last post, I tend to stay in profitable trades, taking profits at various points. I’ve been in this one since December 7 when I went short at 133.03. This is a long time for me as my trading style is geared to short-term trading. In fact, I woke up this morning saying to myself, maybe I should just close that trade out—it has, after all, been hovering around 250 pips profit the last couple of days. However, when I logged in this morning the pair had dropped back to a support level and is currently, as of 8:21 AM EST, at 373 pips profit. What I will do is see how it plays out the rest of the week. I am paying interest on this since I’m short. On the other hand, taking partial past profits on this trade of +43, +180, +264, and +360, means that what’s left is a small position so the interest isn’t a big problem. “Haha,” some could say. “Wasn’t that stupid to take profits off at the +43 pips when so many more pips were ahead?” Well, in hindsight we’re all perfect traders. My answer is no. I did what I did because I wasn’t sure of the future when it was up 43 pips.

I’ve drawn horizontal lines on the daily chart, again in holiday green, that show support at 128.82, 126.89, and 124.37. It looks as though it might be trying to base at the 128.82 level as I write. If I wasn’t short would I try a long? Well, the beauty is that the stop can be fairly tight. However, there’s some negative sentiment against the Euro right now and the yen loves bad news (which means it strengthens) so one would have to be careful. Finally, although, I know I’m getting repetitious, thin liquidity means moves can be erratic. All good traders should be winding down their trading activities for the year and enjoying the holiday season.

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—how low could it go?

I shorted EURUSD again yesterday morning at 1.4585 as it reached up and touched the bottom of the daily uptrend channel. The high was 1.4591 and it was just one of those lucky moments where I happened to sell near a top. They say people make their own luck. I was hovering over the Euro, looking for a rally and I knew that was the bottom of the channel so I decided it was about the best I was going to get. I sold. Guess I made my own luck. I took some profits off the table at 1.4492 (+ 93 pips) not because I was trading in the middle of the night, but because I left a buy order in place to do so. Now, the stop is above breakeven (+130) on the remainder of the trade, (which is currently up 230 pips), so I can forget it. Especially, since I’m trying to wind down for the holidays.

Questioning minds want to know….how low could it go? Support levels come in at the following levels:

1) 1.4337—polarity
2) 1.4192/1.4209—Double bottom (late August/Early September)
3) 1.4008—polarity
4) 1.3728/48—May, June lows (Bet this level would make the Euro bulls go, “Wow!” or maybe “Ow!”

There’s an old trader’s saying that says, “Don’t tell me what. Tell me when.” Alas, one doesn’t know when, although those using time or cycle analysis will sometimes predict. Without getting into all that, though, the value of knowing support levels is that you can be alert to price behavior at those points and look for confirming clues as to how you might trade. It’s also important to watch price behavior to look at when you might lighten shorts. I tend to leave profitable trades on but take partial profits as they go. Others might have a definite target in mind and close the trade at that point. The important thing is to have an approach.

As I pointed out several times in the last month or so, Euro was looking weaker. Then too, bad news came out of Eurozone over the last couple of days and this obviously had an impact as to why now. However, as I’ve also pointed out, Euro bulls are fiercely protective of their Euro and hate to give up on it. We’ll just have to see how this plays out. A definitive answer will most likely have to wait until after the holidays.

Here’s the daily chart with the support levels drawn in pretty holiday shades of green and red. For those new to reading the blog (Welcome!) my trade is the little triangle on the uptrend line.



© 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.

GBPJPY—didn’t quite make it to resistance yesterday

The pair didn’t quite make it to the 147.50/90 resistance area yesterday (high was 146.94) before dropping sharply. However, the pair is coiling inside a symmetrical triangle on the three-hour chart so there are future opportunities for trading. Given the overall downtrend, I’d expect that this is a continuation triangle. As a result, the breakout, when it arrives, will be downward. However, as I’ve written before, pullbacks are common. In any case, it may also bounce off the upward sloping trend line of the triangle before breaking out. Examining price behavior at the time will offer more clues. However, my litany during this holiday season is to be careful when trading. Thin liquidity can result in rapid and exaggerated moves that can take out your stops and leave you reaching for spirits of an intoxicating kind.

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.

GBPJPY—May be getting to a nice sell point

I trade this pair but not usually in this blog because it’s a hip-hopping, hard-rockin’ Mama—in other words, too volatile for most traders. The pair can move so quickly that by the time I take the trade and write the words about why, the pair has already made a sizeable move. Still, since things are so-o-o-o-o-o slow this morning, with everyone waiting, I guess, for the collective wit and wisdom of the Fed to spew forth this afternoon with their rate decision, I thought I’d point out a potential trade I’m looking at.

Two downtrend lines are converging. One is the longer-term one from the July 23, 2008 high of 215.92. The other is the shorter-term downtrend line from August 9 of this year that had a high of 163.02. The shorter line is at 147.84; the longer is at 147.49. The 147.50/90 area has been a support zone recently and this enhances its potential as a resistance level. Given that the pair is in an overall downtrend, this could prove to be an attractive level at which to sell.

There’s also a descending triangle on the chart. According to Bulkowski in his book, Encyclopedia of Chart Patterns, prices should touch the horizontal base at least twice. I’ve placed three small arrows to show that it has touched three times. Prices should also touch the down sloping line twice and it has done this as well. There’s a little too much white space for my liking but, hey, you take what you can get, and while it may not be definitive, it’s something to note. Bulkowski’s book can be found at Amazon. Encyclopedia of Chart Patterns (Wiley Trading)

If the price does approach resistance, it will be important to examine price behavior at the time. In addition, I again warn about the decreasing liquidity.

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.

AUDUSD—No Humpty-Dumpty

The pair reached a low of .8956 in early morning trading. This compares to the early November low of .8916. The next supports are .8860/87 and then .8750/75. One can’t help but wonder if it’s going to head a bit lower.

It’s important to remember that the pair has been strongly bullish since the late 2008 low of .6007. If the trend is reversing, tbe pair won’t simply topple off the wall, Humpty-Dumpty style, in one great fall. Topping and bottoming are events. Detecting trend reversals is painful at best—all those shorts that stop out on bearish traders—and all around futile behavior at worst—the market can outlast you and all your best-laid plans.

What are the signs it’s weakening and a reversal might be in the cards?

1)Almost ten weeks of sideways behavior that looks as though it’s forming a broadening top
2)Break below the upward trend line on the weekly chart
3)Falling momentum on weekly and daily charts

Now those are all excellent signals. They’re also on weekly and daily charts. In shorter time periods there are going to be many ebbs and flows. Then, of course, you have the ongoing bullish sentiment which means some traders expect the pair to continue to rise, buoyed ever upward by the rotten, despicable state of the USD and glinting commodity prices. The availability heuristic is ever present.

A look at the three-hour chart shows the pair rising off support a bit since its early morning low. One could try a long trade here but I’d keep it very small. The justification is that the pair is near support which means the stop can be tight. In addition, the candle that’s currently forming looks bullish. One concern is the candles are throwing off some upper shadows. Resistance is at .9082, .9129 (short-term downward trend line), .9170, and the downward trend line at .9250.

I’m going to sit this one out. One reason is that I’m looking for rallies to short. Second, I’m winding down my trading for the year. Another reason is the thinning liquidity in the markets as we move closer to the holiday. It’s a good time to stay out if you can bring yourself to do so. You can’t do that, you say? You gotta trade? Then it’s a very good time to work on mental attitude—the best traders learn discipline.

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—still short

It’s not a surprise that EURJPY is weak as well as the Euro. I’ve been short since last Tuesday at 133.03. To say the pair is finding it difficult to rally is to understate the situation. Notice the small candles of the recent attempt. However, it’s in a support zone of 128.86 to 130.40 so it could do so. There might be an opportunity for some support and resistance trades as well. Since I’m short I’ll stay that way for now. 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—finally reversing?

I did buy this pair yesterday at the bottom of its bullish, upward daily channel it has maintained since mid-June. This was at 1.4633. The pair stopped out overnight at -1.4583 for a loss of -50 pips.

Is this a trend reversal? It could be. A daily close below the uptrend line would be helpful and it would confirm the overall weakness. As regular readers know, I use point and figure (P&F) charts in my trading. I want to short the Euro but I lack a good sell signal on my three-hour and daily P&F charts. The hourly P&F chart gave a sell signal last week and I did have a short at 1.4822 that I blogged about December 8 but it has since closed.

In any case, the pair looks weak. Each successive downward move (from November on the 3-hour chart) has been sharp and the rallies have been weak. There could be support at 1.4481, the early October low. The pair is trading at 1.4530 currently (at 7:30AM EST).

Best to wait for a rally to short rather than try and catch a falling knife or wait for a definitive close on the daily chart. Here’s the 3-hour chart:


© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.

My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.

EURUSD—Bottom of daily channel

EURUSD is has finally descended to the bottom of the daily channel. This could be a reasonable level to buy and I am doing so with a small position. I expect there will be some sort of a bounce. This level is also polarity—it has served as both support and resistance for price. If the pair should definitively close below this uptrend line….well, let’s just say that given the overall weakening, I’d be going short.

What’s remarkable on the daily chart to me is the descending level of RSI. I have blogged frequently in the last month that momentum has to drop for price to drop and it finally appears to be doing so.

Obviously, more study needs to be done on the shorter-term charts and I’ll post more, later. 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.

AUDUSD—Weekly chart

On the weekly chart, AUDUSD now seems to be in a broadening formation. I consider these deadly after an uptrend and believe the pair topped at .9408. So, if it’s not going to go up it has to go down, right? Well, yes, but this pair has been strongly bullish and I wouldn’t expect it to just roll over and fall, precipitously. As I’ve said many times, topping and bottoming are events that play themselves out over days, weeks, and sometimes months. Caution is in order as it always must be when trading.

I’ve circled a potential double top on the weekly chart. It’s only potential because price hasn’t broken below the trough of .8945. I prefer to see double tops separated by one or more candles but this isn’t a requirement. Should it break that trough, and also break below the ascending line of the broadening pattern, it could result in a nice move down.

My short from .9152 doesn’t show on this chart because I use a different charting package for longer-term charts than is available in my broker’s platform. However, it’s really taking its time in dropping. Once again, watching the shorter-term charts makes sense. 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.

USDCAD—Coiling

It has been several days since I’ve blogged about this pair. Since mid-October, it appears to be basing, encouraging some bullishness about the pair (as I’ve been) or at least pausing in its downward trajectory if one remains bearish.

The pair is coiling in a triangle formation. Elliott Wave (EW) practitioners believe the breakout from the triangle is in the direction in which price entered it (down in this case). In coiling triangles, however, the breakout can be in either direction. The triangle displays, in a visual sense, the struggle between buyers and sellers as they vacillate and stall before finally resolving on a direction. It becomes more intense as time passes and this is why the triangle narrows. Ideally, a triangle resolves between ½ and ¾ of the distance from its start so this one is getting mature. Perhaps a resolution is at hand.

If it does successfully break out in the downward direction, the move will likely be a large one as the coiling has provided a chance for the pair to store up energy. However, initial breakouts can be false, setting up a bear trap, so the trader needs to be careful. Whether price breaks above or below, throwbacks (if above) and pullbacks (if below) are common.

I’ve blogged in prior posts about the nature of basing. It’s a process, not an event, so prices tend to rise and fall as the pair finds its bottom. Most of my calculations suggest the pair is basing and I’ve posted several trades that have resulted in my earning hundreds and hundreds of pips since October. However, it’s important to maintain neutrality—i.e. not get stuck in your beliefs. Watching price action on the short-term charts is the way to go.

I currently have two long positions, one from 1.0413 of which I’ve taken partial profits at various points, and one I added on a dip to 1.0527 and which is currently profit stopped at +20. The first one is currently up 227 pips and the second, 112 pips as of 7:40AM EST.



© 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.