Tuesday, January 5, 2010

AUDUSD—ranging for now

After a healthy climb during morning hours (EST) yesterday, AUDUSD is in a narrow range of .9099 to .9163. On the three-hour chart, RSI is still overbought but on the one-hour chart, it has dropped below it a bit. For RSI, overbought is usually considered greater than 70 and oversold less than 30.

When I blogged about the weekly chart yesterday, I noted that I consider the pair had completed a second wave at .9406 so it should be beginning a third wave down. Intellectually, it’s a bit hard for me to swallow since I think things in general look as though they’re improving in the global economy (and if they’re not, my oh my we’re going to have an interesting year.) One could say, then, that I’m falling into the bullish sentiment that has accompanied this pair for some time. Still, the chart is the chart, and I can only trade the chart the way I interpret it. As a result, I took a small short yesterday at .9127 which is slightly underwater as I write this at minus 13 pips. Now that it has retraced more than .618 of the recent downward move, I’m a little antsy about it but I’ll stop out soon enough if it was the wrong trade to take.

There is some negative divergence between price and RSI (price going up; RSI going down) which is bearish.

The long lower shadow of the doji on the hourly chart seems to hint that the pair is rejecting lower price levels. The low of that candle was .9099—a minor support zone. We’ll just have to see where it goes. If I’m stopped out, I may reverse depending on candle behavior. One reason (in addition to the bullish sentiment) is that there’s an ascending triangle formation. This is present, with and without the doji. Ascending triangles often break to the upside.

Here’s the one-hour chart:

© Dianne Fecteau, 2010. 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.

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