Monday, March 15, 2010

EURJPY—malingering

Last we left this pair there was an evening star on the hourly chart and I finally went short at 125.03 despite the momentum not really accelerating to the downside. It has since dropped 63 pips (as of 6:10 AM EST) but it seems to be doing so reluctantly. Sometimes when pairs malinger just below a resistance level, it means they're getting ready to get through it. I have my stop set at +10 so we'll see what happens. Last week there were plenty of mixed signals so I hope we're not in for another week of that.

On the three-hour chart you can see a triangle forming. In EW speak this is bullish as price breaks out upward. It could also be interpreted as a bull pennant. Offsetting this is a somewhat bearish divergence. In addition, if you take .382 of the most recent move down (from 134.38 to 119.66), you have 125.26 so this adds to the resistance it found at the prior top.

Looking at the bigger picture, the pair climbed from Jan to June 2009 but the subsequent correction has eroded that rise quite significantly. If one sees this pair as moving into a horizontal range, then the range extends down to 119.95. A short from the top here could be quite lucrative.

Support is at 124.08, 123.17, 122.59, 121.89 and 121.47. If the pair clears the top of the triangle at 124.80, it could have a fairly easy climb up to 126.39. Next would be 127.02 (50% of move down from 134.38 to 119.66).

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.

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