There’s no doubt a bounce is in the cards and the drop down from the November high of 1.5144 has been steep. I’d welcome a deeper correction before it resumes. However, things are not as clear as they should be for a rally. It has climbed from its low 1.3859 to its high of 1.4026 today. On the hourly chart, though, one can see the momentum, as represented by RSI, has dropped out of overbought status. This is combination with an overall downtrend is bearish. In addition, the recent candle pattern evokes an evening star although I’d have preferred to see the third candle close deeper into the first bullish one. Those two things, along with the overall downtrend and the fact it is stalling at resistance (50% retracement of the drop from Jan. 25 and a round number and prior resistance), is enough to cause me to take another short position. I just did at 1.4003. If it closes above the doji (1.4026), I’m out.
Here’s the hourly 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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