Friday, April 1, 2011
Thursday, March 31, 2011
EURUSD—going nowhere for now
Euro has been in a small range this week from a low of 1.4027 to 1.4149. I'm still short, thinking there will be a break to the downside. This is because of the ABC corrective look of the daily price action as well as the longer downtrend, in effect since July 2008. My stop is at breakeven.
On the hourly chart, the hour just closed (10 AM EST) is a hammer. Since it's near the range support, there may be another bounce but the immediate resistance is 1.4149, followed by the prior high of 1.4248 from last week and the key 1.4283 November 2010 high.
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.
On the hourly chart, the hour just closed (10 AM EST) is a hammer. Since it's near the range support, there may be another bounce but the immediate resistance is 1.4149, followed by the prior high of 1.4248 from last week and the key 1.4283 November 2010 high.
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.
AUDUSD—new high
AUDUSD made a new high this morning, 1.0362. It has achieved several price targets with this high; there are still targets up into the 1.06 area. On the way there, however, there will be some key resistance. 1.0400 is psychological. On the weekly chart, there is resistance at 1.0500.
On the three-hour chart, price has pulled back to the uptrend line. I added a fourth small position. If it falls below the uptrend line, look for support at 1.0314 and 1.0205.
© 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.
On the three-hour chart, price has pulled back to the uptrend line. I added a fourth small position. If it falls below the uptrend line, look for support at 1.0314 and 1.0205.
© 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.
Wednesday, March 30, 2011
EURJPY—soaring
EURJPY has reached a high of 117.27 so far this morning, breaking above a pennant. I have some very attractive price targets for this pair, beginning at 119 and going up to 126 from various methods.
However, be cautious. First, the yen loves bad news—more bad news from Japan's nuclear cleanup efforts could send this pair plummeting. Second, there has been much choppiness over the past two days. This means the market is nervous even though there seems to be better risk appetite this morning.
Note on the daily chart below that the pair hasn't been above 117 since May 2010. This price is parity. It's also at the top of the multi-month rectangle. It would be logical to expect some reaction here and if one wants to go long, waiting for a pullback would be smarter than jumping in at the high.
Resistance is 117.27, 117.60, and 118.27.
Support is at 116.00, 115.54 and 114.57.
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.
However, be cautious. First, the yen loves bad news—more bad news from Japan's nuclear cleanup efforts could send this pair plummeting. Second, there has been much choppiness over the past two days. This means the market is nervous even though there seems to be better risk appetite this morning.
Note on the daily chart below that the pair hasn't been above 117 since May 2010. This price is parity. It's also at the top of the multi-month rectangle. It would be logical to expect some reaction here and if one wants to go long, waiting for a pullback would be smarter than jumping in at the high.
Resistance is 117.27, 117.60, and 118.27.
Support is at 116.00, 115.54 and 114.57.
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.
Tuesday, March 29, 2011
Euro—daily
On the Euro's daily chart, you can see price action opposite that I described it below for the USD. This makes sense. However, as I wrote yesterday, I expected price to hold under 1.4131. This morning it reached 1.4149. Although, it has since dropped, this suggests to me a more complex correction may be unfolding.
I'm still short but I wouldn't hesitate to stop and reverse if price action indicates that's the way to go.
There's resistance at 1.4194, 1.4248, and the key level of 1.4283. Above that November high, suggests gains to 1.4345 and possibly well beyond that. Immediate support is at 1.4021.
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.
I'm still short but I wouldn't hesitate to stop and reverse if price action indicates that's the way to go.
There's resistance at 1.4194, 1.4248, and the key level of 1.4283. Above that November high, suggests gains to 1.4345 and possibly well beyond that. Immediate support is at 1.4021.
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.
USD Index—daily ending diagonal
On the daily chart, one can interpret recent price action as an ending diagonal. I've marked it in red on the chart below. Prechter, in his book, Elliott Wave Principal, defines several rules for ending diagonals. In EW theory, rules cannot be broken.
The first rule is that an ending diagonal (ED) always subdivides into five waves. The second rule is that it must always occur in wave five of an impulse wave or wave C of a corrective zigzag or flat. Rule three states that each wave of the ED must divide into zigzags.
There are four rules concerning price action, i.e. wave two cannot exceed wave one, wave three always goes beyond wave one and wave four never exceeds wave two. In addition, this is the only time wave four can enter into wave one's price.
The pattern traced out on the daily chart meets all of these rules. including wave four penetrating wave one's price.
There are also several guidelines. For example, waves two and four usually retrace between 66 and 81% of the prior wave's price action. That doesn't happen here (in both cases it's less than 50%) but guidelines are just that—they don't have to be in place. Nonetheless, a reaction that can't reach more than 38% or so of the prior wave usually indicates a very strong trend down so an ED can fail. Nobody, unfortunately, has ever produced a valid study showing the validity of EW theory, let alone the performance of something such as the ED. The thing is, though, that if this ED does fail, i.e. price drops below the 75.24 low, that's a powerful signal.
If it is a successful ED pattern, then price action out of it is usually fast and powerful. This would be to the upside. There's other evidence for a violent move if price increases. There's significant sentiment against the USD. It's difficult to believe there are many people left to sell. The people jumping in now are typically weak players. Any rise in price would cause significant short covering. This would fuel an additional rise. This type of behavior leads to fast moves.
Note also the positive divergence on the daily chart. Whatever you think of the USD potential, this isn't the time to be going short.
There are other ways to interpret this chart than EW theory. As I wrote last week about the weekly chart, any move below the prior swing low of 74.16 confirms the downtrend with a lower low (and lower high). The failure of this ED from an Elliott perspective would hint at that possibility. Failed patterns are powerful signals. One can also see the possibility for a rectangle signaling range trading on this chart. I've marked it in blue. However, the next move would be up in that case to about 81.10. Coincident or not, that target is near the price projection of 81.35 from the ED (the origin of the pattern).
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.
The first rule is that an ending diagonal (ED) always subdivides into five waves. The second rule is that it must always occur in wave five of an impulse wave or wave C of a corrective zigzag or flat. Rule three states that each wave of the ED must divide into zigzags.
There are four rules concerning price action, i.e. wave two cannot exceed wave one, wave three always goes beyond wave one and wave four never exceeds wave two. In addition, this is the only time wave four can enter into wave one's price.
The pattern traced out on the daily chart meets all of these rules. including wave four penetrating wave one's price.
There are also several guidelines. For example, waves two and four usually retrace between 66 and 81% of the prior wave's price action. That doesn't happen here (in both cases it's less than 50%) but guidelines are just that—they don't have to be in place. Nonetheless, a reaction that can't reach more than 38% or so of the prior wave usually indicates a very strong trend down so an ED can fail. Nobody, unfortunately, has ever produced a valid study showing the validity of EW theory, let alone the performance of something such as the ED. The thing is, though, that if this ED does fail, i.e. price drops below the 75.24 low, that's a powerful signal.
If it is a successful ED pattern, then price action out of it is usually fast and powerful. This would be to the upside. There's other evidence for a violent move if price increases. There's significant sentiment against the USD. It's difficult to believe there are many people left to sell. The people jumping in now are typically weak players. Any rise in price would cause significant short covering. This would fuel an additional rise. This type of behavior leads to fast moves.
Note also the positive divergence on the daily chart. Whatever you think of the USD potential, this isn't the time to be going short.
There are other ways to interpret this chart than EW theory. As I wrote last week about the weekly chart, any move below the prior swing low of 74.16 confirms the downtrend with a lower low (and lower high). The failure of this ED from an Elliott perspective would hint at that possibility. Failed patterns are powerful signals. One can also see the possibility for a rectangle signaling range trading on this chart. I've marked it in blue. However, the next move would be up in that case to about 81.10. Coincident or not, that target is near the price projection of 81.35 from the ED (the origin of the pattern).
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.
Monday, March 28, 2011
EURUSD—weekly
On the weekly chart, Euro may be making another run for the long-term downward trend line at 1.4279. This downtrend line begins at the 1.6041 high with a second touch at 1.5144. Note, though, that the upper boundary of the rectangle is near 1.50, a nice round number. Of course, Euro reaching 1.50 would find Euro bulls dancing in the streets but it would not invalidate the longer-term downtrend nor the weekly Elliott Wave count. I'm interpreting the count as the move down to 1.1876 being wave 1 of (3) so the current uptrend is wave 2 of (3). That's one interpretation. There are others.
Reaching 1.50 would result in a double zigzag correction—well at least it would if there was then a sustained move down. For now, though, immediate weekly resistance is at 1.4279, near the prior Nov. 2010 high at 1.4283.
Here's the weekly 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.
Reaching 1.50 would result in a double zigzag correction—well at least it would if there was then a sustained move down. For now, though, immediate weekly resistance is at 1.4279, near the prior Nov. 2010 high at 1.4283.
Here's the weekly 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.
EURUSD—rally
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.
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.
AUDUSD—broke above 1.03
Aussie finally made it above 1.03 to 1.0314 as of earlier this morning.
At the beginning of January, I wrote that, "1.0307 is the top upward line drawn on the weekly chart below. There was an inverted head and shoulder pattern on the daily chart (not shown) that I blogged about in November. Its target is 1.0371".
It would be logical to see some correction as this is at or nearing strong resistance. In addition to being near price targets, 1.0333 was the 7/82 high. Calculating the weekly pivot point finds RS at 1.0369. Therefore, while there may be additional moves up to the 1.0370, a correction may kick in at any point. A correction could cause price to drop to 1.0080/65 (near the .382 retracement of the move up from .9706) or parity. Only if the pair drops below .9706, do possibilities that are more bearish come back into play. It's worth noting on the weekly chart below that there is still negative divergence with RSI.
The next potential target is 1.05 near the upper boundary drawn on the weekly chart below (the same line that targeted 1.0307) and a price target zone from various calculations.
Here's the weekly 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.
At the beginning of January, I wrote that, "1.0307 is the top upward line drawn on the weekly chart below. There was an inverted head and shoulder pattern on the daily chart (not shown) that I blogged about in November. Its target is 1.0371".
It would be logical to see some correction as this is at or nearing strong resistance. In addition to being near price targets, 1.0333 was the 7/82 high. Calculating the weekly pivot point finds RS at 1.0369. Therefore, while there may be additional moves up to the 1.0370, a correction may kick in at any point. A correction could cause price to drop to 1.0080/65 (near the .382 retracement of the move up from .9706) or parity. Only if the pair drops below .9706, do possibilities that are more bearish come back into play. It's worth noting on the weekly chart below that there is still negative divergence with RSI.
The next potential target is 1.05 near the upper boundary drawn on the weekly chart below (the same line that targeted 1.0307) and a price target zone from various calculations.
Here's the weekly 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.
Inside Weeks
A few of the pairs I watch had inside weeks with Friday's close. These were USDCAD, USDCHF, USDJPY and, by one pip on the topside, EURJPY.
Inside candles, regardless of time period, are those candles with a price range that is within the prior candle's range. They represent a congestion or consolidation period and are more meaningful when they aren't part of a larger pattern, i.e. a triangle. The reason they're less significant in a larger pattern is that they're still reflecting the lack of significant movement in that larger pattern. Various trading strategies use inside bars. I don't consider them a signal in and of themselves but they're something to be aware of, particularly regarding their high and low as potential resistance and support respectively. Obviously, it's more meaningful if these correlate with other support and resistance. For example, with EURJPY, the high is near general price resistance.
© 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.
Inside candles, regardless of time period, are those candles with a price range that is within the prior candle's range. They represent a congestion or consolidation period and are more meaningful when they aren't part of a larger pattern, i.e. a triangle. The reason they're less significant in a larger pattern is that they're still reflecting the lack of significant movement in that larger pattern. Various trading strategies use inside bars. I don't consider them a signal in and of themselves but they're something to be aware of, particularly regarding their high and low as potential resistance and support respectively. Obviously, it's more meaningful if these correlate with other support and resistance. For example, with EURJPY, the high is near general price resistance.
© 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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