USDCHF—basing

After dipping to a low of .9799, the Swissy has regained its short-term uptrend line on the hourly chart (not shown) and, unless it drops quite a bit further today, is on track to have the same low as last week at .9726. This is more evidence that it's basing. Below .9726 , of course, would hint at further lows. Market action is a bit sluggish, in part due to the thinning holiday markets. As I pointed out the other day, the pair is holding the uptrend line from the hammer low of .9463 in October and RSI momentum looks good on the longer-term charts. Nonetheless, one must be careful to keep stops tight on any longs. There's a chance that pattern on the weekly chart could be a bear flag which, if it played out, would be heart-stopping. Unless you were short. Then it would be joyful.

Here's the weekly chart. My trades don't show on the monthly charts since I use a different charting package for weekly and monthly charts.











© 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.

EURGBP—correcting

EURGBP looks corrective and I expect it may get up to .8552/95 before it heads down again. This would be near a fib confluence and would complete a corrective C wave. I've gone long at .8392. The low of .8361 should hold for there to be an expectation of further moves up within the channel on the 3-hour chart. Below that is support at .8204, .8068 and .7856.

If it does get to those highs then I plan to reverse.

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—still choppy

Euro is still choppy but pushing downward with a low so far of 1.3168. I'm short from 1.3232 and don't expect the pair will be able to gain above 1.3323 (just a bit over the high I expected yesterday). There's a chance the chop could continue over the next day or so. We'll have to see. Thinning holiday markets are having an impact.

© 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—looks corrective

So far, the best that that AUDUSD has been able to do was a high of .9965 on Tuesday, only a few pips above the Nov. 22d high and failure point of .9954. The August, 1982 high was also .9965 (for what that's worth). The pair is hovering near the.618 retracement of the move from 1.0183 down to .9537. Price action since the beginning of the month looks corrective but as I've written in prior posts, the overall trend is still up. Last week's candle was very bullish which hints that the .9537 low may hold.

Immediate support is at .9747. If this breaks then it would show weakness. Next support is at .9537/07 (prior low and daily 100 SMA) and .9496 (where the C wave would equal the A wave). These would have to hold as it's likely sellers would pile in otherwise for potential lows down to .9125 (50% of the move from .8067 to 1.0183) and possibly .8770. On the upside, until it definitively closes over 1.0000, there's little to discuss.

Overall, I'm leaning bearish but of course price action will define whether I enter long or short. We're also getting into thinner holiday markets so moves might be more extreme. Caution is necessary.

Here's a 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.

USDCHF—monthly

The Swissy is holding the uptrend line from the hammer low of .9463 in October. Support is at .9741 (12/5 low) and .9631 (the uptrend line from the hammer low). A close below .9463 would be devastating to the bulls but one could make a case for far lower than that if you use an Elliott Wave argument on the long-term monthly chart. You'd have to go back to before 1980 to start the count but what is most relevant is the triangle formation price recently dipped below. EW theory hypothesizes that prices thrust out of triangles and in this case that price would be significantly lower than what we've seen. Notice though that I use the word "hypothesize." EW has no proven studies and in fact there haven't been any so hypothesis is really putting too nice a spin on things. Regardless, that's the theory. If one accepts that we're in wave (C) then a projected price for (C) would be .7445 if it is .618 of (A). Gulp. Do you think that would satisfy the baboons practicing the banana republic economics of our administration? Probably not, but I'd certainly try a long at that price. 

That's one way of looking at things. However, in addition to it being only one piece of evidence, one can make an opposing argument rather easily. For example, look at RSI. It's a nice uptrend line. Even better, since the 2008 low, RSI hasn't gone into oversold (below 30). It hasn't dropped below 37 on the price dips. That's important. One would expect the much despised currency to have significant downward momentum. It isn't doing that. It also means there is positive divergence. There has also been positive divergence on the daily chart. RSI levels and divergence is only one piece of evidence as well. So is there anything else? One could argue that the pair is basing although the pullback from 1.0066 was a bit steep. On the USD Index chart, one can use an EW count on the monthly chart to show that the pair is beginning a third wave up. This would result in USDCHF going up as well.

All this is to say, that one has to examine several pieces of evidence to determine a trade direction. Most readers of this blog probably don't trade off monthly or even weekly charts because the stops have to be wider in most cases. But one should be aware of the overall picture even if trading is carried out on a daily (or shorter) chart.

Here's a monthly chart. My trades don't show on the monthly charts since I use a different charting package for weekly and monthly charts.











© 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—chop

Euro is chopping around this morning. It may be in the final leg of an ABC correction on the hourly chart which could take it to 1.3318 or so. I was profit stopped out of the remainder of my long at +100 pips. There are some mixed signals so I'm staying out for now. I'll see what it does if it approaches 1.3318. Any gains above that will most likely be capped by 1.3450.

© 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—chop

Euro is chopping around this morning. It may be in the final leg of an ABC correction on the hourly chart which could take it to 1.3318 or so. I was profit stopped out of the remainder of my long at +100 pips. There are some mixed signals so I'm staying out for now. I'll see what it does if it approaches 1.3318. Any gains above that will most likely be capped by 1.3450.

© 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—trade analysis

I'm going to trace back over my trades in the Euro from last week in the hope that someone might find this interesting.

When I wrote about Euro early last week, I was short from 1.3638. I took partial profits of +580 pips on Tuesday and wrote, "Only above 1.3317 would I expect to see a potential move back to the 1.35 area." I also added that I didn't think that was likely (haha as subsequent events proved). By Thursday I was seeing corrective action. Euro rose to 1.3217 and then sank to 1.3060. I noted that it cleared the 1.3150 resistance level and that it had closed four consecutive hours above that resistance.

This price action put me on alert that the Euro might rise further, especially since it had only missed my profit stop by one pip. What's interesting, though, is that I didn't want to believe this. One reason was because of what my regular readers know—I tend to stay in winning trades letting profit stops be hit rather than get out of them. This can be highly profitable, of course, and has been for me. But it can also mean I don't always get out when I see clear signs of change. Who wants to take on risk going the other way when the market has paid you so well for your original analysis?

The other reason behind my not wanting to believe things were changing is that I had faith in my original analysis. I spend many hours studying the market and use a variety of techniques to arrive at my conclusions. I always look for validation—at least three pieces of evidence that support my conclusion. I also go through a "what if I'm wrong" analysis and try to find evidence that refutes my conclusion. I had done this with Euro and I was pretty sure it was going to hit at least 1.28. Faith in one's analysis is something a trader needs to take on trades—otherwise the risk is too scary. Clearly, my original analysis had paid off well; just as clearly the market was signaling that my final conclusion—price would hit at least 1.28—was questionable. But that doesn't mean it was easy for me to let it go.

The final reason I didn't want to believe a reversal was in the cards is that the Euro is in trouble fundamentally and I think it's clear that the worst is yet to come. I can find lots of evidence for this. I don't trade on fundamental factors but that doesn't mean I ignore them completely because ultimately it's fundamental reasons that move charts.

I'm telling all of this because even when a trader is profitable they are vulnerable to being hostage to beliefs. However I've done lots of work on myself in this area—it's probably the majority of the work I've done that has led to my ability to successfully trade. After an hour or so of internal struggle I not only closed my short (for +499 pips) but went long at 1.3139. I had at least three reasons for doing so—on shorter term charts there was positive divergence, hinting that at best it was ready to work out the oversold status; both price and RSI were maintaining an uptrend line on dips; and price was hovering around the 1.3150 resistance. In addition, the drop had been fairly steep and rapid and, as I'm always saying, price never goes straight down. I set a wider stop than I wanted to (because there was quite a bit of chop) and hovered like a helicopter parent over the trade. As soon as I could move the stop to breakeven, I did so.

By Friday morning I was pretty sure I was wrong even though the trade was in profit. There's a certain type of behavior that goes on in prices before news announcements that I find is often predictive of the news (no, I'm not going to describe it). I don't trade on news but I observe prices and if I'm in a trade, the behavior will often give me the confidence to stay in the trade (or get out). I didn't act on it in this case but I was ready to reverse if need be. However the price behavior did not predict the news (that unemployment had edged up) and Euro took off Friday morning in a typical kneejerk reaction. I took partial profits at +235 pips.

As of now, 9:54 AM EST, the trade is up 233 pips. It has been struggling since Friday with the 1.3450 resistance zone, reaching a high of 1.3439 Friday and not quite attaining it since. So there's a warning here but I've haven't yet done the analysis I need to do to determine if I'm ready to reverse. I still believe my original analysis is correct—that lower prices are in store and that this is a correction. As my trading moves to longer term trades (a process that seems to be gradually happening), I might ignore corrective moves such as this (although over 1.3450 I'd want to be out of any short positions—I'm not that long term a trader). But the reversal returned a nice, quick profit.

As an aside, the daily chart (not shown) shows Euro poking its head above the upward boundary of a downward sloping rectangle. The boundary is at 1.3344. So there's a resistance zone in place from here to 1.3450. Paying attention to this zone will be key in any decisions I make. Also, any decision making is placed within the context of the weekly chart which I blogged about yesterday. (And monthly which I also look at in trading decisions.)

A definite close above 1.3450 opens up potential resistance at 1.3656 and 1.3786. Support is at 1.3247, 1.3197, 1.3160 and 1.30.

I'm showing a 30-minute chart below—I made the reversal decision based on the hourly and 15-minute charts.













© 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 channel

A look at the weekly chart shows the Euro at the bottom of an upward sloping channel which I'm tempted to label as a bear flag. It's also possible to label it as an Elliott Wave correction with the possibility of a larger flat correction unfolding. The top of the channel would bring Euro to 1.4543. Many would think this possibility is ludicrous—the Euro is basically junk. Consider, though, that the U.S. government seems intent on keeping the USD weak. Bernanke was on "60 Minutes" last night suggesting the possibility of more quantitative easing.

The weekly candle has a long lower shadow and just barely qualifies as a hammer. A hammer requires that the lower shadow be at least twice the size of the real body. In any case, the low of 1.2969 is a low which must hold for bulls to have any hope. Euro is currently trying to base at a fib confluence point with lows so far this morning of 1.3247. Below this is support at 1.3195, 1.3160, and the psychological 1.30.

Resistance is at 1.3379 and 1.3439. If it definitively closes above the latter, then the bullish case is strengthened.

Here's the weekly chart. My trades don't show on the weekly chart as I use a different package for longer term charting.










© 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—at .618

The high Friday was .9938, a .618 retracement of the move from 1.0183 down to .9537. Many are watching.9954. That price was 50% of the prior swing of 1.0183 to .9725. It occurred the week ending 11/26 and was essentially matched by the high of this past Friday's .9938. In essence then, you have two weeks with the same high. Last week's low was lower than the prior week's and was essentially the same low as the week of 10/8. The July '08 high was .9851 so this adds to the resistance of this level.

The low so far today has been .9849 which is a confluence zone. The pair is trying to base here.

I'm still long from .9602 and just took another third off the table at +268 pips. If the pair manages a close above .9954, I may add another long as the path is clearer for a move up to retest the prior 1.0183. The top of the rectangle is 1.0329. As I pointed out last week, the pair has been a strong performer since the 2008 low and it's not unreasonable to believe it could get there. The last two daily candles have been very bullish.

One can't dismiss the possibility, though, that it may falter again at .9954. This would be a short signal. I would reverse. There are other bearish signals and I have price targets from both my daily and three-hour point and figure charts of .8500 and .8970 respectively. A close below the confluence of .9849, along with falling momentum on the shorter-term charts (i.e. RSI falling and price following) will be the first hints of another top.

Here's the daily chart with a possible Elliott Wave count. This count looks bullish since it assumes completion of an ABC correction. However, there is an alternate (bearish) count possible particularly within the context of weekly and monthly charts. Elliott is not always useful (heresy, I know, to the true believers but I don't know any true believers that are rich from trading—the truest ones are slogging away in regular jobs so what does that tell you?). In this case, I find it less than useful even though it supports my long position. The downward sloping RSI line I've drawn in red indicates negative divergence so this is a bearish sign. This pair is an interesting one—it's in an overall uptrend since the 2008 lows but is showing signs of real weakness, especially on the weekly chart as I blogged about on Friday.
















© 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.