AUDUSD formed a hammer candlestick after its nice rally yesterday. Since the hammer came after a downtrend and at support it is a good sign of at least a temporary correction upwards. As I blogged yesterday, I went long at 8093. I didn't have the hammer at that point to guide me but the support level was significant and I had the daily speed line to validate that support as well as positive divergence on the three-hour chart.
The high so far today has been .8317. This is near resistance of .8366 so there should be some sellers coming in. Note, too, that in addition to the price resistance there is a short-term downtrend line coming in from earlier this month.
Should it break upwards through this resistance, the next resistance levels are at .8499, .8525, .8578 and .8610. Support is at .8310, .8189, .8067, .8000, .7932 and .7830. Notice that while the resistance numbers are fairly close together, support numbers are not so if it begins to fall there's not a lot to catch it. The key is to watch momentum through an indicator such as RSI around the resistance levels. Ideally, you want to see strong momentum. On the three-hour chart you can draw an uptrend line under momentum as well as price which is good. If it breaks below the momentum uptrend line and price violates its trend line, then closing or reducing longs and possibly going short is a good strategy.
Here is 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.