EURUSD—bear flag on daily

On the daily chart, Euro touched the top of a channel at 1.4485 this morning. This channel could be a bear flag, a pattern that often forms during a decline, giving everyone a chance to catch their breath before the decline resumes. A bear flag could result from profit taking after the rise from the Euro’s low last month of 1.4217—that’s not a lot of profit but the explanation sounds reasonable, right? This is why I usually don’t ask why. Many explanations sound reasonable, but who really knows why these minor (if it is minor) fluctuations occur? If it is a flag and it breaks below, the length of the flag to date suggests we could see a low of 1.34. Hooah!

In any case, 1.4485 was a reasonable place for a short if you’re bearish on the Euro. I missed it and while I might go short even now at 72 points below that point, a look at the hourly chart suggests waiting. The reason is that it looks as though it might be at the bottom of a short-term range and so, perhaps, I’ll get another chance to short at a better price. A break above that range might suggest a buy. If it doesn’t go back up, will I short? Yes. I’d wait for a definitive break below the flag on the daily chart that I wrote about above.

Here are the hourly and daily charts:




© 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.