Monday, March 7, 2011

EURJPY—spike high

A shooting star candle spiked at a high of 116.01 on Friday. The pair closed at 115.14, the highest weekly close since May 2010. On the daily chart, the 50 simple moving average (SMA) crossed above the 200 SMA. This is a golden cross. Some see them as bullish. There have been three golden crosses on the daily chart in the last ten years (Fall 2005, May 2008 and May of 2009). The first two were bullish; the last one was for a period of sideways movement before prices headed down. Not much of a sample size from which to draw conclusions. I have price targets that are quite a bit higher in the 119 area. The pair has been in an uptrend since January.

Shooting stars occur when price opens near the low, rises sharply, and then settles near the low. Psychologically, it means the bulls couldn't maintain the highs, in this case because of profit taking when the price climbed above the prior high. This could be signaling a reversal. However, Thursday's candle was bullish and there has been little in the way of upper shadows over the past several days. If this star becomes part of an evening star formation (today's candle would have to close deeply within Thursday's candle), it will be significant. On the daily chart, there is negative divergence.

On the monthly chart I posted last week, I noted the bear flag formation with the upper boundary at 116.14. If price consolidates just below this resistance, expect another attack on it later this week or next week. The lower boundary of the flag is 107.40.

Resistance is at 116.01, 116.88/97, 118.22, 118.73 and 119.23.

Support is at 115.69, 114.85/50, 114.00 and 113.13.

Here's the daily chart:

© 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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