Euro dropped to a low of 1.3864. I bought two positions yesterday, one at 1.3885 and one at 1.3883 as it rose from the low. The drop meant the E leg didn't completely form, not unusual for a pair getting ready to thrust upward. It broke out of the triangle at 1.3985 and its high so far is 1.4042. This however is not good enough to go to the bank with. It needs to clear 1.4080 (the prior high) and then, more important, 1.4159, the Oct. 15th high. This brings it near 1.4180, my 45° internal trend line on my Point and Figure chart.
If it clears those resistance levels then, as I wrote yesterday, the monthly chart shows a downtrend line coming in around 1.4535. 1.4448 is the price target for the triangle. This target is around the .618 retracement of the entire move down from 2008 which is at 1.4450. A close above that monthly downtrend line would be one piece of evidence that this correction is over and one might forecast higher highs from there.
Until it clears resistance at 1.4159, there's still a risk the breakout from the triangle is a fake out. This can be tricky to gauge. A retest of the broken line would be good but if it makes an hourly close well back inside the triangle, I'd be suspicious.
For my current two trades I have a profit stop. If it retests the trend line of the triangle I may add a position.
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.