Forex Reflections

Hiatus

2011-07-19T06:16:00.002-04:00

I'm taking a little bit of a hiatus from the blog. It's something I do for free in my spare time and I have enjoyed doing so, but right now it's a bit too much. I also want to think about its future direction.

EURUSD—bounce

2011-07-13T09:00:00.000-04:00

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.

EURUSD—Summary

2011-07-12T09:05:00.000-04:00

I’ve been on vacation the last week and am not fully back but have taken my first peek at the markets in a week this morning. There is much going on with the Euro.

First, on the monthly chart, the pair has broken the steeply ascending uptrend line with its drop yesterday. That is not too surprising—steep angles are difficult to maintain. The question is whether this is now the wave three down that an Elliott interpretation supports.

Euro never regained the 1.4697 prior high which shows weakness. From a daily perspective, the potential bullish triangle appears nullified by yesterday’s drop. On my daily point and figure (P&F) chart, the pair generated a sell signal.

The low this morning was 1.3837, forming a hammer on the three-hour chart. The pair has bounced sharply from there but on the 15-minute chart, price action appears to be tracing out a three-wave correction. If so, the C wave high so far of 1.4024 is not quite equal to the A wave (1.3827 to 1.3963). If the C wave is 1.618 of A, the high will be 1.4107.

There is a resistance zone from 1.41 to 1.42. This includes the potential wave C high, the broken monthly uptrend line of 1.4147 and price resistance. Beyond that is 1.4340. However, there is strong support at 1.3820/37 and the 200 daily SMA is at 1.3912. If the pair breaks the 1.3820 support, there should be additional moves down in line with the third wave scenario that may be playing out.

© 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.

No posts week of July 4th

2011-07-05T22:16:00.001-04:00

I'm taking a few days off.

Have a save and happy July 4th weekend.

2011-07-01T07:50:00.000-04:00

EURUSD—mixed signals

2011-06-30T06:17:00.000-04:00

Euro managed to break above key resistance at 1.4450, reaching a high of 1.4521. Price is stumbling a bit now. The most bullish case is that there is an Elliott triangle forming. If one assumes that point D was 1.4521, then there should be a move down, possibly to 1.4141 (although sometimes price falls short of E before thrusting out of the triangle) and then new highs. That scenario ties in with a butterfly pattern that may be forming where the end of the butterfly would be around 1.52. Continuing this bullish fantasy, this would mean we were ready to pull out of wave four for a fifth wave move (wave one starting at 1.1876). A potential target, using the golden section, would be 1.5264. Hmm. Pretty close to the butterfly target. Supporting this bullish heresy would be the point I made the other day—RSI isn't dropping significantly on the daily chart, even when Euro finds new lows.

If one looks at price action from the perspective of an ABC correction off the top of 1.4942, wave C would have been .618 of wave A at 1.4096. The low was 1.4074 before price began moving up.

Forgetting the Elliott interpretation, there is a symmetrical triangle. These can be a continuation move but can also signal a potential reversal. Price is above the 50-, 100-, and 200-SMA on the daily charts.

Finally, on the four-hour chart, one might say a double bottom formed at 1.4074 and 1.4103 with it confirmed at 1.4442. The target for this is about 1.4784. This target takes it above the 1.4697, a number important to Elliott bears.

Whatever else one can say about the upward price move from yesterday, it took out a number of stops from short sellers. The market loves to do that but I consider it a warning for higher prices.

Looking at the downside from an Elliott perspective, one can maintain that wave two peaked at 1.4697. Price is at the beginning of wave three and although one would prefer less upward price action, as long as price stays below 1.4697, one can maintain this interpretation. One can dismiss the alternate bullish triangle by saying the ratios between the legs are not quite right. If this is true, the targets are attractive

I'm leaning less bearish than I was because I'm not seeing a relationship between price and momentum on the hourly chart. I blogged about this on June 22. RSI drops below 70 but price does not move down much. Still, the pair is at resistance and then next resistance is 1.4550/1.4600 so behavior there may tell the story.

There is short-term support at 1.4450/42, 1.4328 and 1.4238. The latter two look as though it is a transposition of numbers but it is actually the June 29 and June 28 low respectively.

Here's the four-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.

EURUSD—Time to fish or cut bait

2011-06-29T15:44:00.000-04:00

After a thwarted attempt to get above 1.4442 yesterday, Euro has been hanging about just below the key 1.4450 level since early this morning. If it manages to break through, look for a move to 1.4600 then 1.4697. Above that would negate a bearish case for the most part. If it breaks below 1.4103, this would confirm a double top.

© 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—short-term momentum

2011-06-28T10:25:00.002-04:00

Euro has pushed up to 1.4370 with good momentum on the short-term charts. If it easily takes out 1.4385 and the psychological 1.44, the key resistance of 1.4428/50 will be the next target.

© 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—wavering

2011-06-28T09:46:00.001-04:00

The bears certainly expected Euro to begin its plunge by now, especially those who believe price is within a third wave down. The bulls would like to see it scoot up and take out 1.4442 (June 22 high) and then the 1.4697 prior high. Both sides are bound to be somewhat frustrated as it plays its small moves with no definitive action.

Those who went short in the 1.42 area are probably approaching stops. This may fuel some additional price rise. However, logical resistance is the 1.4385 confluence area, 1.4378 (weekly pivot R1 calculation) and 1.4428/50 which is key resistance.

On both a weekly and daily basis, there is a bearish bias. However, RSI lows on the daily chart are not as low as one would expect to see if the bears had true control. The daily uptrend line (since January), broken with the June 16, 1.4074 low, has been serving as a magnet line for price.

On my three-hour point and figure chart, Euro is caught in a symmetrical triangle with small columns of X and O. This only means that supply and demand are approximately equal. Underlying this, though, is the real question of whether accumulation or distribution is taking place. There needs to be a definitive move one way or the other to answer this question.

I may try a short in the 1.4340/85 area. I'll post a chart when there is a more definitive move.

© 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.

Friday close, pivot, SMA

2011-06-27T10:45:00.000-04:00

For each of the following nine pairs, I've listed the Friday close, the annual pivot points, the 200- and 100-SMA, and the close for 31 Dec. 2010. I look at a series of comparisons such as this every week. While I don't care so much where a market has been as where it is going, some items pop out when you compare various parameters.

First, all pairs except for USD led pairs (USDCAD, USDCHF, and USDCHF) are above their 2010 year-end close. This is generally positive. However, if one considers the highs for the year for each pair, all pairs that are above their 2010 close are below their highs for the year. Of the three below their 2010 close, the USDCAD and USDJPY are above their lows.

Five pairs are below their annual pivot points. In addition to the USD-led pairs mentioned above, both EURJPY and GBPJPY are below.

Four pairs are above their daily 200-SMA. These are AUDUSD, EURGBP, EURJPY (barely), and EURUSD. When price is below a 200-day SMA, it is often bearish. Three pairs are above their daily 100-SMA, AUDUSD, EURGBP, and USDCAD. Surprising about the latter—it is worth watching to see if it maintains that and the 100 serves as support.

I also watch the 50-daily SMA and I am always interested when there is a 50 crossing the 100 or 200, particularly if it occurs in conjunction with a pattern.

Nothing here is definitive unless used in conjunction with other analysis. It is just something to think about.

No posts today

2011-06-24T09:03:00.001-04:00

I'm implementing my summer Friday's off rule effective today. I'll see you Monday.

EURUSD—broke 1.42

2011-06-23T08:28:00.001-04:00

A bit of battle between buyers and sellers went on between 1.4212 and 1.4236 but supply prevailed (so far) and has pushed Euro to a low of 1.4187. This is just below the June 20 low of 1.4192. It would strengthen the bearish case to have an hourly close below there.

© 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—lower

2011-06-23T06:32:00.000-04:00

Key resistance at 1.4428/50 held nicely. Euro broke below the uptrend line of the rectangle and the 21-SMA on the four-hour chart that I blogged about yesterday. The low so far this morning is 1.4235. This implies that the move up from 1.4074 was an ABC correction (A= 1.4074/1.4340; b=1.4340/1.4192 and C topped out close to the point where C would equal A).

I missed the break, having knocked off early yesterday to run around town checking out dog kennels for boarding our puppy. Sometimes the home front calls. However, a rally is possible, given that the current low is close to the 50% point of the move up from 1.4074 to 1.4442. The pair might rally to 1.4328 (the 21-SMA on the four hour chart) or 1.4381, the breakout point from the rectangle. Additional resistance derives from the weekly 10-EMA (1.4317), and two fib levels (.382 of 1.3429/1.4942 at 1.4364 and .382 of 1.4942/1.3970 at 1.4341). With a rally, I'd sell weakness. If the rally does not happen (and it might not if we're in a third wave), then I will enter on smaller rallies with weakness on much shorter-term charts.

However, it's important to remember that until price drops below 1.4074, thus creating a lower low, there is still resistance up to 1.4697.

© 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.

EURGBP—contrast with EURUSD

2011-06-22T09:54:00.000-04:00

Contrast the EURGBP with the price behavior of EURUSD. On the four-hour chart, there is strong move up, especially with the last two candles. This pair, too, is rising within an upward sloping rectangle so it is time to take some profits on my long as it approaches that point. The longer, downtrend resistance line is coming in just above that boundary. However, note that unlike the Euro, momentum, as reflected in RSI, is also maintaining its uptrend line. It is interesting that on this pair, as with the Euro, the 21-SMA is tracking the lower boundary of the rectangle.

EURGBP offered clearer buying signals after weekend analysis than did EURUSD. For example, the week ending 17 June closed with a hammer candle near a support level in the context of what appeared to be a corrective move within an overall uptrend.

Resistance is at .8938/76 (monthly pivot R2, downtrend line, rectangle upper boundary, June 8 high) and .9044.

Here is the four-hour chart:

EURUSD—hovering near key resistance

2011-06-22T09:33:00.000-04:00

Euro managed to climb to 1.4434 within an upward sloping rectangle. On the four-hour chart, the 21 SMA is tracking the lower boundary of the rectangle. Key resistance is 1.4428/50. The fact that price is hanging around just below here is troublesome to bears—when price maintains a narrow range beneath a key resistance it often manages to break through. If it does so, there is psychological resistance at 1.45. After that is 1.4573—the upper boundary of the rectangle and the point where the downtrend line from 1.4942 comes in. Finally, there is key resistance at 1.4697, the prior high.

There does not appear to be strong momentum behind the pair, i.e. note that RSI has fallen below its uptrend line. If price falls below its uptrend line, that confirms weakness in the pair. Candles on the four-hour chart are exhibiting upper and lower shadows. This indicates indecision. There needs to be a strong move in one direction or another for traders to jump in and rev up the momentum.

Best approach for now is to wait for a clear sell or buy signal. As I wrote yesterday, a push to 1.45 or above on the hourly chart where RSI moves into overbought territory (above 70), followed by RSI closing below 70 would be a sell signal, especially if combined with a bearish candle formation. A strong move above 1.4573, especially with a retest, would be a buy signal. My suspicion is that price is in a third wave down in the larger period so I am more inclined to look for a sell signal. However, once I recognize this bias I have to be alert to not let the bias drive my trading and pay close attention to the chart.

Here's the four-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.

EURUSD—narrow range

2011-06-21T08:23:00.001-04:00

Euro is wavering in one of those narrow ranges so far this week between 1.4291 and 1.4384, no doubt by short-term fundamental, kneejerk focus on Greece. This is under key resistance at 1.4428/50. Even if it rallies above there, it's doubtful it will get beyond 1.4697 but of course that is a lot of pips between the two.

I am out completely as of now. My plan is to wait to find a selling opportunity. To do this, I'll use resistance and momentum on the hourly chart. Ideally, I would like to see a push to 1.45 or above where RSI moves into overbought territory (above 70). I would then wait for an hourly close below 70 and short at that point. That combination should provide for a tight stop.

The more bullish possibility in the short term is that Euro may be tracing out a butterfly pattern on the daily chart. Given that the upward sloping rectangle on the weekly chart (see Monday's blog) constrains prices between 1.3564 and 1.5368, 1.5308 (1.27 of the XA leg) is within that realm of possibility. For this to be possible, price needs to clear 1.4942 and there would probably be momentum clues well before then that the move up was gaining strength.

© 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—monthly

2011-06-20T04:55:00.001-04:00

I have not blogged about the dollar index recently. On the monthly chart, one can make the case for a move up from the bottom of the symmetrical triangle where it will find resistance at either the longer term downtrend line (80.47) or the upper boundary of the triangle at 88.49. The move from 89.63 down to 74.15 (1,548) had a nice balance with the move from 88.66 down to 72.69 (1,597).

Any drop below 72.69 would be bearish. It would also raise the possibility that there is a double top in with the confirmation point at 73.50. The price target would be 69.81. No doubt that would bring on the same tired response from the US Treasury that “we support a strong dollar.”

Nonetheless, given the potential weakness in the Euro and other currencies relative to the USD, I think a rally is more probable.
Here’s the monthly 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—weekly analysis

2011-06-20T04:15:00.001-04:00

Euro is at a critical point on the weekly chart. The week ending 6/17 had a low of 1.4074 and formed a hammer candle on the weekly chart. Since 1.4074 is in a solid support zone, Euro needs to stay above this low. This support zone is drawn from pivot calculations, fib retracements and price. However, note that on the weekly chart below, it is also the area where the downtrend line from the 1.6041, 2008 high meets a shorter-term uptrend line from the 1.2874 low. Bears and bulls are battling it out here.

From the Elliott Wave perspective, price action does not look bullish on the weekly chart. There is a three-wave move from 1.1876 to 1.4283 and then another three-wave move from there down to 1.3970. Alternatively, one could say there’s an X joining the first three wave move at 1.2874 and a double zigzag beginning from 1.2874. If so, that might mean price action is in the C wave of the second zigzag and there could be additional moves up. Regardless, though, it is difficult to make the case that the move up from 1.1876 is impulsive. I am not enamored of Elliott—the best counts occur so after the fact—but it is something to consider as an indicator of market psychology.

From a strict pattern point of view, the upward sloping rectangle constrains price action to between 1.3564 and 1.5368. The top line of the rectangle is a duplicate of the bottom line as to angle. In rectangles, price gets batted back and forth until there is a clear break out of the rectangle, i.e. one side becomes overwhelmed by the opposing side. Price fell short of the top line at 1.4942. Sometimes this hints at the breakout direction, in this case down.

Note on the weekly chart that RSI has dipped below its uptrend line. This happened in conjunction with price breaking an uptrend line drawn from January (the red dotted line on the chart). That line had a steep angle of ascent and was bound to break but if one extends that line, price tested it as resistance at 1.4647. If price closes beneath the uptrend line from 1.2874, that would be bearish and would make the longer term uptrend line vulnerable for testing, just above 1.35.

Adding to this bearish picture is the fact that since the May high of 1.4942, there has been a lower low at 1.3970 and a lower high at 1.4697. In fact, regardless of trend lines, since July 2008, almost two years ago, there has been nothing but lower highs (1.5144 and 1.4942) and lower lows (1.2329 and 1.1876). That is a downtrend. While trends reverse, it hasn’t proven to reverse yet. The first clue would be taking out 1.5144.

On a more positive note, Euro is holding above support (the 45° trend lines) on both my daily and three-hour point and figure charts. That reinforces the price zone above 1.40 as support. If price breaks beneath 1.3970, look out below. That would also be near the 50% retracement of 1.6041/1.1876.

The weekly cloud chart shows Euro to be well above the cloud so that’s bullish for looking for buy opportunities on the daily (or shorter) basis.

Immediate resistance is 1.4428/50 (the daily, 50-SMA, the monthly pivot calculation, the .618 retracement of 1.6041/1.1876), 1.4512, 1.4683/97 and 1.4735 (.786 retracement of decline from 1.4942). Above 1.4735 would be very bullish.

Support is 1.4186/52, 1.4074, 1.3970/59/22/08 (prior low, 50% fib mentioned above, monthly 10-EMA, and 50% retracement of 1.2874/1.4942), 1.3831 (the 200 daily SMA), 1.3780/40, and 1.3675.

Here’s a 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

2011-06-17T09:33:00.000-04:00

Euro has rallied to 1.4299 in what appears to be an ABC correction on the hourly chart (Wave A is 1.4074 to 1.4222; wave B drops from there to 1.4128). This means C has the potential of 1.4219, 1.4276, and 1.4367 so price is just above the point where C would equal A. The 50% retracement of the move down from Tuesday's high of 1.4497 is 1.4286; .618 would be 1.4335. There is additional resistance up to 1.4445 and of course the prior high of 1.4497. The latter is key resistance—if that breaks then it negates many bearish signals.

Price has not met the bear flag target of 1.3994. What is troublesome is that if one examines RSI on the daily chart, it is maintaining itself above 34.92, the low of RSI in January. That needs to start dropping to support the idea that the bearish view is the correct one. Euro also managed to stay within support (the internal 45° line) on the daily and three-hour point and figure charts I maintain.

Nonetheless, the case is still there for being in a third wave down. Let's see what unfolds.

© 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—testing interim resistance

2011-06-16T11:38:00.000-04:00

Euro is testing the uptrend line drawn on the daily chart from January with the high so far today of 1.4178. This resistance is reinforced by the fact that it’s a fib confluence zone—the .382 retracement of 12874/14942 is 1.4152 and the .50 retracement of 13429/14942 is 1.4186.

I’m of two minds about this type of resistance. If it keeps battering at it, Euro may break through. On the other hand, another rebuff could send it back to its downward slide.

If this is an ABC correction on the hourly time frame, potential C wave targets are 1.4178, 1.4217 and 1.4281. The first one supports the high as resistance so I may add a short position with a tight stop. One must keep the weekly support line in mind, however.

© 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—at weekly uptrend line

2011-06-16T09:19:00.000-04:00

The Euro has continued down, touching 1.4074. This is near the lows of May 13 and May 16. The 100-daily SMA (currently 1.4159) failed to serve as support, something that occurred in both February and May. Price is sitting on an uptrend line on the weekly chart (drawn from January). A break of this would be significant and would confirm the break of the RSI trendline.

The bear flag target of 1.3994 is within sight.

It appears likely that, as I wrote on Monday, this is the third wave down with the move up from 1.1876 being a double zigzag correction. If so (and I’d be cautious here as the markets have shown a tendency to swing one way or another depending on the risk assessment de jour), then there is a lot further to go. The best strategy would be to sell weak rallies. There is still a chance this could be an ABC correction with this being the C leg. Additional targets if that is true are 1.4046 (C = .618 A), 1.3675 (C = A) and 1.3074 (C = 1.618 A). Paying attention to price and momentum behavior between 1.3994 and 1.4074 should offer clues as to where things go from here. If price gets below 1.3862, it destroys the bullish Elliott Wave count (see Monday’s analysis).

Resistance is at 1.4129 (the weekly 20 EMA), 1.4151/86, 1.4234/88, and 1.4320/50.

Here’s a 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—new low

2011-06-15T12:19:00.000-04:00

Euro touched 1.4206 but in doing so formed a hammer on the 15-minute chart with positive divergence. I think it can get lower—at least to 1.4155 (the daily 100-SMA) and maybe 1.4096 but it is probably time to take some profits. I have two short positions—one from 1.4581 and one from 1.4447.

© 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—trying to base

2011-06-15T11:14:00.000-04:00

Euro has dropped to a low of 1.4264. The bear flag target (see yesterday's blog post) is 1.3994 so obviously it has a way to go. However, it may be trying to base for a recovery.

The hourly candle's low that completed at 9 AM was 1.4264; the one that completed at 10 AM was 1.4265; and the one that just completed at 11 AM was 1.4272. Yesterday, I wrote that 1.4288 was support. If the basing attempt fails, the next support level is 1.4236, 1.4186/51 (50% of the move from 1.3429 to 1.4942 and the daily 100-SMA and near .382 of 1.2874/1.4942). After that is 1.4096 (C wave target if .618 of A (see Monday's analysis), and 1.40 (psychological).

If it consolidates before additional downward price movement, expect it to reach a high of 1.4347/53 or 1.4378/90 before turning down again. Above that should find resistance at 1.4444. I would be highly suspicious of additional downward moves if it regained that much. However, there have been a lot of back and forth in the markets as uncertainty continues to cast its shadow.

© 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—bear flag

2011-06-14T08:23:00.000-04:00

On the four-hour chart, Euro may be forming a bear flag. This pair loves to stair-step its way down so this would be in line with past price behavior. The .382 retracement of 1.4697/1.4288 was 1.4444. Price reached 1.4472 in the hour ending 7 AM EDT and for the hour just ended (8 AM), the high was 1.4468. The weekly pivot calculation is 1.4455. I would not rule out a move to 1.4493—the 50% retracement—or 1.4541, the .618 retracement. The latter is just above 1.4538, the .382 retracement of 1.4942/1.4288. Regardless, the zone between 1.4444 and 1.4555 is strong resistance.

Should the stinker—sorry, Euro—get above there, it means the pair would have regained the broken short-term trend line. After that, 1.4697 should cap prices. If it does not do so, there is little resistance to the high of 1.4942.

Support is 1.4406/4378 (.382 of recent move up, confluence, near flag breakout point, polarity), 1.4348, 1.4288, 1.4186/51 (50% of the move from 1.3429 to 1.4942 and the daily 100-SMA and near .382 of 1.2874/1.4942), 1.4096 (C wave target if .618 of A—see yesterday's analysis), and 1.40 (psychological). The bear flag target is 1.3994.

I'm leaning bearish, obviously, as I added another short position. However, closing prices on both my daily and three-hour point and & figure charts, show potential breakouts to the upside. I would take them seriously if they occur.

Here's the four-hour chart:

EURUSD—daily chart

2011-06-13T11:19:00.000-04:00

On the daily chart, one way to interpret the action from 1.1876 is from a bullish point of view as Euro makes its way up an upward sloping rectangle. The wave action would be:

Wave 1: 1.1876 to 1.2467 (591)
Wave 2: 1.2467 to 1.2152 (315)
Wave 3: 1.2152 to 1.3335 (1,183)
Wave 4: 1.3335 to 1.2588 ((747)
Wave 5: 1.2588 to either 1.4159 (1,571 pips) at which point began an ABC correction or to 1.4274 (1,686 pips) which then initiated a correction down to 1.2874.

That meets the three inviolate rules of an impulsive wave—wave three is not the shortest wave; wave four does not poke into wave one's territory, and wave two doesn't retrace more than wave one. The purpose of an impulsive wave is to make forward progress and price did do so. The action from 1.2784, though, is less clear. Bulls might say that would be the beginning of wave three. However, if it was then:

Wave 1: 1.2874 to 1.3862 (988)
Wave 2: 1.3862 to 1.3429 (433)
Wave 3: 1.3429 to 1.4942 (1,513)
Wave 4: Either it completed at 1.3970 or it is still in process. If it is still in process, then B topped at 1.4697 and C can go no lower than 1.3862 (because wave four cannot enter into wave one territory). In a zigzag, wave C is usually .618A, equal to A, or 1.618A . If it is .618 of A then that price is 1.4096. To equal A, the price would have to drop lower than 1.3862 which should not happen to preserve the Elliott count.

Euro touched a low of 1.4288 and now seems to be struggling to recover from there. If one examines a cloud chart (which I try to do as little as possible but as they become more popular it's worth glancing at them), Euro has descended down to the bottom of the cloud. However, since it entered from above, this is still bullish and supports the ABC correction theory.

However, there is another way to examine the price action from 1.1876 and that is as a large correction, made up of a double zigzag. I have marked the letters for this correction, a double zigzag, on the daily chart below and this fits in with weekly price action as well which is a big plus in my mind. If this is true, then there is a big drop ahead as we'd be in a third wave.

This just goes to show how loopy Elliott Wave can be if you attempt to use it as a trading tool. However, it can be evidence and it can indicate market psychology. The nice thing about either of these interpretations is that unless the 4th wave discussed above is complete, the most likely scenario is for additional moves down under either interpretation.

Looking at possible support, regardless of Elliott, when the price dipped to 1.3970, the 100-daily SMA held as support. Currently, the 100 is at 1.4143. That is very close to 50% of the move from 1.3429 to 1.4942 (1.4186) and .382 of the move from 1.2874 to 1.4942.

For resistance, the high today is 1.4404, just completed on the hourly chart. That was just above confluence but it was also a doji. Above that is 1.4450 and 1.4500. At that point, price would have regained the broken, short-term, hourly uptrend line.

Here's the daily chart:

EURUSD—met H&S price target

2011-06-10T10:03:00.000-04:00

Euro met the head and shoulders price target of 1.4419. In doing so, it has dropped to a low of 1.4402, breaking below both a descending triangle on the hourly chart and a short-term uptrend line. My short position, even from the poorer entry of 1.4581, has done well and is still on. Still, this is near support so some profit-taking at +170 pips is in order. A .382 pullback of the current move up was at 1.4419 and the monthly pivot was at 1.4445.

The next target is the .50 retracement at 1.4334. A close for the week below 1.4378 is bearish.

Here is the hourly chart:

EURUSD—hourly head and shoulders

2011-06-09T10:51:00.001-04:00

I shorted yesterday at 1.4644 but moved my stop too quickly and was taken out at break even. I shorted again at 1.4581 and while price so far is dropping, I would not start filling out deposit slips yet.

Still, there are some bearish signs. I wrote yesterday about an Elliott double zigzag that topped at 1.4942. On the hourly chart, a confirmed head and shoulders pattern is in place. The neckline was 1.4558 and the potential price target is 1.4419. Price has touched 1.4478 so it is not that far away. The 1.4419 target ties in with both a .382 pullback of the current move up at 1.4419 and the monthly pivot of 1.4445. Beyond that target is a .50 retracement at 1.4334. A short-term uptrend line on the four-hour chart comes in at 1.4326.

If this head and shoulder pattern should fail, then it would be wise to remember that such patterns often are part of an Elliott expanded flat and price could move up quite nicely. A move above 1.4734 (.786 retracement of the move down from 1.4942) would make this more likely.

Here is the hourly chart:

GBPJPY—dropping

2011-06-08T04:42:00.002-04:00

My short stopped out at +20 so I'm glad I took some profits when it was up at +68 pips. On the daily chart, the pair has dropped below the uptrend line from the March 16 low (see yesterday's blog). The low so far is 130.61, just a bit below Friday's low of 130.67. The May low of 130.29 is next, unless it can rally. Unless this is a fake-out, it's probably best to short rallies. There is positive divergence on the four-hour chart so a bounce may be in the works.

Resistance is at 132.08, 132.77 (June high) and 132.95/133.03/133.25, the 20- and 10-weekly EMA and 100 daily SMA respectively. After that are 134.50 (the daily chart downtrend line) and the May high of 135.14.

© 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—near strong resistance

2011-06-08T04:30:00.000-04:00

Euro is approaching strong resistance and looks as though price action might be bearish around 1.4720. On the daily chart, one can trace out an Elliott Wave corrective count with the double zigzag peaking at 1.4942. If the pair closes above 1.4734, this count will be invalid. This would be .786 of the move down from 1.4942 and would suggest further price moves up. However, the lovely thing here is that one can short and have a tight stop since the market would be giving a strong message with moves higher than 1.4734. If anyone reading this is long, tighten stops and possibly take some profits.

Beginning on May 26, yesterday was the eighth bar of a Tom DeMark sell setup with today being the ninth candle. The candles since the 1.3970 low have been robust—they have opened near the low and closed near the high so this is bullish. Price has also exceeded the .618 retracement of the move down from 1.4942. However, the bullishness may be close to a point where a consolidation would make sense. A .382 pullback would bring prices down to 1.4419 (close to the monthly pivot of 1.4445) and 1.4334 would be 50%. A move below 1.4300 would be very bearish.

On the four-hour chart (not shown), there is negative divergence with RSI—prices moving up but RSI moving down. My plan is to enter short and see how it goes.

Here is 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.

GBPJPY—struggling

2011-06-07T06:41:00.000-04:00

In line with my blog yesterday, I went long in GBPJPY at 131.08. I've locked in some profits at +68 pips but I'd like to see the pair do better than this. As it is, it's struggling with the 132 area, having reached a high of 132.08 this morning. That is only one pip higher than yesterday's high of 132.07. The .618 retracement of the move from 130.29 to 135.14 is 132.14.

One can trace out a five-wave decline on the hourly chart and, if this is so, the pair should be in a C wave with a potential high of 132.45 (where C would equal A) and 133.46 (where C is 1.618 that of A).

Resistance is at 132.08, 132.77 (June high) and 132.95/133.03/133.25, the 20- and 10-weekly EMA and 100 daily SMA respectively. After that are 134.50 (the daily chart downtrend line) and the May high of 135.14.

Support is at 131.89/71 (daily 200 SMA and the low for the prior two hours), 130.67 (Friday's low), and 130.29 (May low). Below 130 would likely see additional price drops.

Here is the hourly 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.

GBPJPY—Friday doji

2011-06-06T08:32:00.000-04:00

The Guppy dropped to a low of 130.67 on Friday, closing the day with a dragonfly doji. This can be a bullish signal as it means price had lower lows but price closed at the high of the day. Usually, though, it is more bullish if it occurs after a rise in price rather than a drop. Price has been dropping since the May 31 high of 135.14. One could view it as a hammer since there has been a drop in price. Price in the 130 area has served as support on several occasions and 130.29 was the low for May. The combination of the doji and being at support is enough to say that if price drops below 130, there may be further weakening. However, one could take a long position below 131with a stop below the doji. I will be watching momentum on the shorter time frames (4- and 1-hour) to see if I want to get into this trade.

If price manages to rally, resistance is close by at 132.77 (June high) and 132.95/133.03/133.25, the 20- and 10-weekly EMA and 100 daily SMA respectively. This is also near a round number. After that is 134.32 and 135.14, the high for May.

Here is the daily chart:

AUDUSD—nice drop

2011-06-01T16:42:00.001-04:00

Aussie came through today, touching a low of 1.0603 a few minutes ago. A sustained close below 1.06 would be good news for the bears. I am bearish short-term but it is important to remember that the pair is still in an overall uptrend.

© 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.

2011-06-01T16:39:00.000-04:00

AUDUSD—back at resistance

The Aussie drifted back to a high of 1.0753 overnight. Drifted is the correct word. The move did not have a lot of energy and one can see the lack of momentum in the diverging RSI on the one-hour chart. In doing this, it took out my short from yesterday at breakeven but I re-established it this morning at a better price.

As I wrote yesterday, on the daily chart, the picture appears corrective with a three-wave structure down to the 1.0441 price. The pair would be in the B wave. Given that the 1.0757 prior high was near the monthly 1.0746 pivot calculation as well as near the .382 retracement of 1.0724 (1.0257/1.1012), the fact that this is serving as resistance again this morning is significant.

It is true, though, that a pair that hangs around just below resistance can often break through it. Should it do so, the next resistance is at 1.0820 and then 1.0889. Support on the four-hour chart is at 1.0690 and 1.0634. The latter is the short-term support line but also at the 50% point of the 1.0257/1.1012 range. A break below 1.0600 opens up the possibility of
1.0567, 1.0441, and 1.0359.

Here is the one-hour chart:

AUDUSD—resistance

2011-05-31T12:40:00.000-04:00

By any reasonable technical analysis on the weekly chart, AUDUSD is still in an uptrend. One could argue that the pair recently completed an ABC correction with the drop from 1.1012 to 1.0537 being leg A, the rise to 1.0889 being B, and the slump to 1.0441 being almost the point at 1.0414 where C would equal A. If this were true, then one would expect price to resume rising and to surpass the 1.1012 high. I do have price targets up to 1.14. However, the pair is stumbling a bit in a resistance area.

From the 1.0441 low, Aussie has reached a high of 1.0757. On the daily chart, the picture appears corrective with a three-wave structure down to the 1.0441 price. This rise, then, would be wave B, a remnant of the former trend. The high so far of 1.0757 is near the monthly 1.0746 pivot calculation as well as near the .382 retracement of 1.0724 (1.0257/1.1012).

I had a sell order on the table that was filled Friday at 1.0725. I have moved the stop to breakeven. A more reasonable stop would be just above the recent high (1.0757) but I have been out of the market for a few days and need to get my bearings back. I can always short again if this one stops out. If price moves above 1.0889, I expect that would mean the larger trend is resuming. Note that there is positive divergence on the four-hour chart.

If the price breaks below 1.0607, the downtrend line beginning at 1.1012 on the four-hour chart, support is at 1.0567, 1.0441, and 1.0359.

Here is the four-hour chart:

EURUSD—weekly and monthly

2011-05-31T08:43:00.000-04:00

Last week, Euro closed above the downtrend line drawn from the 2008 highs. Price action today has moved above last week's high of 1.4325 to a high of 1.4424. The monthly chart shows an engulfing candle forming (outside bar) with a higher high and lower low than took place in April. This is occurring after four monthly candles with higher highs and higher lows. This is a warning of a possible trend change. The pair is also stuck in a confluence zone so it needs to move above 1.4490 to gain some real upward traction.

Look for support at 1.4194 (the downtrend line from the 2008 high) and 1.3969 (last week's low). Resistance is 1.4424 as well as 1.4490.

© 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.

Blog will return Tuesday 31 May

2011-05-27T08:29:00.000-04:00

Have a happy and safe Memorial Day weekend.

EURUSD—small bounce

2011-05-25T09:15:00.000-04:00

Yesterday, I traced out the move down from 1.4346 as being impulsive with the price action rise from 1.3970 possibly being a 4th wave. That wave topped at 1.4133 and price began to decline but only got as far as 1.4014 (two candles on the hourly chart were at that low). Since then, price has risen again with two candles topping on the hourly chart at 1.4094. Calculating this as an ABC correction from 1.4014 with A topping at 1.4093 and B dropping to 1.4044, results in 1.4093 being .618 of the A wave. Wave C would equal A at 1.4123 and would be 1.618 of A at 1.4173. However, if it continues to the latter two levels it is solidly within the resistance zone I wrote about yesterday of 1.4106 to 1.4162. In addition, an inviolate Elliott rule is that wave four cannot enter wave one's territory and that would be no higher than 1.4139. Therefore, resistance is at 1.4139. Beyond that, is 1.4233 and 1.4346.

The highest probability appears to be another move down. Note, though, that the pair is forming an ascending triangle on the hourly chart.

On the daily chart (not shown), the 1.3970 low formed a hammer so a drop below would be bad news. Support is at 1.3970, 1.3937 and 1.3863. 1.3521 is the daily uptrend line from last June.

Here is the hourly chart.

EURUSD—resistance

2011-05-24T10:30:00.000-04:00

Euro, after dropping to a low of 1.3970, has bounced to a high of 1.4119. Here it is struggling with a strong resistance zone of 1.4106 to 1.4162 that previously served as support. The .382 retracement of the move from 1.2874 to 1.4942 is at 1.4153.

On the hourly chart, price action looks impulsive with the rise to 1.4124 a possible fourth wave.

Note, that on the daily chart (not shown), the low formed a hammer so a drop below would be bad news. Support is at 1.3970 and 1.3863.

Here is the hourly chart.

AUDUSD—daily chart

2011-05-24T07:49:00.000-04:00

Aussie is drifting down within the downward sloping rectangle. The low so far is 1.0480 although it bounced a bit from there to 1.0580. On the hourly chart, the price action looks somewhat sluggish. The low of 1.0480 was below the .382 retracement of the move from .9706 to 1.1012. However, as I blogged last week, there is support in this area. The retracement of .382 of the move from .9537 to 1.1012 is 1.0439. The C leg equals the A leg of the ABC correction at 1.0414. The weekly S1 pivot calculation was 1.0444. The price objective from the triangle last week on the hourly chart was 1.0443.

The 50% retracement of 9706/11012 is around 1.0353—that is a good possibility if prices sink below the 1.0480 low. On the hourly chart, that low resulted in a hammer. The lower boundary of the rectangle is currently at 1.0293.

From a bullish perspective, this entire price action could be a bull flag on the daily chart. If so, price can still sink to the bottom of the flag (the downward sloping rectangle) at 1.0293 before rallying. There is still a long-term uptrend line in play from last June with a second touch in March. However, the market is clearly readjusting.

Here is the daily chart:

Sorry about no posts today

2011-05-23T15:26:00.000-04:00

I'm working on a project and just didn't have the time. I'll be back tomorrow.

EURUSD—weaker

2011-05-20T08:06:00.000-04:00

It appears as though 1.44 is a struggle for the Euro. The high was 1.4336 in the last hourly candle. Euro then dropped to a low of 1.4212, breaking below what may in fact be a bear flag on the daily chart. Target of the flag is a heart-stopping 1.3350. That is a bit far away to get excited about, especially since there are significant support levels before that. The nearest one is a strong confluence zone at 1.4169/28. Additional support is at the May 16 low is 1.4067, then 1.3890, the .382 retracement of the move up from 1.2874.

If the pair is going to rally, it needs to overtake 1.44. However, the first target to get excited about is the channel from the beginning of the year at 1.4671.

Yesterday I went long at 1.4237 and was stopped out at +40 pips—another insignificant trade. As I blogged yesterday, where does one decide to get back in? Since the pair is now throwing off signals that it is weakening, I will most likely look for short entries. The lower boundary of the bear flag at 1.4246 is one possibility but I will be keeping an eye on momentum. If the pair breaks 1.4200, that is another sign of weakness.

Here is the daily chart:

EURUSD—1.44 in site

2011-05-19T05:58:00.000-04:00

Yesterday, I wrote that 1.4319 was a likely target and Euro touched 1.4307 last night before falling back to a low of 1.4207, thus taking out my long position I had established at 1.4188. I probably should have left the stop at breakeven—19 pips isn't worth waking up for—but that's neither here nor there. The question, once taken out, is does one get back in? If so, where? It always amazes me that traders who get stopped out don't have a clue as to the answers to these questions.

On the short, three-hour chart, I think it's possible the Euro can get to 1.4400 but it seems as though it's going to be a long grind. The high last night of 1.4307 was only 20 pips higher than the day before. Obviously, there is some pressure on the pair. However, as long as the Euro stays above 1.4261, higher highs are possible. 1.4390 is .382 of the move down from 1.4942 to 1.4049 and 1.4342 is .618 of the move down from 1.4588. 1.4440 is 1.618 of the A leg of the ABC correction I wrote about yesterday. Moving right along the upper boundary of the rectangle on the three-hour chart, the boundary hits a confluence point around 1.4386. So, I entered long again earlier this morning, albeit at a much less attractive price than yesterday (1.4237 versus the prior 1.4188).

© 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—resistance

2011-05-18T11:11:00.002-04:00

The Euro touched a 1.4287 high late last night, just above the weekly 10 EMA of 1.4261. As I wrote on Monday, the weekly 10 EMA has been support since early March. Now it looks as though it may be serving as resistance.

On the three-hour chart, the pair might be in an ABC correction beginning with the low of 1.4049, going to A at 1.4244 and B at 1.4124. The potential price for C is 1.4245, 1.4319, or 1.4440. Of the three, I like 1.4319 (where C equals A) since that equates with 1.4326 which would be the top of the rectangle. This is also near a .382 retracement of the move down from 1.4548.

Support is at 1.4121 and 1.4049.

I went long yesterday at 1.4188. Obviously, I have moved my stop to breakeven.

Here's a three-hour chart.

AUDUSD—hourly chart

2011-05-18T09:55:00.000-04:00

Aussie broke above the triangle yesterday to a high of 1.0665. This was just above former short-term price resistance and price is now drifting downward and has almost reached the extended line of the triangle from yesterday's hourly chart.

This may serve as support (at/above 1.0559) or it could have been a fake-out move. If price bounces from there, it's a failed pattern (at least from the Elliott perspective) and could be the basis for some good gains. However, one will want to watch momentum if trading on this short time-frame.

One can look at this entire mess from the price high of 1.1012 as a complex correction, a double from an Elliott perspective.

Support is still present in the 1.05 area. A retracement of .382 of the move from .9706 to 1.1012 is 1.0513 and that same price is the monthly S1 pivot calculation. The weekly 10 EMA is 1.0533. There is also the psychological 1.05 round number.

Beneath 1.05 is also good support down to 1.04. The retracement of .382 of the move from .9537 to 1.1012 is 1.0439. The C leg equals the A leg of the ABC correction at 1.0414. The weekly S1 pivot calculation is 1.0444. The price objective from the triangle itself is 1.0443. After 1.04 is 1.0359, (50% of .9706/1.1012).

Resistance is 1.0665, then 1.0717.

Here is the one-hour chart:

Trouble posting

2011-05-18T09:48:00.002-04:00

Ever since my main computer upgraded to IE 9, I'm having a lot of trouble posting.

AUDUSD—triangle

2011-05-17T10:11:00.000-04:00

Aussie is still below its broken trend line. The dip to 1.0514 took it slightly below last week's hammer low of 1.0537. This is not good. It is currently coiling within a symmetrical triangle. Symmetrical triangles are often continuation moves although they do not have to be. From an Elliott perspective, a triangle always resolves with price action continuing in the direction from which it entered the triangle, downward in this case. Looking at price behavior from the high of 1.1012, an ABC correction is taking place, with the C wave unfolding. The potential price for the C wave is 1.0595 at .618 of A, 1.0414 where it would be equal to A, and 1.0120 where it would be 1.618 of A.

There is some good support in the 1.05 area. A retracement of .382 of the move from .9706 to 1.1012 is 1.0513 and that same price is the monthly S1 pivot calculation. The weekly 10 EMA is 1.0533. There is also the psychological 1.05 round number.

Beneath 1.05 is also good support down to 1.04. The retracement of .382 of the move from .9537 to 1.1012 is 1.0439. The C leg equals the A leg of the ABC correction at 1.0414. The weekly S1 pivot calculation is 1.0444. The price objective from the triangle itself is 1.0443. After 1.04 is 1.0359, (50% of .9706/1.1012).

Triangle resistance is 1.0604. There should be one more move up to this price before prices break downward (if they are going to break downward). Short-term price resistance is at 1.0642 and then 1.0717.

Here is the one-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.

EURUSD—key support

2011-05-16T04:53:00.000-04:00

The Euro dipped below a daily key support range of 1.4115/84 with its dip to Friday’s low of 1.4067. It closed at 1.4118 which is just within the range. The prior price low on April 18 was 1.4157.

On the weekly chart, the close was between the 10 (1.4261) and 20 (1.4041) weekly EMA. The 10 EMA has been support since the week ending 4 March 2011. Notably, price broke the weekly uptrend line drawn from January and RSI dipped below its uptrend line. Trend line breaks are a warning. In addition, it’s a nice ABC correction, chart wise (however charts don’t make the moves).

If price can’t stabilize here, then the break of the weekly EMA 20, price support, and the psychological 1.40 leads to a major support zone from 1.3852 to 1.3908. There are several components to this support zone. 1.3908 is 50% of the move from 1.2874 to 1.4942 and 1.3902 is the weekly pivot S2 support. 1.3862 was .618 of the move down from the Nov. 2009 high of 1.5144 to 1.1876. 1.3852 is parity. All this will make for a very strong support zone. If this zone breaks, then 1.3500 is possible. That would be at the uptrend line from the 1.1876 low in June 2010.

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.

Week High, Low, Close

2011-05-16T04:32:00.000-04:00

Traveling

2011-05-10T09:25:00.001-04:00

I'm traveling the next few days so won't get much chance to post. I will be at the MTA conference on Thursday and Friday in New York so I'll post some tidbits from the presentations there.

USD Index—Weekly

2011-05-09T06:20:00.002-04:00

Last week was a nice bullish engulfing candle for the USD. One could make the case for the recent low of 72.69 being an Elliott wave two. This would suggest that the price behavior for the last two years from the 89.63 high was a complex, double zigzag correction (WXY). One could also argue against this, i.e. the move that ended at 88.66 was an ABC correction with the downtrend now resuming.
Another way to look at the weekly chart is as a contracting rectangle. I like this interpretation as it is simple, in line with Occam's Razor. The top of the rectangle is at 88. However, whether one chooses the optimistic Elliott interpretation or the rectangle one, the next move should be up. If the buck can climb above 75 then next resistance is at 75.82, then 78.87 and 81.45. Support is obviously the recent low of 72.69, then 71.31 and 70.67.

Here is 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.

Weekly High Low Close

2011-05-09T05:45:00.002-04:00

AUDUSD—3-hour price

2011-05-06T09:15:00.001-04:00

On the regular 3-hour price chart, the Aussie formed a hammer candle at the low. However, it broke its uptrend line on the way down and I take trend lines seriously. Nonetheless, based on the hammer and the P&F chart support I blogged about below, I bought yesterday at 1.0618. Note, though, that it's at the short-term downtrend line resistance. This could be 4th wave, the remnant of the prior uptrend. Time to take a little off the table in the way of profits.

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—P&F

2011-05-06T09:01:00.001-04:00

On my three-hour point and figure chart (P&F), the 45° internal support line held yesterday's drop to 1.0537.
A P&F chart shows only price change and disregards time. Because the chart does not change unless price changes by a predetermined amount, many see these types of charts as a way of depicting uncontaminated supply and demand. There is also a belief it shows volume indirectly since price does not usually change unless there is volume behind the change.

The "X" column means price is increasing; the "0" column, that it is decreasing. The 45° support line is more objective than trend lines drawn on regular price charts (at least according to aficionados of the method).

I find the use of P&F charts valuable but use them as an adjunct to my other approaches.

Here is the 3-hour chart for the AUDUSD. I draw it on a closing basis for the three-hour period. One can see that the The 45° support line held nicely and the pair has rallied. This line was also at the point of a triple breakout on the chart. Resistance on this chart is now at 1.0950.

© 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—nearing major support

2011-05-05T10:27:00.001-04:00

Most recent low is 1.4654. The 38.2% retracement of the move from 1.4157 to 1.4882 is 1.4605; 50% retracement is 1.4520. The April congestion zone was also around 1.4520. The annual pivot calculation for R1 is 1.4683. The monthly pivot is 1.4584; weekly S1 is 1.4573.

What this means is the Euro is in a strong support zone from here down to 1.4520. That's 130 pips below the most recent low so the zone is rather large. However, it also means that it could base anywhere in this zone. Obviously, if it breaks 1.4520, it's huah for the bears, especially if there is a weekly close below here.

© 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—weekly support

2011-05-05T09:57:00.000-04:00

Weekly support from the steep uptrend line drawn from .9706 is 1.0647. The most recent low is 1.0643. A break below this opens up 1.0570 and 1.0444.

It's also possible the pair will base here. Watch momentum on the shorter-term charts. For example, on the one-hour chart, there is positive divergence with RSI.

EURUSD—Coiling

2011-05-04T08:03:00.003-04:00

On the three and one-hour charts, Euro is coiling in a symmetrical triangle. From an Elliott point of view, a triangle is a continuation move with a price target around 1.5015. Note that there would be one more leg down on this triangle to complete the E leg. Thus, one could go long if it reaches this, around 1.4790.

There is short-term negative divergence with RSI on the three-hour chart, although longer term, price and RSI remain in an uptrend together. The triangle also followed a broadening pattern. Broadening patterns after highs are often deadly. However, the combination of the broadening pattern and the triangle result in a rough diamond pattern. If this is a diamond, subsequent moves are usually rapid.

Support is at 1.4790, 1.4728/11, 1.4689, 1.4639, 1.4528 and 1.4496. First resistance is 1.4902, then 1.4961 and 1.5000/15. After that, there is 1.5105/16, 1.5163 and a potential price target at 1.5163.

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.

No posts today, Tuesday

2011-05-03T10:23:00.000-04:00

EURUSD—possible price resistance, support and targets

2011-05-02T09:06:00.003-04:00

If the market continues to hammer the USD, Euro will likely continue to rise. What are some possible resistance levels and price targets?

Weekly pivot calculations provide an R1 resistance level at 1.4961 and R2 at 1.5116. The latter ties nicely with the monthly R1 level at 1.5105. On the weekly chart, one can identify an ABC correction. A begins at 1.1876 with a three wave move up to 1.4283; B ends at 1.2859; and C is in progress with a target of 1.5266.

Another way of looking at this entire move is to consider it a harmonic move on the weekly chart of AB=CD with C to D still in progress. Taking the B to C retracement, would result in a price target of 1.5163. That is close to the resistance levels from the pivot calculations above. Looking at the monthly chart, one can trace out an AB=CD move in progress (AB=1.1876 to 1.4283 with C beginning at 1.2971) and the target is 1.5378. I think that is the high end for any move.

Support is at 1.4728/11, 1.4520, 1.4450/34, and a strong zone in the 1.4184/15 range.

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.

March to April results

2011-05-02T08:42:00.002-04:00

April was especially nice if one was long Aussie, Euro or Cable to the USD. The USD took a beating everywhere. EURGBP went almost nowhere.

Weekly High Low Close

2011-05-02T08:35:00.002-04:00

AUDUSD—another new high

2011-04-29T08:55:00.001-04:00

Ridiculous but welcome since I'm still long from .9940. I took profits on other position. New high this morning of 1.0964.

USDCHF—another new low

2011-04-29T08:53:00.001-04:00

Damned if USDCHF did not find a new low at .8651, not too far below the prior low. Is it a retest of the low before a rally? Could be, but don't bet the bank on it. Price did not complete the symmetrical triangle I wrote about yesterday before breaking below—this indicates weakness and a potential price of .8537.

© 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.

USDCHF—struggling

2011-04-28T10:33:00.002-04:00

Two days ago, USDCHF fell to a low of .8671 just above S2 of the weekly pivot calculation. As I wrote then, the low formed a hammer candle at weak support and there was positive divergence on the three-hour chart. The pair then rose to .8834 and dropped to .8689. On the one-hour chart, this looks clear as a potential ABC pattern. Leg C of this would be .8790 if C=.618 of A, and .8852 if it should equal A, or .8953 if 1.618A. The pair has only managed to rally to .8761 and here it is struggling.

The pair also appears to be coiling within a triangle. If this is a consolidation move and it breaks below it, the potential target is .8537. This aligns with some targets I have from Elliott analysis on monthly and weekly charts. Unfortunately, I have other targets lower than that, down to .7980 from point and figure work and from Elliott. A reader pointed out that a downtrend line drawn off the lows for the past 100 years is coming in but it looks as though the pair is threatening to break that. One would still expect a rally up to at least .8790 as the triangle legs aren't complete.

Interesting price behavior at interesting psychological extremes. Is there anyone who has a positive opinion about the dollar. On the other hand, who is left to sell except some weak hands?

© 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.

GBPUSD—resistance

2011-04-27T08:06:00.003-04:00

Can GBPUSD overcome its current resistance? On the weekly chart, there is a short-term downtrend line coming in from 1.6879 that had its second touch last week. The prior high is 1.6600; the high this morning was 1.6581.

I bought yesterday at 1.6457 based on the low of 1.6432 being near the .382 retracement of 1.6166/1.6600, the weekly pivot being at 1.6425, a prior breakout point at 1.6428, and the pair being near the bottom of a flag pattern on the three-hour chart. Obviously, I've locked in some profits and my stop is above breakeven.

The pair is down to a low of 1.6545 so far. This is near weak support at 1.6553/49. Additional support is at 1.6504, the breakout point of the flag pattern. If things look OK as to momentum and price if it returns there, I may add to my position. Beneath this is 1.6428/17.

I have price targets to 1.6953, 1.7045 and 1.7140 should the pair start to boogey.

© 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.

USDCHF—new low

2011-04-27T07:47:00.000-04:00

USDCHF fell to a low of .8671 just above S2 of the weekly pivot calculation. On the three-hour chart, this low formed within a hammer candle. Since the hammer is at weak support and there is positive divergence on the three-hour chart, let us see if the pair can overcome current resistance at .8765. Just above here is the psychological resistance of .8800.
I am almost positive that Bernanke can say something today to assure the dollar will continue to decline.

© 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.

USDCHF—at wedge support

2011-04-26T07:15:00.002-04:00

On the weekly chart, the price has fallen to the bottom of a descending wedge (outlined in red) with the low at 87.46. This is taking place within the downward sloping rectangle. Bulkowski, in his book Encyclopedia of Chart Patterns, notes that there should be at least five touches with a minimum duration of three weeks. While wedges can be consolidation patterns of the prevailing trend, falling wedges can resolve to the upside simply because the steepest angle is usually more difficult to maintain. If price does break upward, it can move quickly. This is because energy is being stored up as the price moves become narrower. Note, too, that there is positive divergence on the weekly chart. However, as I wrote yesterday, one can go broke trading positive or negative divergence.

It would take a brave person to suggest buying the dollar at this point. After all, the sentiment against it is extreme. An extreme position never maintains itself in the markets but it can take time to resolve. Still, nothing continues straight down so there should be a reaction at some point.

A weekly close below the lower boundary of the wedge would be bearish. I have a target of .7980 on my daily point & figure chart. On a long-term monthly chart, one can make an Elliott Wave argument for .8500 down to .7500. S1 of the annual pivot is at .8520; S2 and S3 of the monthly pivot is at .8716 and .8513 respectively; S1, S2 and S3 of the weekly pivot are at .8758, .8653, and .8525.

Resistance is at the top of the wedge, near the round number 90. The next resistance is at .9150. This is the daily 50 SMA and this held price on the daily chart in early April.

© 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—comparison of two up trends

2011-04-25T07:41:00.002-04:00

On the monthly chart, a comparison of two up trends is interesting as to time and price.

The current ascent began with the 10/2008 low of .6007 to the recent high of 1.0778. This was 4,771 pips over a period of 31 months. The ascent that began with the 4/2001 low of .4775 to the 7/2008 high of .9851, totaled 5,076 pips over a period of 88 months. The gains from 2008 have been 94% of those in the prior uptrend but in only 35% of the time. Has price gotten ahead of time?

Momentum, as measured by RSI, is also more gradual in the current up trend. Even with the meteoric rise the Aussie has been experiencing, RSI is not "overbought" (over 70). Nor has it achieved its prior highs—negative divergence with price. If ever there was a good example of how one cannot trade divergence by itself, this is it.

Look closer at the divergence though. Connie Brown, writing in Technical Analysis for the Trading Professional, discusses a positive or negative reversal, a hidden divergence. For example, I wrote the words positive reversal below the down slanting red line under RSI between 2003 and 2006. She describes this as the market building internal strength—price is higher but there is a new oscillator low. She provides a method of calculating price moves from these and, in this case, her method resulted in a price target of .9473, quite a bit lower than the .9851 high but arguably higher than one might have otherwise calculated at that point in time, especially if one let oneself be blinded by the negative divergence.

Another interesting characteristic of the chart is the AB=CD comparison. In the former uptrend, AB (4775/8010) was 3,235 pips. CD (6774/9851) was 3,077 pips. Close enough. In the current uptrend, AB (6007/9408) is 3,401 pips. If CD is equal to that, then the price target for CD is 1.1467. Far-fetched? Perhaps. If the pair made it to the top of the upward sloping rectangle, that would be about 1.15. I also have a daily point and figure target of 1.14.

As I wrote last week, that the Commitment of Traders report is near an extreme of non-commercial longs to shorts. Extremes are not a good thing. However, you cannot trade that either. Even if the Aussie suffered a sharp correction, the overall trend from .4775 is up with two touches of the trend line.

Resistance is between 1.0750 and 1.0830, then 1.0900. Support is at 1.0583. Additional support is at 1.0444, 1.0390, 1.0289, 1.0248 and 1.0205.

For those who trade on shorter periods than the monthly chart, there are many opportunities to buy and sell but buying pullbacks has obviously been a good strategy for the last several years.

Here's the monthly 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.

Week Ending 22 April 2010

2011-04-25T07:39:00.001-04:00

No posts Good Friday

2011-04-21T10:33:00.001-04:00

Tomorrow is Good Friday and I will not be posting. For those who celebrate Easter, have a glorious and blessed holiday.

Lower liquidity

2011-04-21T10:32:00.001-04:00

Once London closes today, expect much lower liquidity as we move into a holiday weekend.

EURUSD—new high

2011-04-21T08:12:00.003-04:00

New high yesterday; new high today of 1.4649. The bulls are frothing at the mouth. The real Elliott Wave people (i.e. those who follow the rules and guidelines of the theory correctly and not those who distort the theory to suit their own means) are very quiet since most reasonable EW interpretations has been calling for a drop. So where might price go from here?

We're beyond a few price targets. Probably nobody much remembers the daily flag whose pole began at 1.2874 and ended at 1.3862 before forming the flag. That price target was 1.4566. Resistance is at the round numbers of course—1.47, 1.48, etc. If we are in a double ABC correction on the weekly chart, such as I posted on April 8 with the A wave beginning at 1.2859, then 1.618 of A is 1.5052. The top of the daily rectangle is at 1.5016. The two together will make for nice resistance if Euro should climb that far. Above that is the November 2009 high of 1.5144. I have a target on my daily Point and Figure chart of 1.5620 but I do not believe the European Central Bank has enough money to push it up that high, ha-ha. Everyone seems to forget this rise is taking place within some interesting fundamental factors. Euro bulls would call those sour grapes but I don't see why we all have to pretend the emperor is wearing new clothes.

Note that there is a broadening top forming. There are only two touches so far (if this is a high before a correction). An orthodox broadening top requires three touches at the top. These are deadly because they suggest a highly excited, out of control market. So if one is inclined to go long, buy on a pullback, watch momentum, and use tight stops.

There is negative divergence on the three-hour chart. Nearby support is at 1.4577 (the very steep short-term uptrend line), 1.4517 (prior resistance, short-term), 1.4451 (.618 of 1.6041/1.1876), 1.4400 and 1.4341 (lower boundary of the daily rectangle).

Here is a 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.

EURUSD—above resistance

2011-04-20T08:15:00.001-04:00

With the high this morning of 1.4547, Euro is above the 1.4520 resistance that had capped a congestion range. It is clear that buyers did enter as I wrote about the weekly chart on Monday. Because it held at 1.4157, that strengthens that area which was already a strong support zone.

If Euro can maintain the move, the target of the top of the daily triangle at 1.4969 is possible. However, note the negative divergence on the daily chart. Failure here will find support at 1.4326 (the lower boundary of the rectangle), 1.4157 and the psychological 1.40.

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—nice move

2011-04-20T07:51:00.002-04:00

With the new high this morning of 1.0687, Aussie has accomplished a major price target. I added two positions yesterday at 1.0500 thinking this was perhaps a bit high for an entry but one of them hit their profit target at 1.0650 and the other is still on. My other two positions are from .9940 and 1.0236. I've taken partial profits on the one from .9940.

Where is it going to go from here? As I wrote yesterday, I have price targets at various levels up to 1.14. In the minutes released yesterday by the Reserve Bank of Australia, there is comment that since Japan is a major export market for Australia and since there is going to be massive rebuilding and reconstruction in Japan, Australia's exports to Japan may increase. What is interesting is that exporters usually find a strong currency to be a challenge. The Australian dollar is very strong indeed.

Since 1.0650 was a major target, one would expect sellers to take some profits. This should depress prices a bit—let's see if it happens or if buyers are on a tear. It is difficult to believe price can keep rising like this. Where are the buyers who have not already bought in? On the most recent Commitment of Traders report, there were 97,153 long noncommercial traders and only 6,502 short ones. These are extremes. Such extremes do not occur frequently.

First level of support should now be at 1.0583. Additional support is at 1.0444, 1.0390, 1.0289, 1.0248 and 1.0205.

Below is the three-hour chart I prepared yesterday where I entered because there was a hammer at the low of 1.0444 and it was near a price projection I had made for an ABC correction.

© 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—weekly

2011-04-19T07:17:00.003-04:00

The most noticeable characteristic on the weekly chart, besides the robust uptrend, is the doji candle that formed this past week. This candle is a dragonfly doji. In the dragonfly, the open and close takes place at or very near the high. In this case, the high for the week was 1.0581 (almost spot on the high of the prior week at 1.0583 that was the open for the week) and the close was 1.0566. The low for the week was 1.0390. Many see this type candle as bullish because psychologically it shows that price dropped to lower lows but managed to close near the highs. Nonetheless, it reinforces resistance at 1.0583.

Any type of doji, after up trend, hints that the market may be running out of steam. This doji, coming as it does at a new high, is suspicious. If this week's price action results in the Aussie closing at lower lows, then it will confirm an evening star pattern which. This is bearish.

Still, bearishness may only mean a correction before the uptrend resumes. After 1.0390, there is strong support in a price zone from 1.0289/82 (week ending 4/8 low and weekly 10 EMA) down to 1.0248 (.382 of the 9704/10583 move) and 1.0205. With such a strong uptrend in place, this zone most likely would hold any correction.

I'm still long with various positions from .9940. I would probably add on significant dips. It is true that this trend is mature and it is true there is negative divergence on the weekly chart. However, unless we're going to have a significant correction across many markets and unless there is going to be some sort of policy change that supports the US dollar (haha, let me not choke laughing), it's more likely the Aussie will resume an uptrend after any correction. If it does so, 106.50 is next and there are price targets up to 114. Of course much backing and filling would occur along the way.

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—weekly

2011-04-18T09:05:00.002-04:00

Euro high last week was 1.4520 before dropping off to a low of 1.4267 this morning. This is major support since 1.4263/43 was a prior high and parity. Beneath that is 1.4227 (.382 of the move up from 1.3752) and 1.4223 (the broken long-term downtrend line on the weekly chart). Buyers may well enter. If the bulls fail to hold price there, then below that is a support zone beginning at 1.4166 down through 1.4103. Note that the pair is still within the rectangle on the weekly chart and could move up rather sharply.

On the weekly chart, there is a possible evening star forming. This is a three-candle pattern where the first candle is a strong bullish candle, the second is a much smaller sometimes doji star, and the third candle closing deeply within the first one. Forming at resistance, as it is, adds more significance if the close at the end of the week confirms the pattern. That is not tradable for many short-term traders but the way to trade it, if you believe it is going to happen, is to short rallies on the shorter-term charts.

© 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.

2011-04-18T08:35:00.001-04:00

USDJPY—daily This pair continues to show some interesting but messy price behavior. On the daily chart, a flag pattern is forming, possible consolidation on the way to higher prices. If this is a flag, the target is 92.13, which seems somewhat unlikely although certainly not impossible. However, before this ever happened, bulls need to carry the price above 84.20/77, 85.16 and the recent spike high of 85.52. Note that the price has moved back inside the triangle (the dotted lines) that contained it for the most part over the last several months. The low so far has been 82.65, very close to the support I blogged about last week of 82.56. A .382 retracement of the recent move up from the 76.59 low would be 82.11; 50% is 81.06. 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.

Week Ending 15 April 2011—High, Low, Close

2011-04-18T08:01:00.001-04:00

Overwhelmed

2011-04-15T09:50:00.002-04:00

Sorry for no blog posts Thurday and Friday. Between a touch of the flu, taxes, and my cat, Alban, getting diagnosed with bone cancer, it has been a tough week.

I sat down Thursday morning, early, to try to trade and I just couldn't focus. I was determined to get back to it today but I just don't have the energy. Sometimes, it's better to let it go. We all have to recognize when life overtakes us and realize we can't be at our best.

I'll have it back together by Monday.

No posts today, Thursday

2011-04-14T07:43:00.001-04:00

See you Friday.

USDJPY—immediate support and resistance

2011-04-13T10:07:00.001-04:00

On the daily and hourly time charts, immediate resistance is a zone of 84.20/77, 85.16 and 85.52. Immediate support is at 83.47, 82.56, and 80.71. On the hourly chart, there is a symmetrical triangle with a possible next leg down to a D point at 83.55 before a move up to point E from the Elliott perspective (whereupon it should move down sharply). One can also view the recent hourly price action from 83.47 as an ABC correction with possible C targets of 84.10/84.47/85.06. After that it should move down. Recent high has been 84.26.

© 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.

USDJPY—weekly chart

2011-04-13T09:52:00.001-04:00

Yesterday I looked at the monthly chart where there were some interesting characteristics. The weekly chart is also interesting in its own way. Price is getting close to a downtrend line resistance from the 110.69, July 2008 high. Tying it back to the monthly chart, 110.69 was the high before it broke below the multi-year symmetrical triangle.

Look at the weekly rectangle before the recent spike low to 76.45. One sees a high of 84.53 and low of 80.22 or 431 pips. Subtracting the 431 pips from the 80.22 low, one gets a target of 75.81, not far below the recent spike low of 76.45. However, that spike low quickly reversed. Price came back in the rectangle and pushed above its upper boundary. Psychologically, the market participants charged down, reversed en masse, and charged back up. Terrific herd behavior.

If price should maintain itself above the rectangle, the potential price target is 88.94. There is negative divergence with RSI on this chart just as there was on the monthly chart. However, before it could get there, price must overcome the downtrend line resistance, located today at 86.19.

Thinking about both the monthly and weekly charts, it is possible wave five ended at 76.45 (I would not bet the bank on this or anything relying only on Elliott Wave Theory but one could argue this wave count). However, if true, the next move would be up in an A wave.

Weekly chart support is at 83.4, 81.39, 80.59 and the egregious 76.45. Below that is not much support.

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.

USDJPY—monthly chart

2011-04-12T08:45:00.003-04:00

USDJPY fell to 83.47 over night but has since rallied a bit. On the monthly chart, the pair fell from a multi-year triangle in 2009. If one tries to interpret the price target from this based on an Elliott perspective, it's too low to be meaningful (well, it would be meaningful if it happened but it's not realistic from today's vantage point). One could estimate a wave five price target at 62.76 (gulp) if golden section calculations are used.

Interesting is the fact that if you look at the AB=CD harmonic, the 1.27 extension of CD is 76.19. This is based on A beginning at 147.63 and ending at 101.22 (4,641 pips) and C beginning at 135.14. 4,641 times 1.27 equals 5,894. Subtracting that from 135.14 brings it to the 76.19. The pair hit a low of 76.45 in the most recent dip.

Also interesting is the symmetry of the move from 147.63 to 76.45. It's almost, not quite, a three-drive pattern, a harmonic pattern that can signal a trend reversal. Note the positive divergence with RSI on this chart and the hammer at the recent low. These three together suggest higher prices may be coming. For that to happen however, the pair must first overtake the long-term downtrend line. It also needs to overcome resistance at 85.54, 85.93, 90.00 and 94.99.

Here's a monthly chart. I'll post a weekly chart later.

© 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—possible consolidation or retracement

2011-04-11T09:11:00.005-04:00

Euro reached 1.4488 on Friday so bulls are in control coming into the new week. However, because there is strong resistance here, the possibility is for at least some consolidation and perhaps retracement. The resistance consists of price targets, wave and harmonic projections, and the .618 retracement of the move from 1.6041 to 1.1876 at 1.4451. This does not mean the move up is over. As I wrote on Friday, there is a possibility the pair is moving up within an upward sloping rectangle on the weekly chart that would take it to 1.5150. Applying even rudimentary cycle analysis also makes that possible. Within the daily chart, though, one can see that Euro is at the top of a similar type of rectangle and a drop to the bottom of this pattern wouldn't be unusual. Support is at 1.4420, 1.4384, 1.4320, then major support around 1.4262/43 (prior high and parity), 1.4202 (.382 of the recent move up from 1.3752), and then a zone beginning at 1.4166 down through 1.4100. Most likely, these supports will cause dip buying. Here's the daily chart:

Week Ending 8 April

2011-04-11T09:10:00.002-04:00

EURUSD—new high

2011-04-08T06:23:00.002-04:00

Euro has touched 1.4421 this morning. On the way, it broke the downtrend line on the weekly chart.

This move up has triggered many stops. This covering of short positions helps price rise. Now that price has topped 1.44, a big psychological number, there should be some reaction.

Were there price targets in this range? Yes. As I pointed out in my comment on the daily chart earlier this week, I had targets up to 1.4366. Given that Euro closed at 1.4392 yesterday, one has to look at weekly targets. One of the closest is 1.4432. This is where the current C wave on the weekly chart would be equal to A. 1.4451 is .618 of the move from 1.6041 down to 1.1876. As a result, 1.4450/4500 should top before a reaction. Profit taking will also fuel a reaction. I wouldn't necessarily short the reaction except in very small time frames. With the current signals, higher probability trades are those that buy dips. It is very possible that Euro is heading towards the top of the upward sloping rectangle, around 1.5150.

What about my Elliott count on the weekly chart below that implies this is wave 2 of (3)? Am I daffy? I hope not.  While I take it seriously when a pair breaks a major trend line, it's not my only piece of evidence. I don't have good reason yet to change my count. That count is a result of price activity from July 2008 to the present, almost 33 months. The current upward push from 1.1876 took place over the last nine months, about 28% of the total time.

I would like to see the pair retest the trend line, perhaps dip slightly below, and then reverse upward again to gain confidence in buying a large position.

Support for a pullback is at 1.4389, 1.4350/20, 1.4280/43, 1.4152 (strong) and 1.4000.

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.

AUDUSD—new highs

2011-04-07T08:53:00.002-04:00

AUDUSD reached a new high this morning of 1.0495. This was the first of several price targets in a zone that extends to 1.0550/95. I've unloaded some longs but still have two positions. I'd expect a reaction between there and 1.0600. Note that some trend lines intersect near 1.0700. (I don't disregard old broken trend lines). There are additional price targets up to 1.1400. While it certainly would not achieve that soon, this currency is a bullish freight train. Since the low in 2008 of 6007, Aussie has gained 4,488 pips, a gain of 75%. One could have done far worse than to simply buy dips in this currency. Commodity currencies in general are strong.

There is negative divergence on the daily chart. However, daily candles are strong—they are not throwing off many upper shadows. If it were, it would be a hint the market is rejecting higher prices.

Support is at 1.0289/57.

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.

GBPUSD—April seasonally strong

2011-04-06T07:55:00.002-04:00

If you look at the monthly chart below, you can see that April tends to be an up month for Cable. I've marked the years above the April candle. This chart begins in 2001 so it is only nine years of data but the pattern goes back further than 2001. Think about it only as something of which to be aware.

Cable is still below the downtrend drawn from 2009. However, the pair broke above a long-term downtrend line from Nov. 2007 in February, closed below it in March and is above it again as of today. The pair needs to close above 1.6401 for this break to gain credibility.

Note the symmetrical triangle. These can be continuation patterns. From an Elliott perspective, they always are continuation patterns that occur in a fourth wave. If this is true, the width of the triangle is the price target for wave five. This would be 3,542 pips (1.3503 to 1.7045). It seems a bit much to contemplate at this point—way down in the 1.11 area.

If, instead of a triangle, one wants to look at this as an ABC correction, then wave C at .618 A would be 1.6400. Other approaches strengthen this resistance. The .382 retracement of the 2.1164/1.3503 decline is at 1.6430 and 1.6410 is R3 of the weekly pivot.

Above 1.6430/1.6500 would strengthen the case for a move to much higher prices. The August 2009 price high is 1.7045. A daily flag target I blogged about March 19 had a target of 1.7215. If this is an ABC correction and wave C equals A, the target is 1.7725.

On the support side, 1.5345 is the most recent swing low. If one buys the Elliott triangle interpretation, leg D of the triangle would be 1.47 or so.

Here is the monthly 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—correcting

2011-04-05T10:01:00.004-04:00

After yesterday's high of 1.0422, Aussie has pulled back to a low of 1.0289, breaking below its short-term uptrend line. RSI also broke below its uptrend line. The pair appears to be trying to hammer out a bottom here. This is close to key support at 1.0257, the December high. Below that is support at 1.0200, then 1.0143 and 1.0059. If the pair can base here and begin another push upwards, it needs to take out the 1.0422. If so, 1.0500 is next. This would be in line with the overall uptrend that has been in place since 2008. 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.

EURUSD—failure at resistance

2011-04-05T09:42:00.001-04:00

The recent 2011, 1.4269 high was the second time Euro has tried to break above the November high of 1.4182. The first was 1.4248 on March 22. This sets up a potential double top, potential because it requires a push below 1.4021 for confirmation. If it is confirmed the target is 1.3773.

Support is at 1.4139/15, 1.4110 (strong with confluence and an uptrend line), 1.4062, 1.4021 and the psychological 1.4000.

As I blogged yesterday, there are possibilities for a push to 1.4326/66 but, so far, this is out of reach.

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.

EURUSD—Reaction versus change in trend

2011-04-04T07:20:00.003-04:00

Is the price rally from the 1.1876 low a corrective reaction or a change in trend? This is almost impossible to answer at this point but looking at the price behavior from the perspective of different theories is useful. Today, I'll discuss the monthly chart considering Dow Theory, Elliott Wave analysis, and simple trend lines.

From the Dow Theory point of view, Euro remains in a primary downtrend on the monthly chart. In Dow Theory, a primary downtrend lasts one to several years and there is at least a 20% decline in value. The Euro had a 23% decline from the1.6041 July 2008 high to the October 2008 1.2329 low. The low of 1.1876 in June 2010 resulted in a percent decline from the high of 26%.

In a primary down trend, there are intermediate trends or reactions that result in price rallies. During these reactions, price retraces 33 to 66% of the prior price change. In the Euro's first reaction from 1.2329, price retraced 76% of the 3,712-pip decline. An intermediate rally fails to bring price above the top of the preceding rally. The rally that began from the low of 1.2329 stopped at 1.5147 in November 2009, well below the prior 1.6041 high. The rally that began at the low of 1.1876 is still in progress. This reaction is well past the 66% retracement of the prior decline of 1.5147 to 1.1876. A 76% reaction would bring price to 1.4362.

Differentiating between the first leg of a new primary trend and an intermediate reaction within the primary trend is difficult. Dow stated that the secondary trend often consists of three or more minor waves. On the monthly or weekly chart, one can see this as a three-wave reaction. One can also examine volume, unavailable in the spot market, and the maturity of the primary trend.

Maturity is tricky. The downtrend has been going on since July 2008 three months shy of three years. Is that mature or immature? In comparison to the prior long uptrend from 2000, it's immature. Dow spoke about three stages within primary trends, with the third stage of a bear market finding assets liquidated regardless of their underlying value. This is not happening. It is questionable if it has happened at all during the downtrend given the financial woes of various Eurozone countries. Another third stage sign is little interest in buying. Obviously, someone is buying or price would not be going up. All this leads to the appearance of this being a corrective rally rather than a change in trend.

By the way, many expect the ECB to raise the interest rate this month. Increasing an interest rate often boosts a currency. However, the proverb of buy the rumor, sell the news, comes to mind. How the Euro reacts to the actual news (if the rate increase takes place) will be interesting to watch.

Obviously, if price exceeds 1.5147, the primary trend has changed from down to up. For short-term traders that seems too far away to be useful; for longer-term traders, it is not that far.

Dow Theory is one piece of evidence. Elliott Wave can be another. From an Elliott point of view, one could argue that the C leg of an ABC correction on the monthly chart is over and that price is beginning another rise. It is possible. However, if one looks at my wave counts on a weekly chart, it seems more likely that price is in a third wave with this current correction being wave two of three. If price exceeds 1.4282, this interpretation is invalid (wave two cannot exceed the start of wave one). The high this morning was 1.4269, tantalizingly close. If it exceeds 1.4282, is a bearish interpretation out of the question? No. The correction could still be taking place. On February 28 I blogged that if one assumes the C wave is currently "in progress, then .618 of the A wave would bring price to 1.4347."

There are no absolute answers from either Dow or Elliott Theories. However, one needs to keep them in mind as many traders follow them.

Another thing to use is a simple trend line. Trend lines can be surprisingly valuable. Clearly, Euro is at an important resistance trend line. This line is currently at 1.4326. A sustained break above this line would be compelling evidence that the trend is breaking upwards. Note that while Euro has clearly broken below a major uptrend line (the dotted line), it has yet to break below the second uptrend line drawn in solid red on the chart below. That trend line is currently at 1.2226.

From doing only this limited analysis (Dow, Elliott and trend lines), I now have a resistance zone beginning at 1.4326 (the trend line) and ending at 1.4366 (the same percentage correction as the prior correction). The mid-point of this zone is a.4346, almost exactly the price projection from the C wave calculation. This zone also coincides with a price resistance on my three-hour point and figure chart. As a result, I will most likely think about selling if price reaches those levels. If price exceeds that zone, the next major resistance is at the upper boundary of the upward sloping rectangle. This is currently around 1.5150. Obviously, on a daily chart, one would see interim resistance levels.

What about time? Time is not as useful as some Gann followers would have you believe. I do look at it, though. One thing to say about it is that the prior correction took 13 months to reach the high of 1.5147. This rally is now in its tenth month. If the rally continues beyond 13 months then it might be significant.

An important factor is momentum. It plays a role in all trade analysis I do, particularly in shorter time charts. On the monthly chart below, RSI has broken above its downtrend line. However, note that it is not pushing into overbought levels (above 70) even though the price rally has been steep.

Here's the monthly 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.

Weekly High, Low and Close

2011-04-04T06:52:00.001-04:00

No posts today

2011-04-01T09:12:00.001-04:00

See you Monday

EURUSD—going nowhere for now

2011-03-31T10:02:00.002-04:00

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.

AUDUSD—new high

2011-03-31T09:37:00.001-04:00

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.

EURJPY—soaring

2011-03-30T07:31:00.003-04:00

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.

Euro—daily

2011-03-29T07:50:00.003-04:00

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.

USD Index—daily ending diagonal

2011-03-29T07:24:00.001-04:00

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.

EURUSD—weekly

2011-03-28T11:21:00.002-04:00

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.

EURUSD—rally

2011-03-28T10:39:00.003-04:00

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.

AUDUSD—broke above 1.03

2011-03-28T07:52:00.002-04:00

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.