Euro is rallying from 1.4021. That price was slightly below the 1.4041 support and only five pips below the price at which wave C would equal A in a three-wave correction off the 1.4248 high from last Tuesday. The rally followed positive divergence on the three-hour chart.
If this rally is simply a correction of the 1.4021 low, the potential for wave C is 1.4131 where wave C would be 1.618 of wave A (wave A started at 1.4021 and ended at 1.4085; wave B ended at 1.4027). 1.4131 is also where a very short-term trend line comes in from the 1.4220 high.
A move above 1.4131, then, hints that the daily uptrend is resuming. RSI on the short-term chart gives a hint of momentum and this is something I'll watch as another piece of evidence for strength or weakness. Since I'm already short from 1.4190 with a stop at above 1.4153, I'll most likely add to my position if, and only if, I get some confirmation from RSI or from a bearish candle. Otherwise, a stop and reverse may be the way to go, especially if the Euro breaks above 1.42.
Resistance is at 1.4131, 1.4194, 1.4248, 1.4283 and 1.4345.
A break below 1.4021 would find support at 1.4000/3981, 1.3856 and 1.3752.
Here's the three-hour 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.