Tuesday, January 19, 2010

EURUSD—nudging out of bear flag

On the daily chart, EURUSD has been in a bear flag for the last 18 trading days. As I’ve written before, you could also see this as an upward channel if it makes you feel better about the world. This morning when I finally pulled myself out of bed, I see it’s nudging the downward line of that flag.

I went short at 1.4325 but I’m a bit skeptical of the pair because Euro traditionally hems and haws about dropping. Another problem is that it’s at the 200SMA (simple moving average) on the daily chart and this has been serving as support for the last couple of weeks. As a result, I’ve already moved my stop to breakeven plus one (plus one? What am I, scraping for any sou now?) while it’s 25 pips ahead. On the other hand, RSI has broken below its uptrend line, seemingly followed by price. In addition, you’ll notice that RSI, which reflects momentum, never rose very high during the last price rise.

The pair needs to close definitively below the flag to make it a safer trade. Even then, I wouldn’t rule out a pullback to the flag line before it gives up its bullish ghost. If it gives up the ghost….Nothing is certain in this world except death and taxes after all. Well, those and the on-going stupidity of government agencies who believe they can convince us that by taking away our freedoms they’re making us more secure. I’m talking to you, CFTC and TSA and SEC and…..the list is way too long. Here’s the daily 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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