Dropping down, way down, from the monthly analysis, one can see that on the three-hour chart (and on the daily) there is a symmetrical triangle forming with leg D completed. The Elliot Wave people can bleat all they want about Euro being ready to turn down but a triangle in their view precedes breakouts in the direction of the prevailing trend. Which is up.
In my monthly analysis I wrote about buying a pullback. If I did this I'd want to enter around 1.3762 (the bottom of the triangle to 1.3807 (the recent low). One could also make a case for entering around the current levels because price is at a fib confluence point; however the risk is much higher (stop should be below the triangle but you could set it tighter at 1.3880.). The potential loss has to be weighed against potential gains (risk reward). Conservative traders would wait until the breakout above the top of the triangle with the stop below the downtrend line. My personal strategy is to see if the pair can hold above 1.3890. If it does I may risk a small long. Otherwise, I'll re-enter as it approaches the bottom of the triangle with a stop and reverse in place.
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.