Within this downtrend, there's a triangle pattern. If it's interpreted from an Elliott Wave perspective then it must break downward. The upper boundary of the triangle was touched yesterday at 82.47 which should be point e. I couldn't sleep last night and decided to short at 82.24 since the stop could be tight. I'm not trading because of the triangle by itself but rather because of the overall downtrend, the touch of a downtrend line (which happens to be the upper boundary of the triangle), and momentum behavior on shorter-term charts. When I add those reasons to the weekly triangle and triangles on shorter-term charts, the probability shifts to favor short positions.
However, I don't consider this a slam dunk trade. For one thing, there's much uncertainty among traders—witness the preponderance of doji candles on various charts. For another, the pair hasn't dropped as much on the hourly chart as I would like to see if the downward trend is resuming. This is where the ability to have a tight stop shows its real value. It helps make the risk tolerable given contradictory factors.
Support is at 81.12, 80.94, and 79.30.
Here's the weekly chart (my trades don't show on the weekly chart as I use a different package for long-term charting):
© Dianne Fecteau, 2011. 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.
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