USDCAD—potential double bottom on daily chart

USDCAD sunk as low as 1.0225 in yesterday’s trading. The prior low in mid-October was 1.0214. If the pair is basing (as I have frequently written here in the past few months) it should not close below 1.0214. Therefore, a long position can have a fairly tight stop. If 1.0225 was the end of a wave two correction then the direction should be up with nearby resistance at 1.0290, 1.0375, and 1.0405.

You could also make a case that there is a double bottom forming since the two lows at 1.0214 and 1.0225 are so close to each other. Double bottoms require confirmation. In this case, confirmation won’t be until 1.0853, the high of the peak between the two bottoms. That’s quite a bit of wait for that and I’d prefer to try a long near the bottom. A definitive break below 1.0214 would be a sign to get out of longs.

Here’s the daily 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.

EURCHF—near trend line

As I wrote Tuesday, I’m still short from 1.4928. My stop is 110 pips above breakeven. The pair is beginning to hesitate and it’s doing so near a trend line from October 2008. Its low was 1.4731 a few days ago. The daily candles have upper shadows as they’ve had all the way down this slippery slope so further lows may be in store. A definitive break of the trend line would probably encourage me to add to my position. There’s more support at 1.4695 and 1.4580. Here’s the daily 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.

GBPJPY—nice drop as well

The yen pairs are all doing poorly and since the yen loves bad news (it gets stronger as things in general get worse) one has to wonder what’s going on. Regardless, I just took partial profits at +204 pips in my short from 149.84.

I wrote yesterday that the pair was coiling in a symmetrical triangle and I was lucky enough to be up when it hit the top. (This is luck, guys, that I was awake but what wasn’t luck was that I knew a triangle was there and didn’t have to think about whether I’d short or not if the pair saw that price level.)

The bottom of that triangle is 147.01 and 147 is also a psychological round number. I may take additional partial profits there. 146.00 is the next support after that. The first resistance is at 147.98 to 148.23.

I think the pair should bounce if it reaches 147 but we’ll see. 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.

EURJPY—now that’s a drop!

I wrote yesterday that I shorted at 132.90 and, just waking up and getting on the computer (why did I sleep late?) I found it hit my profit target for +244 pips. Had I been awake I might have moved the target lower because the pair is clearly weak and it has been in a broad range over the last year of 126.89 to 139.22.

There’s no clear evidence it will drop to the bottom of that range but it would be lovely, wouldn’t it? At least it would if you’re not long in the pair. At a low this morning of 130.30, it has a ways to go. Support is here at 130.50 so I wouldn’t be surprised to see a bounce but there’s no evidence right now it’s going to do so. It’s oversold on both the hourly and three-hour chart.

A case could be made for a head and shoulder pattern on the three-hour chart. I’ve traced it out. If that’s true, the target is 128.66.

If you’re not already short this pair, don’t try to catch a falling knife as they say. Wait, instead for a bounce and short the rally with a tight stop or look for a definitive close beneath 130.50 on at least the hourly chart. If you do the latter, make sure RSI isn’t climbing up from oversold as this could indicate a bounce.

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.

GBPJPY also down

All the yen crosses are weak this morning with a short I took in GBPJPY at 149.84 down 100 pips. I just took partial profits at +95 pips.

This pair is coiling in a symmetrical triangle on the three-hour chart and I just happened to be awake, although dopey, when it touched the top of the triangle this morning. Dopey is OK as long as you trade the chart in front of you as it turns out. Upper shadows on the candles and a lack of oomph in the RSI were signals that helped make the decision as well.

It’s currently in a general price support zone and the candle that just closed with it’s long upper and lower shadows indicates indecision. Additional support is at 148.57, 148.28, 148.07, 147.28 and 147.00. Obviously, if it starts to climb and closes above the triangle, that hints at a long 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.

EURJPY—weak this morning

After trying a long in the pair this morning and getting stopped out (-30 pips) I shorted at 132.90 as it broke down through support. It’s down 59 pips as I write this and I’ve moved my stop to just above breakeven. It’s at a far stronger support level now at 132.30 so I may lighten my position a bit. The near term potential for this pair is 131.42, the bottom of the range since December on the three-hour chart, and then much lower if you look at the range it has been in since last spring. I’ll make sure to have my deposit slips handy if that happens. 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.

USDJPY—negative signs abound

My long trade in USDJPY (from 91.15) reached a high of 92.04 early this morning (EST) and I took partial profits at +70 pips. I’m glad I did as it has since retreated a bit to a low of 91.66. I’m profit-stopped on the pair so I’m not too concerned about its behavior except to note that I may go short if it breaks definitively below 90.73. That would also be just below the uptrend line from late November. Unless it does, it’s still range-bound.

On the three-hour chart, the pair could be starting to form the right shoulder of a Head and Shoulder (H&S) pattern. It’s a bit too early to tell. There is also negative divergence between price and RSI. Both these things are bearish which is in line with the bearish sentiment surrounding this pair.

Another negative sign is that at least so far the retracement from the January 7 high to the recent low on the three-hour chart has been just at .382. If this is all it can achieve, then the up move is weak.

Resistance levels are 91.80, 92.50, 93.21, and 93.77. I’d probably take more profits off the table at each of those levels since sentiment is so bearish.

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.

Can you trade theory?

Someone sent me a comment that read, apropos of nothing it seemed, “If the Forex condition is at bull market, investors should start to acquire positions. Careful analysis using Dow Theory is needed to evaluate the movement of the trend.”

I happen to like Dow Theory. However, for a technical trader such as me, it’s only one piece of evidence. In addition, you can’t trade theories. You trade the chart in front of you, especially if you’re a short-term trader. It is important, though, to know the trend of the market in the time frame you’re trading as well as above that time frame. Regular readers know I routinely look at monthly, weekly, and daily charts even if I’m trading off the three-hour chart.

Dow Theory is a theory of price movement that’s concerned with trend direction. It doesn’t concern itself with forecasting. Its goal is to determine changes in the primary trend of the market. This is another reason it’s not useful alone for short-term traders who are in and out of the market. The primary trend is one that can go on for years but within the primary trend, it’s possible to take successful counter-trend trades as the market corrects or consolidates.

The theory has six major tenets. These are:

1) The averages discount everything
2) The market has three movements—primary, intermediate, and minor.
3) Volume must increase as the trend develops
4) Closing price is the most important
5) Averages must confirm
6) Trends are assumed to persist until there is clear evidence otherwise

You can see why it’s difficult to apply this wholesale to the Forex market. First, the Forex market doesn’t have averages such as transportation, utilities, etc. We also don’t have volume. Finally, closing price is undefined in a 24-hour market. Many people use 5 P.M. EST but others use midnight.

There are three movements in every market—primary is the longest term and can last for years; intermediate can be three weeks to three months, and minor can be one to three weeks. There are also percentage retracements one can apply to determine this. It is important to assess where a market might be at any given time. It’s also true that trends persist and that the trader needs clear evidence that they’ve changed. This is why I often write that a pair is in an overall uptrend or downtrend. It helps place price action in context.

What I’d say to the reader who wrote that we should acquire positions at the start of the bull market is, “Not just yes, but hell yes!” That’s what everyone wants to do. However, it’s also very difficult, in part because of the need for clear evidence the trend has changed. Topping and bottoming are processes as I’ve written many times. In addition, the market is often not trending at all but in consolidation or congestion mode. Dow Theory doesn’t help at all then.

We have a rich amount of material to draw upon as technical analysts and we should make use of it. Everyone should understand Dow Theory. However, when it comes to trading, trade the price action that’s in front of you on the chart and practice ironclad discipline. As my monthly results show, you can be very successful doing this alone.

© 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.

AUDUSD—topping?

On the weekly chart, AUDUSD looks as though it may be topping and it has never regained its November high of .9406. On the other hand, the bounce up from the last uptrend line was a sharp one so clearly bullish sentiment continues for this pair. Overall, it has broken two trend lines. The third one may be significant support as a horizontal support line intersects it at .8975. If price reaches that level, a long position might be a good way to go. It will very much depend on price action on the shorter time frames.

I’m leaning, though, towards shorting this pair for a few reasons. Note on the weekly chart that RSI dropped to a low not seen since March 2009. Even with the holiday fizzle, this is dramatic. In addition, as I wrote on January 4, I believe that the .9406 top completed a primary wave two in this pair and that we’re beginning the third wave down. What a ride that will be if it’s true. Honestly, I don’t wish that on anyone who just went long but why would you be going long at this level? The other reason is that gently rounding top that you see on the weekly top—it’s as though interest is just slowly drying up. There are rumors, too, that commodity prices may be easing so this pair, being a commodity currency, would also ease back.

A definitive close below yesterday’s low of .9171 may be the time to short since I didn’t short at Monday’s high.

Here’s the weekly 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.

Yen Crosses

The remainder of my short in EURJPY stopped out at +30 pips profit. The remainder of my short in GBPJPY stopped out at +25 pips profit.

I’m still long USDJPY from 91.15. The low of its range is 91.60—yesterday the low was 90.73, still inside that range. It bounced from there but only achieved a high of 91.49 early this morning before stumbling. I was planning on taking some profits off the table at 91.80 since there is strong resistance there because of Fibonacci retracement, polarity, and the 139 Exponential Moving Average (EMA). On the rather messy daily chart below, you can see that it might be starting to coil inside a symmetrical triangle. If so, I’d probably close the trade if it achieves 92.50 or so.

Sentiment is very bearish on this pair so a definitive break below 91.50 would be a reason to stop and reverse.


© 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.

USDJPY—at support

USDJPY, which has been in a range on the three-hour chart since December, just touched the bottom of that range at 91.10.(There’s additional support at 90.60.) This is a safe place to take a long position, given that the pair has been in an uptrend since November. I went long at 90.15. However, overall the pair is in a downtrend on the daily chart. What should also warrant caution is the failed breakout above the daily downtrend line. The pair is oversold on the hourly chart and just dipping into it on the three-hour chart. 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.

EURCHF—new low

I still have a small position left in this pair (from 1.4928) and my stop is now 100 pips above breakeven. I’ve taken much of this trade off the table at various profit points. It has been dropping since mid-December to a low yesterday of 1.4731. It hasn’t seen prices this low since last March. Now that the Swiss National Bank seems to have little interest in intervention, it’s possible it could drop to its prior lows of 1.4580 or so. There’s significant support in the 1.4695 area so a bounce wouldn’t be out of the question. Here’s the daily 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.

EURJPY—a little messy

I shorted the pair this morning at 132.94. My reasons were that the pair is weak and has been in a downtrend since October. On the three-hour chart, a hammer formed after a brief downtrend but the next candle closed near its low. This also hints at weakness. Finally, both price and RSI dropped below their recent uptrend lines. One problem is that there is an uptrend line from mid-December coming in at 132.61. If it can get below this then the next support is at 1.3234/27 and then the recent low of 1.3126. The 1.3234 is the low of last week’s significant hammer. If it doesn’t break the uptrend line, it will likely be a stop and reverse for me. It may spend another several months in last year’s broad range of 126.89 to 139.22 from last year. 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.

EURUSD—200 SMA

On the daily chart, the 200 SMA seems to be providing support for this pair since it bounced off it at 1.4407.

Last week I wrote about the bear flag on the daily chart that is an upward sloping channel for those who prefer to see the glass half-full. The top of this is now at 1.4560. Regardless of what you call it, the pair needs to break above it in order to suggest buying. Conversely, a break below the bottom of this would suggest selling. While I am leaning towards shorting this pair, I prefer to wait a bit to see if I can find a clearer signal. One thing I’ll be watching is momentum. Here’s the daily 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.

No trading for me today

I'm traveling so can't trade the market. I hope this isn't a day of moves to end all moves.