My long position from 1.0256 hit its profit stop yesterday at 1.0526 (whimsical little stop point) for +270 pips. Whaaahh! I was hoping the pair would go on to do grand things and I'd have this little position left from the start of what I still believe is wave three. Oh well. If it meant that much to me I could have left the stop at breakeven. My two tiny positions at 1.0593 and 1.0620 also stopped out at 1.0570 for -23 and -50 pips, respectively.
I wrote yesterday that if the pair went below 1.0547 (the Jan. 25th and Feb. 3d low) there may be a much deeper correction in the making, possibly down to 1.0470. It did and touched a low of 1.0480. Is that it? Will it now begin to climb again? I opened two long positions at 1.0516 and 1.0524. They already have a breakeven stop.
What's my evidence for this unbridled enthusiasm on my part? It's really not unbridled but I still believe this pair is basing although yesterday's drop was a bit unsettling. Until it drops below 1.0208, however, I can't throw out months of analysis. Still, three daily bearish candles off the high of 1.0781 are nothing to sneeze at. The drop below the Feb. 3 low of 1.0547 was stinky. Offsetting these somewhat (for me) is the fact that RSI didn't also take a precipitous drop on the daily chart and seems to be holding. On the one- and three-hour chart, the candles show a harami pattern at the bottom. On the three-hour, it's a harami cross (long black candle followed by a doji) and is considered a strong reversal signal. I actually bought before I had this piece of evidence based on some clues on much shorter-time frame charts but I found this to be confirmation for the earlier decision. Also, you can believe I wasn't going to stay in if it dropped below 1.0450. Always use tight stops.
For now, anyway, the pair seems to be recovering. We'll have to see what today and the weekly close brings.
1.0547/53/57 ( Feb 3 low; downtrend line from Sep '09; Jan 28 low)
1.0771/76/81 (fib confluence and recent highs)
1.0848/53 (November highs)
1.0988 (Sept '09 highs)
1.0480 (Yesterday's low)
1.0407 (Nov. low)
1.0367 (Dec. low)
1.0208/25 (If it breaks this then USD bulls will be most unhappy)
Here's the three-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.