When last I was long Ozzie (last Thursday—eons ago in the short-term trader warped sense of time), it was struggling with a long-term downtrend line. I’m glad I took some partial profits at 70 pips because the rest of the trade stopped out at +9 pips. Then it had an inglorious fall, apparently because of the RBA’s decision to leave interest rates untouched.
That fall provided a buying opportunity yesterday. I went long at .8821. What was there on the chart that supported this decision after seeing the sharp drop?
First, the pair is technically still in an uptrend from March ‘09, although it broke an up trend line from July and has been ranging since October with a spike high in November to .9406. It was nearing the bottom of this range (lows had been .8735 in December and this pair bottomed yesterday at .8781). That was 50 pips away but I believed the December lows were an overreaction and, in any case, that’s not a huge stop when the potential gains are 150 or 200 pips. I don’t expect it to return to .9406, although who really knows, but I suspect there’s more upside before it gives up the ghost, if, in fact, it’s planning on doing that. In addition, the “mood” yesterday was more upbeat. The markets may indeed be only delaying the day of reckoning (I mean equities) but that’s tomorrow’s problem. I trade today. On the 3-hour chart, the pair formed a nice little doji at the bottom. There’s also positive divergence between price and RSI. All good reasons to buy and I just took +75 pips profit off the table and have the remaining position profit-stopped. It could head down again, of course. Certainly, a break of the range would be reason to step up to shorting.
Resistance:
.8930/ 57/63 (recent highs)
.8991 (.382 retracement of drop from min-January)
.9020/33/56 (former daily uptrend line from July ’09, daily 34 EMA, and 50% retracement)
.9093 (1/25 high)
Support:
.8782 (Monday low)
.8735 (Dec. ’09 low)
.8569 (Oct. low)
© 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.
Wednesday, February 3, 2010
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