EURUSD
My experience this week with the Euro has been decidedly mixed. Monday I was short. That stopped out with a loss of 25 pips. Yesterday I was long. That profit stopped overnight at 40 pips. Now the pair is hanging around its typical resistance level, wondering, I guess, which way to go.
Being whipsawed tells me that the market doesn’t know what to do at the moment. Nor do I. Bowing to Gann’s advice of staying out until I have a better sense of direction, you can bet that I will be tearing up those charts in the next hour or so.
EURJPY
I did short the EURJPY yesterday at 130.83. It’s up 103 pips as of now, 6:20 AM EST. Where might it go? Let’s look at the charts.
On the daily chart there are some interesting patterns. First, is the up channel from early in the year (its lines are drawn in black). When it fell out of that channel it entered some sort of corrective pattern or perhaps a consolidation. That’s confined between the purple lines. While the bottom purple line shows an up trend, the red line indicates a slight down trend since June (the red line). This shows it coiling in a triangle. Going along with the upward trending red line there is also divergence with the RSI.
What to make out of all this? In part it depends upon your personal approach to trading but the most conservative statement is that the market is pausing right now, storing up energy to make another move.
Why am I short? It broke below the triangle once. Now it looks as though it’s doing so again. It’s as thought it’s compelled to at least venture lower. Also, one can make the case for a double top although it’s not perfect. But if it is one, it broke below its neckline and is hanging out there.
Another thing is that divergence. Divergence has been all over the charts lately and it’s troubling. Why? If a price is trending up you expect to see any particular indicator you’re looking at also trending up. That’s known as confirming the price trend. When it doesn’t do so, that’s known as divergence. Divergence can be an early warning of a trend change. Note the words “can be.” It doesn’t mean it is a trend change. It means you have to watch prices more carefully than you might if everything was moving together. Divergence can last a long time. That’s why it’s not tradable in and of itself.
My experience this week with the Euro has been decidedly mixed. Monday I was short. That stopped out with a loss of 25 pips. Yesterday I was long. That profit stopped overnight at 40 pips. Now the pair is hanging around its typical resistance level, wondering, I guess, which way to go.
Being whipsawed tells me that the market doesn’t know what to do at the moment. Nor do I. Bowing to Gann’s advice of staying out until I have a better sense of direction, you can bet that I will be tearing up those charts in the next hour or so.
EURJPY
I did short the EURJPY yesterday at 130.83. It’s up 103 pips as of now, 6:20 AM EST. Where might it go? Let’s look at the charts.
On the daily chart there are some interesting patterns. First, is the up channel from early in the year (its lines are drawn in black). When it fell out of that channel it entered some sort of corrective pattern or perhaps a consolidation. That’s confined between the purple lines. While the bottom purple line shows an up trend, the red line indicates a slight down trend since June (the red line). This shows it coiling in a triangle. Going along with the upward trending red line there is also divergence with the RSI.
What to make out of all this? In part it depends upon your personal approach to trading but the most conservative statement is that the market is pausing right now, storing up energy to make another move.
Why am I short? It broke below the triangle once. Now it looks as though it’s doing so again. It’s as thought it’s compelled to at least venture lower. Also, one can make the case for a double top although it’s not perfect. But if it is one, it broke below its neckline and is hanging out there.
Another thing is that divergence. Divergence has been all over the charts lately and it’s troubling. Why? If a price is trending up you expect to see any particular indicator you’re looking at also trending up. That’s known as confirming the price trend. When it doesn’t do so, that’s known as divergence. Divergence can be an early warning of a trend change. Note the words “can be.” It doesn’t mean it is a trend change. It means you have to watch prices more carefully than you might if everything was moving together. Divergence can last a long time. That’s why it’s not tradable in and of itself.
I don’t enter trades based only on one time frame. What really caused me to short was the daily in combination with the signals on the hourly. There it broke a short term uptrend line on both price and RSI and had a bearish candle.
Here’s the daily and hourly:
Here’s the daily and hourly:
None of the above are trade recommendations. Remember that trading involves substantial risk.
© Dianne Fecteau, 2009. 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.
© Dianne Fecteau, 2009. 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.
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