The bounce has been stronger than some expected. One can now trace out a potential ABC correction on the three-hour chart of 1.3827 to 1.4054 for A and down to 1.3952 for B. If C were to equal A, the price target would be 1.4169. Price has stalled at 1.4111 but now seems to be attempting to base at 1.4053 (actually it has dropped slightly below) on the 15-minute chart. Since that was the high for the A leg of this scenario, one might see a move to 1.618 of A or 1.4303. I actually like 1.4303 since that aligns with a bounce I’d expect on my point and figure chart in order to create a stronger sell signal. It is also close to the 50% retracement point of the move down from 1.4578.
There is a former confluence zone of 1.4112 to 1.4163 on the shorter-term charts. This correlates with the resistance zone I wrote about yesterday of 1.41 to 1.42. The broken monthly uptrend line is at 1.4147. Certainly if price gets above 1.42, it makes the 1.43 target more achievable. There does seem to be a more positive attitude to risk this morning.
Would one go long here then, hoping to pick up a hundred pips or so? Not necessarily. However, to do so, would require watching the short-term charts for both price behavior and momentum. If one believes that the downward move that began Monday is indicative of an Elliott wave three, one would want to sell rallies.
© 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.