Friday, May 28, 2010

Liquidity decreasing

Liquidity is decreasing as the long (USA) Memorial Day weekend gets ready to begin. Monday will be light as it's a national holiday.

Charts don't move markets

One of the things I heard Larry Williams say at the MTA syposium last week is that it's important to remember that charts don't move markets. This is true. Charts do many things—provide a visual price history, reflect patterns, diplay volatility—but they aren't the reason that prices go up or down. Things such as central bank policy (i.e. the Swiss central bank intervention we've seen in the EURCHF), international trade, and sentiment (is there anyone anymore who loves the Euro?) are just some of the factors that influence FOREX.

What the charts do, though, is provide a straightforward way (usually) for the trader to determine entries and exits. They provide clues as to market direction even though there are no guarantees the market will move in that direction. However, as you see if you read my blog regularly, trading these clues can be profitable. If you enter when the probability is greater that the market will move a certain way and if you use tight stops, charts are wonderful things.

© 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—resistance

The pair reached a high of .8551 before stumbling. This is close to 50% of the slide from .9078 to .8067 so it's not surprising the pair would fall back a bit as buyers take profits off the table. I still have four long positions—the original from .8093 and .8390, .8436, and .8443. Only three show on the three-hour chart since the triangle for .8443 covers the .8436. All, of course are profit-stopped at this point.

I still believe it's possible the pair can get to.8640 but momentum is the key. RSI showed the pair becoming overbought and dropping out of that on the hourly chart but, so far, price hasn't aggressively followed. Adding to longs if the price retreats to the uptrend lines is probably OK as long as tight stops are used.

Resistance is at . 8551, .8578, .8610, .8640 and .8700. Support is at .8463, .8375/62, .8310, .8285, .8163, .8067, .8000, .7932 and .7830.

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—rally continues for now

As of yesterday afternoon I had six long positions since I kept adding (or pyramiding) on the way up. These were from from 1.2165, 1.2208, 1.2254, 1.2283, 1.2296, and 1.2309. As of this morning, only the first three are left, the others having profit-stopped out at +34, +30, and +14 pips respectively. I also took partial profits on the position from 1.2165 for +216 pips.

Now what? After touching 1.2453, the pair is running into a bit of resistance and has fallen back to the breakout line (drawn on the hourly chart below). If it begins to have a series of closes inside the the ascending triangle, then Euro's little rally may be finished. However, false breakouts are common with these patterns so it's difficult to trade on this one pattern alone. More interesting is the prior resistance at 1.2383 which is where the pair currently is (as of 8:26Am EST) and the uptrend line, currently at 1.2275 which might be a good place to add another long. Momentum continues to look good as reflected in RSI and as long as that uptrend line doesn't break then the Euro might get to additional highs.If it can definitively scale 1.2453 (the level of the downtrend line from May 10 highs) then one could expect to see 1.2574. Should the pair start to fall again, it's possible one might see new lows today.

Resistance is at 1.2453, 1.2574/99, 1.2673/99, 1.2740 and 1.2803. Support is at 1.2383, 1.2204, 1.2132 (50% of Euro's lifetime high/low or 1.6038/.8225), 1.20000 (psychological), 1.1826, 1.1641 and 1.1432.

Here's the hourly 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.

Thursday, May 27, 2010

AUDUSD—update

I just took partial profits on my position from .8093 at +402 pips. I have three other long positions as well from .8390, .8436, and .8443. The pair touched .8507 a few minutes ago an is faltering which is to be expected. It's also overbought on the hourly chart and I suspect there may be a bit of a pullback from here. However, I'm more confident that the pair can reach .8640 before getting into real trouble so may add to longs on another pullback, especially to the short-term uptrend line.

Here's a 15-minute 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—update

Here's a 15-minute chart that shows how I'm adding to position as the market continues up. I don't follow this approach a lot but it can be profitable in the right market conditions. Right market conditions are when a market is reversing, even if only in a corrective rally. My positions are long from 1.2165, 1.2208, 1.2254, 1.2283, 1.2296, and 1.2309. On each buy I move stop as quickly as possible to breakeven. These all now have their stop set at various levels of profit.

At this point the market may retreat back to the short-term downtrend line at 1.2333 where I'll study price action and possibly add another position. The rate of ascent is very steep so a pullback is likely.
If the pair breaks 1.2388, one might want to consider going long although momentum will be key.

Here's the 15-minute 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—corrective rally may be starting

I had an error in my blog yesterday in that I said I shorted at 1.2387. That was incorrect; I shorted at 1.2345. The chart showed the correct price. In any case, that short profit-stopped out at 1.2244 for +101 pips.

While I still believe the Euro is weak, I tried a long at 1.2165 late yesterday afternoon. I took partial profits at +70 pip. I went long because momentum didn't seem to be building for further drops. In addition, it looked like the pair was basing. Finally, it was time for some kind of rally after all and I could have a tight stop. The Euro advanced to 1.2343 before falling back to 1.2204. That's a stiff retracement and would seem to indicate the up trend is not too strong. However, momentum looks good and the overall move from May 25th looks corrective. On the hourly chart it looks as though the pair has completed an ABC correction. As a result, I just added a long position at 1.2208. Believe me, this is where the ability to have tight stops helps you enter a trade. I've just moved that stop to breakeven and I am more than happy to reverse and go short if need be.

Resistance is at 1.2343, 1.2388, 1.2416, 1.2574/99, 1.2673/99, 1.2740 and 1.2803. Support is at 1.2204, 1.2132 (50% of Euro's lifetime high/low or 1.6038/.8225), 1.20000 (psychological), 1.1826, 1.1641 and 1.1432.

Here is the one-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.

AUDUSD—fighting resistance

AUDUSD has continued to trend upward to a high of .8418 this morning but has been fighting resistance here. I'm still long from 8093. I took some partial profits at +296 pips. A clear break upwards of .8418 would cause me to add to my position. I have price targets for the pair that indicate it could reach .8640 but it will have to fight to get there. There's still risk aversion out there.

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.

Resistance is at .8418, .8499, .8560, .8578, .8610 and .8700. Support is at .8310, .8285, .8163, .8067, .8000, .7932 and .7830.

I'll continue to watch momentum on this pair from the point of view of it breaking its uptrend lines under price and RSI. In addition, it RSI becomes overbought on the hourly chart and then drops from overbought (over 70), along with faltering price action, it will probably be time to at least lighten a long position and possibly to close it and go short.

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.

Wednesday, May 26, 2010

EURUSD—failed rally

Euro rallied to 1.2388 yesterday (resistance) but has fallen back, touching a low of 1.2248this morning. The remainder of my short from 1.2387 profit-stopped at 1.2337 for +50 pips. I shorted again yesterday at 1.2387 and took some partial profits earlier this morning at +65 pips.

The one-hour chart shows the Euro broke beneath both a price and RSI uptrend line so the pair is still weak. While I think sentiment will ease up at some point, it doesn't seem to be doing so yet and the pair can't get a good rally going to save its life, it seems. I'm getting ready to add another short if price so indicates in the next few minutes.

Resistance is at 1.2301, 1.2388, 1.2416, 1.2574/99, 1.2673/99, 1.2740 and 1.2803. Support is at 1.2248, 1.2135 (50% of Euro's lifetime high/low or 1.6038/.8225), 1.2127, 1.1826, 1.1641 and 1.1432.

Here is the one-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.

AUDUSD—daily hammer yesterday

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.

Tuesday, May 25, 2010

May High/Lows

Here are the high/lows for May to date. An asterisk indicates a new high or low for the year:

AUDUSD: .9275/.8067*
EURGBP: .8808/.8428*
EURJPY: 125.45/108.83*
EURUSD: 1.3253/1.2144*
GBPJPY: 144.92/126.73*
GBPUSD: 1.5283/1.4228*
USDCAD: 1.0855*/1.0101
USDCHF: 1.1696*/1.0924
USDJPY: 94.99*/88.01*
USDTRY: 1.6435*/1.4884
USDZAR: 8.0842*/7.3751

AUDUSD—found support?

AUDUSD touched .8067 this morning before rallying slightly. Based on the support level and the existence of positive divergence on the three-hour chart, I bought at .8093. I took some partial profits at +65 pips. After gettting to .8179 (so far today), sellers came in so it's fallen back a bit. There's also a daily speed line coming in here. If it gets through this resistance, the next resistance levels are at .8310, .8366, .8578 and .8610. Support is at .8067, .8000, .7932 and .7830.

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.

EURUSD—back to the lows

Last week, May 18th to 19th, the Euro hovered around the 1.2144 low; then, after a brief rally to 1.2673, it has slumped back down to a low today, so far, of 1.2178. The outlook from many analysts is that further lows or at least the pair hanging around in the current lows is indicated for the near future.

I shorted yesterday at 1.2387 and took some partial profits earlier this morning at +175 pips.

The three-hour chart shows a slight uptrend but it's coupled with slightly negative divergence. In order to maintain this rather tenuous uptrend line, the Euro needs to stay above 1.2168. So, if you like gambling, you could go long with a very tight stop of below that point. Since I'm short and in profit, I obviously can't do that. I probably wouldn't do it even if I could.

Why? For one reason, there is a tremendous amount of sentiment against the Euro. Lots of traders see themselves as contrarians but as Humphrey Neill pointed out, most of the time the crowd is right. It's at turning points that they're wrong. The question, of course, is how you can determine a turning point. I'll cover that in another post. But for now, it seems safer to continue to short rallies or short on a clear break of 1.2144. Another reason is that the rally to 1.2673 last week looked corrective. You can see three waves on the three-hour chart, an ABC pattern. Finally, there's negative divergence on the three-hour chart.

This isn't to say the pair can't bounce. But if it does you want to watch momentum and short. Resistance is at 1.2289, 1.2377, 1.2444, 1.2574/99, 1.2673/99, 1.2740 and 1.2803. Sellers will probably be salivating at those last few levels. Support is at 1.2178/68 (morning's low and the uptrend line), 1.2135 (50% of Euro's lifetime high/low or 1.6038/.8225), 1.2127, 1.1826, 1.1641 and 1.1432. So there's quite a bit of room on the downside should it continue to fall.

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.

Monday, May 24, 2010

What do you want to see in this blog?

I'm curious as to what you, the readers, find useful in this blog. Could you email me at dianne@kendiacorp.com and let me know? Or you can post a comment to this blog as an anonymous reader. If I'm going to keep blogging, I'd like to know that what I'm blogging about provides some value to people. Thanks.

GBPUSD—weekly chart

GBPUSD has still not dropped to its 2009 lows and it looks as though it’s trying to base with the doji formed on the weekly chart. The low of this doji is 1.4228. A break below that does bring those 2009 lows into sight and one could short the break with a tight stop. It’s worth noting that the pair has dropped below the weekly close of 1.4460. So far this morning it has also broken below a short-term uptrend line. Finally, as I blogged last week, the pair has broken below a lon-term uptrend line on the monthly chart. All of this points to continued weakness and shorting rallies or a clear break below 1.4228 is the way to go.

Support is at 1.4229, 1.4110, 1.3826, 1.3654, and 1.3503. Resistance is at 1.4440/60/76, 1.4529, 1.4640, 1.4703, 1.4851, 1.4889, 1.4918, 1.5055, and 1.5173.

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.

EURUSD—Weekly chart

It still looks reasonable to assume we’re in a wave three on the weekly chart, which implies a drop to below 1.1432. As I wrote last week, EW theory states that wave three can’t be the shortest wave. Wave one was from 1.6041 to the 1.2329 low for 3,712 pips. Wave two ended at the November high of 1.5144. Therefore, 1.5144 minus 3,712 pips is 1.1432 so this implies that wave three would go beneath this price. You could also make a case for being in wave C and, if so, there is room for more downside.

You can’t, though, rely on any one thing by itself, including Elliott. In addition, moves are never straight down or straight up. So what the weekly view does is provide a context, a very large context, into which to place analysis of the smaller time frames. If we look at it this way, and further consider the Elliott perspective, then one would want to short rallies.

Another thing to notice on the weekly chart is the longer term trend lines. The uptrend line, recently broken, that’s coming in from 2005, will now possibly serve as resistance. This is at 1.2769. Should it break above this line, back into the coiling formation then the downtrend line is at 1.4805. This also supports shorting rallies, especially at the uptrend line but also should it reach the downtrend line.

More support for shorting is provided by Fibonacci confluence zones on the shorter time frame charts. These levels are from 1.26 to 1.2740.

Finally, there is a long-term magnet line in the 1.25 area that I’ve blogged about in past postings.

The Thursday high was 1.2673 and the pair has fallen back from this reaching a low of 1.2365 so far today. If you missed that short (and I did as I was at the MTA symposium late last week and not trading very much at all), then you can either watch carefully as it approaches 1.2296 and try a small long (with tight stops) or wait until it rallies again to short.

Why not just jump in and short anywhere? You could but it’s risky because the Euro has fallen far and fast. It’s too much, too soon and I suspect a rally will take hold at some point. These are volatile times so there will most likely continue to be wide swings in the coming week. Use tight stops.

Support is at 1.2296, 1.2229, 1.2144, 1.2127, 1.1826 (the Feb. ’06 low) and 1.1641. After that would be the 1.1432 mentioned above and lower. Resistance is at 1.2377, 1.2444, 1.2574/99, 1.2673/99, 1.2740, 1.2803, 1.2880, and 1.2963

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.