Notably, yesterday’s high was lower than the two highs last week and provided a second touch of a downward trend line on the 3-hour chart. A trend line needs to have at least two, and preferably three, touches to be valid. This short-term downtrend alone, though, isn’t cause for alarm, since up trends consist of upward movements along with corrections. On the three-hour chart, RSI has dropped into oversold a few times recently and recovered each time. The last two times, though, it didn’t reach an overbought condition. This hints at not as much momentum carrying prices up. Finally, both price and RSI are beginning to coil inside a symmetrical triangle. Is there a grand move coming up? A trend reversal? Oh, where is our crystal ball when we need it?
What I could do was go long again on the dip early this morning. I did so but with a smaller position than usual. Both the 1- and 3-hour charts formed a doji candle on the dip so the stop can be tight. Why go long at all if I’m suspicious of the overall movements? Suspicion is all I have for one thing and that’s not enough to avoid trading what is still an uptrend. If price closes below .9132 (ideally .9061), it will be time enough to think about shorting.
© 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.
My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.
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