EURUSD—struggling with resistance

The pair climbed nicely to .13704 before being repelled by the downtrend line from March 3. I have two long positions from 1.3571 and 1.3612. I just took partial profits on the one from 1.3571 at +80 pips. The long from 1.3557, which I blogged about on Friday, stopped out at breakeven.

I haven't changed my longer term outlook about this pair—I believe it will go lower—but we're currently in a correction that could reach up as high as 1.4039. I'd certainly be happy going short at that level. It could also stall out at 1.3750 or 1.3850.

Resistance is at 1.3704,m 1.3736, 1.3800, 1.3839, 1.4022, and 1.4100. Support is at 1.3659, 1.3626, 1.3593, 1.3531, and 1.3435.

Here's the hourly chart:






















© Dianne Fecteau, 2010. 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—is that the extent of the correction?

Euro continued to tumble after NFP on Friday to a low of 1.3586. On the daily chart, that low was in the shape of a hammer. It since bounced to a high of 1.3714 today. On the three- and one-hour chart, you can see the zigzag or ABC bounce. I took another short position at 1.3686. My stop is already at breakeven. It wasn’t much of a correction—I can’t believe that Euro bulls can’t do better than this, particularly with some traders taking profits but there you go. As long as the pair stays below 1.3833/57, the overall trend looks to be down. That would be a decent short area if it does correct further to that point. If it breaks below Friday’s hammer, it will likely decline much further.

Support:

1.3586 (today’s low)
1.3432 (Mar and May ’09 lows)
1.3361 (Aug ’07 low)
1.3263 (June ’07 low)

Resistance

1.3714/43 (today’s and Friday’s high)
1.3755 (top of EW 1 from March low and June ’09 low)
1.3791/3800/3833 (.382 retracement from Feb 3 high, round number and July low)
1.3855/57 (Feb. 4 double top). I doubt it will get above here)
1.3931 (polarity)
1.4000 (Psych)
1.4101 (50% of move down from Jan 13 low)

Here’s the one-hour chart:



© Dianne Fecteau, 2010. 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—long again

When last I was long Ozzie (last Thursday—eons ago in the short-term trader warped sense of time), it was struggling with a long-term downtrend line. I’m glad I took some partial profits at 70 pips because the rest of the trade stopped out at +9 pips. Then it had an inglorious fall, apparently because of the RBA’s decision to leave interest rates untouched.

That fall provided a buying opportunity yesterday. I went long at .8821. What was there on the chart that supported this decision after seeing the sharp drop?

First, the pair is technically still in an uptrend from March ‘09, although it broke an up trend line from July and has been ranging since October with a spike high in November to .9406. It was nearing the bottom of this range (lows had been .8735 in December and this pair bottomed yesterday at .8781). That was 50 pips away but I believed the December lows were an overreaction and, in any case, that’s not a huge stop when the potential gains are 150 or 200 pips. I don’t expect it to return to .9406, although who really knows, but I suspect there’s more upside before it gives up the ghost, if, in fact, it’s planning on doing that. In addition, the “mood” yesterday was more upbeat. The markets may indeed be only delaying the day of reckoning (I mean equities) but that’s tomorrow’s problem. I trade today. On the 3-hour chart, the pair formed a nice little doji at the bottom. There’s also positive divergence between price and RSI. All good reasons to buy and I just took +75 pips profit off the table and have the remaining position profit-stopped. It could head down again, of course. Certainly, a break of the range would be reason to step up to shorting.

Resistance:

.8930/ 57/63 (recent highs)
.8991 (.382 retracement of drop from min-January)
.9020/33/56 (former daily uptrend line from July ’09, daily 34 EMA, and 50% retracement)
.9093 (1/25 high)

Support:

.8782 (Monday low)
.8735 (Dec. ’09 low)
.8569 (Oct. low)





© Dianne Fecteau, 2010. 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—working its way back up inside the triangle

The pound in general is doing well this morning, ostensibly because UK CPI exceeded expectations but the writers and pundits have to write something, right? My remaining short in this pair was profit stopped overnight at 1.4904 for +80 pips.

GBPJPY is still within the triangle I’ve been blogging about lately, somewhere in the middle so this is no place to take a position for most traders. I did however just get off another short at 148.71. It’s a small position because I’m not entirely comfortable with this. However, my reasons for shorting again are as follows:

1)The pair is in an overall downtrend
2)Price objective from the confirmed double top is still unmet
3)The yen is strengthening across the board
4)Within the current triangle on the one-hour chart, the pair is running into resistance. The last two closed candles show long upper shadows that hint higher prices are being rejected
5)The most recent closed candle on the one-hour chart is a spinning top.

Spinning top candles have small bodies, black or white. They show the bulls and bears are in a tug of war. Even though the prior candle was a long white bullish one, the bulls haven’t entirely seized control. Some would say that these last two candles are a double top but that’s not true unless price breaks below the trough (the lowest point between the two).

Let’s just see what happens. Here’s the three-hour chart:


© Dianne Fecteau, 2010. 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—still in triangle

This pair is still within its symmetrical triangle. I suspect it will break out of it this week, although probably not today since it’s a holiday here in the states (Martin Luther King day). I’m still short from 149.84.

Symmetrical triangles graphically show the struggle between buyers and sellers. There is no certain direction at this point so the market stalls and vacillates until traders resolve the struggle. While these types of triangles are often continuation patterns, that’s not at all guaranteed. If you believe it’s an upward continuation pattern, no doubt you’re looking at the short-term uptrend from November or even the longer term uptrend from this past year.

It could be but here are some things to consider:

There has been a sideways pattern in much of 2009, just as there has been with the EURJPY. The bottom of the sideways pattern is 139.03 in the spring of 2009. The pair then climbed, making a double top at 162.60/163.09 in June and August of 2009. The trough of that double top is 146.77 and the pair broke below it in September to a low of 139.71. The price target from that pattern was 130.45 (Peak to trough subtracted from trough or (146.77 – (163.09 – 146.77)). Clearly, it didn’t make it but these things aren’t guaranteed. In addition, the target isn’t always achieved in one grand move—that is, it can vacillate and stall….Since the 139.71 low, it retraced somewhat over 50% of the decline from the top and then began to falter, leading, finally, to this triangle. If this is true, then perhaps there is more significant decline to come until it reaches the price target of 130.4 Placing this within the context of the weekly chart, one sees that the sideways pattern formed after a sharp downtrend from 2007. One could argue that the downtrend led to a long sideways consolidation period, during which the market is catching its breath before continuing its slide. If this is so, this little triangle is truly insignificant. However, the probability is that the trend will continue down.

From the weekly chart, one could also make the case that the pair is basing and that this is a second wave correction after an initial move up from the lows of 118.83/119.72. If so, this triangle is probably part of that and the move will be up.

My point of all this is to show first, that looking in the larger context can give perspective to things, and second, that you don’t really know what a pair is going to do at any given time. However, that leads some traders to tear their hair out and gnash their teeth. I don’t know why it should. With this kind of scenario, find good entry points and keep at least a portion of your trade on, until things become clearer. One thing I can promise is that things will become clearer, especially when the pair breaks out of this triangle.

Meanwhile, I’m staying in my short until taken out at which time I’ll evaluate the market again. Here’s the daily chart:



© Dianne Fecteau, 2010. 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—200 SMA

On the daily chart, the 200 SMA seems to be providing support for this pair since it bounced off it at 1.4407.

Last week I wrote about the bear flag on the daily chart that is an upward sloping channel for those who prefer to see the glass half-full. The top of this is now at 1.4560. Regardless of what you call it, the pair needs to break above it in order to suggest buying. Conversely, a break below the bottom of this would suggest selling. While I am leaning towards shorting this pair, I prefer to wait a bit to see if I can find a clearer signal. One thing I’ll be watching is momentum. Here’s the daily chart:


© Dianne Fecteau, 2010. 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—ranging for now

After a healthy climb during morning hours (EST) yesterday, AUDUSD is in a narrow range of .9099 to .9163. On the three-hour chart, RSI is still overbought but on the one-hour chart, it has dropped below it a bit. For RSI, overbought is usually considered greater than 70 and oversold less than 30.

When I blogged about the weekly chart yesterday, I noted that I consider the pair had completed a second wave at .9406 so it should be beginning a third wave down. Intellectually, it’s a bit hard for me to swallow since I think things in general look as though they’re improving in the global economy (and if they’re not, my oh my we’re going to have an interesting year.) One could say, then, that I’m falling into the bullish sentiment that has accompanied this pair for some time. Still, the chart is the chart, and I can only trade the chart the way I interpret it. As a result, I took a small short yesterday at .9127 which is slightly underwater as I write this at minus 13 pips. Now that it has retraced more than .618 of the recent downward move, I’m a little antsy about it but I’ll stop out soon enough if it was the wrong trade to take.

There is some negative divergence between price and RSI (price going up; RSI going down) which is bearish.

The long lower shadow of the doji on the hourly chart seems to hint that the pair is rejecting lower price levels. The low of that candle was .9099—a minor support zone. We’ll just have to see where it goes. If I’m stopped out, I may reverse depending on candle behavior. One reason (in addition to the bullish sentiment) is that there’s an ascending triangle formation. This is present, with and without the doji. Ascending triangles often break to the upside.

Here’s the one-hour chart:



© Dianne Fecteau, 2010. 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.

USDCAD—slouching towards Gehenna

OK, I know I said I wasn’t trading but I can’t help but peek at the markets, especially as I update my charts in preparation for the New Year.

Yesterday, I saw that USDCAD had dropped, taking out my final long at +10 pips. This isn’t unexpected as thin December markets can cause extreme moves. The last time I wrote about this pair (long ago on December 18), its downtrend line from August had repelled it a fifth time. It then proceeded to sink to its current level.

Will it continue to drop? Unanswerable, that, but more to the point, is it worth risking a buy? I’m always worrying about the downside so the real question is where I could place a stop. Unfortunately, there’s not a lot of support until you get to the 1.0272/66 October 19 and 20 lows. After that, of course, is the wretched low of 1.0208. At 1.0367, today’s low, one would have to be willing to risk anywhere from 100 to 160 pips (actually a bit more as I’m not going to put the stop right on the prior low.) That’s not awful, depending on one’s point of view but it might be a bit much for some traders.

Another way of finding a stop number is to look at the uptrend line from the 2007 low. It’s coming in at 1.0347. This isn’t too bad. So yes, I can risk a buy using just below that trend line as my stop point.

Another thing to note on the daily chart is how the pair is coiling inside a symmetrical triangle. After three months, I’d expect that this would resolve soon, either upwards or downwards. Something to look forward to, for sure.

Here’s the daily chart showing the move from November 2007:



© 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.

EURUSD—finally reversing?

I did buy this pair yesterday at the bottom of its bullish, upward daily channel it has maintained since mid-June. This was at 1.4633. The pair stopped out overnight at -1.4583 for a loss of -50 pips.

Is this a trend reversal? It could be. A daily close below the uptrend line would be helpful and it would confirm the overall weakness. As regular readers know, I use point and figure (P&F) charts in my trading. I want to short the Euro but I lack a good sell signal on my three-hour and daily P&F charts. The hourly P&F chart gave a sell signal last week and I did have a short at 1.4822 that I blogged about December 8 but it has since closed.

In any case, the pair looks weak. Each successive downward move (from November on the 3-hour chart) has been sharp and the rallies have been weak. There could be support at 1.4481, the early October low. The pair is trading at 1.4530 currently (at 7:30AM EST).

Best to wait for a rally to short rather than try and catch a falling knife or wait for a definitive close on the daily chart. Here’s the 3-hour chart:


© 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.

USDCAD—Coiling

It has been several days since I’ve blogged about this pair. Since mid-October, it appears to be basing, encouraging some bullishness about the pair (as I’ve been) or at least pausing in its downward trajectory if one remains bearish.

The pair is coiling in a triangle formation. Elliott Wave (EW) practitioners believe the breakout from the triangle is in the direction in which price entered it (down in this case). In coiling triangles, however, the breakout can be in either direction. The triangle displays, in a visual sense, the struggle between buyers and sellers as they vacillate and stall before finally resolving on a direction. It becomes more intense as time passes and this is why the triangle narrows. Ideally, a triangle resolves between ½ and ¾ of the distance from its start so this one is getting mature. Perhaps a resolution is at hand.

If it does successfully break out in the downward direction, the move will likely be a large one as the coiling has provided a chance for the pair to store up energy. However, initial breakouts can be false, setting up a bear trap, so the trader needs to be careful. Whether price breaks above or below, throwbacks (if above) and pullbacks (if below) are common.

I’ve blogged in prior posts about the nature of basing. It’s a process, not an event, so prices tend to rise and fall as the pair finds its bottom. Most of my calculations suggest the pair is basing and I’ve posted several trades that have resulted in my earning hundreds and hundreds of pips since October. However, it’s important to maintain neutrality—i.e. not get stuck in your beliefs. Watching price action on the short-term charts is the way to go.

I currently have two long positions, one from 1.0413 of which I’ve taken partial profits at various points, and one I added on a dip to 1.0527 and which is currently profit stopped at +20. The first one is currently up 227 pips and the second, 112 pips as of 7:40AM EST.



© 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.

AUDUSD—slight bounce

What was left from my long trade from two day’s ago profit stopped out at +5 pips in yesterday’s dip.

As I wrote yesterday, the pair looks a bit weaker than it did. After a few days of lower highs and lower lows, yesterday had a slight higher high and higher low. This may have been just a minor correction before another push upwards. It needs to break above .9406 to know for sure.

Both the three- and one-hour chart formed some interesting doji candles this morning. Doji candles can indicate trend reversals after an uptrend, even a small one such as what we saw overnight. For that to be the case, though, additional candles must confirm its signal, the market should be overbought, and the doji should be relatively rare on the chart. It’s important to remember that even if all three of these conditions exist, it doesn’t guarantee a trend reversal (there are no guarantees in trading, alas). It might only signal that the market is going to move sideways a bit.

On the three-hour chart, you can see a gravestone doji. After such a long bullish candle before it, I would have liked to see the third candle complete an evening star formation but it didn’t do so because it didn’t penetrate deeply enough into the bullish candle’s body. It should have looked like this:



Instead, as you can see, the third candle, while somewhat bearish was not very long. So far, no candle has confirmed the signal from the doji. However on the one-hour chart, there is what looks like the possibility of an evening star when the candle completes at 8:00AM.

Neither is the market overbought or oversold. What is interesting is that momentum seems sluggish as measured by RSI. It’s not shooting up on this small price rally so there doesn’t seem to be a lot of interest in the pair.

There aren’t numerous doji candles on the chart so one should take note of this one, however. One thing that reinforces it is that the market is at resistance. This means the stop can be tight, just above the doji high. I’d be a little careful with this since there’s an upper shadow that extended to .9188, several candles back but the stop can still be tight. Price is also at a fib confluence zone that I’ve indicated with the purple line. This reinforces resistance. Because of this, and given prior weakening signs I’ve written about, I decided to try a short position as you can see. Here’s the three-hour chart.


© 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.

AUDUSD—Sideways on the weekly chart

AUDUSD declined during the latter part of last week but it still has not made a definitive move. The pair has been moving sideways, from .8905 to .9408, for the last eight weeks. It’s currently near the low end of the range with a low this morning of .9053. It may be headed back to test that low again. That point could be a decision time. Is this a more serious correction or is it a good place to go long?

If someone attempted a long at .9053, the stop should logically be placed below .8947 (106 pips) or below the range low which is .8905 (148 pips). That might be a bit much for some people’s taste. If so, then there are two other choices. The first it to wait to see if it drops to the bottom of the range, going long around .8945. The other possibility is to wait for an upwards breakout, probably above .9172. This is much safer than trying to call a bottom. It would obviously also require other confirmation. If it begins to approach that point, I’ll post.

For shorts, a break below .9053 might be worth a try. Alternatively, one could wait for a rally to .9108 and, depending on price candles and RSI, try a short there. The pair has been top-heavy and it has broken and closed below its daily uptrend line. Here’s the 3-hour chart:


© 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.

November Trade Results—Up 2,054 pips

In October, I started posting my trade results from trades I’ve mentioned on this blog. I don’t blog all my trades (I’d never have time to trade if I did so) but I do touch on many here as I tend to follow different pairs for a period of time. For the month of November, the results are a net gain of +2,054 pips. This compares to a result of +1,994 pips in October. In some of the trades, I took partial profits. I’m not sure about the best way to report those so I just lump them together, e.g. if I closed out half at 50 and the rest at 100, I count 150. I also had some trades I blogged about that stopped at breakeven. I didn’t count these in the trades I list.

It was another good month. The market again presented many, clear opportunities. It’s not that I’m a great trader. It’s that the market provided me some great clues. My role was to stay alert to them. I also do a tremendous amount of analysis. Trading is hard work. Anyone that says it isn’t is either (a) delusional; or (b) lying.

I’ve had losing months in the past and will no doubt have them again. I don’t have crushing losses because I keep tight stops but even tight stops add up if a bunch of trades go against you. I’ll also tell you that the first year I traded I blew through 60% of my trading account; the second year I “only” lost half of what was left. (Big improvement, right?) Finally, things turned around and stayed flat for a while. After that, things began to improve. The moral is, if you’re just starting out, trade ultra small positions and manage your risk. You’ll still lose but it won’t hurt so much. If you keep at it, studying the markets, keeping an open mind and not trying to put your own spin on things, and journaling your trades, you’ll eventually make money.

When I do have a losing month, you’ll see it here because in this blog I show you real charts with the trades on them. You can look back through the month and find the trades I mention below. So many people out there, so-called gurus, tell you how much money they made. However, you never see their trades as they go—it’s always in retrospect and they’re always showing you old charts. Phooey on that. Don’t give them your money so they can “teach” you.

Anyway, I don’t expect these results in December. It’s always a slower month for me as the holidays approach but of course if I see opportunities, I’ll take them.

Here’s the detail:

Currency Pair, Net Gain or Loss in pips, and number of trades with pips
AUD/USD +501 6 trades at +63, +80, +128, +110, +50, and +70
EUR/USD +304 4 trades at +10, +125, +107, and +62
GBP/JPY +100 1 trade at +100
GBP/USD +383 3 trades at +100, +225, and +58
USD/CAD +766 3 trades at -28, -59, and -76
10 trades at +61, +197, +10, +122, +60, +120, +50, +199, +100, and +10

AUDUSD—Mucking about

On the weekly chart, AUDUSD is mucking about, with this past week’s high of .9328 lower than the prior week’s high of.9402. This is seven weeks of essentially sideways movement. Why is this interesting? For one thing, during the last seven weeks the demise of the USD has been a constant theme. For another, Australia is a strong commodity currency. It’s difficult to draw conclusions yet but this is something to tuck in the back of one’s mind as one examines price action on the shorter time frames.

The pair made a nice dip on Friday to .8947, a tad above the October low of .8916. Since I took the four-day weekend, I missed the long. In dipping, it broke below the daily uptrend line from March. This is a sign of weakness. It's important to remember, though, that a break on the lower liquidity Friday (US holiday weekend) is suspect. The pair has climbed back to its trend line, technically known as a pullback, but fallen away on the three-hour chart. Daily momentum is still good from my readings. However, price behavior is a bit squirrelly. Again, that could be from the lower liquidity of last week.

On the three-hour chart one can see that in the pullback the pair retraced .618 of the drop from last week’s high. OK, the plot thickens. Had I not been asleep when this happened, I might have sold. As I always say, some trades get away from you. One more sign of weakness, this time in a shorter time frame. If I want to short rallies, though, I’m going to have to drop down a bit further to the hourly or 15-minute chart. For now the one-hour chart shows the pair hesitating. On the three-hour chart, the most recently closed candle of just a few minutes ago shows a hammer, which may be bullish. Tonight is the RBA interest rate decision so a little mucking about will probably be the order for the day. Here is the three-hour chart:



© Dianne Fecteau, 2009

AUD Daily Chart

The first long position I took in AUDUSD at .9119 on Friday stopped out at breakeven. I re-entered at .9120 and am still in this position. I took partial profits at 110 pips this morning and my stop is well above break even.

A look at the daily chart shows the pair is still trending upward in a bullish channel. RSI is staying in bullish levels, not dropping below 49.77 during the recent correction. This morning the USD weakened as well so commodity prices are rising which is, of course, good for this commodity currency.

On the weekly chart, the pair closed at .9147. This was below last week’s close of .9330 and the prior week’s close of .9191. This suggests the pair is either consolidating or in a congestion area.

Note that there’s divergence between price and RSI since mid-October on the daily chart. Divergence is often a sign of weakness but it can go on a long time before price reverses. It’s not tradable by itself if other clues for a potential trend reversal are not present. Friday’s candle wasn’t quite a hammer since its body was greater than 10% of its length but it had a longish, lower shadow that hinted the pair was rejecting lower prices. I’ll need to study a lower timeframe to get clues about possible reversals. Here’s the daily chart:


© 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.

EURUSD—For now, up

I wrote yesterday that, although I was holding a short, if RSI started climbing out of oversold and a bullish candle formed on the hourly chart, I’d consider a long. As I explained, there didn’t seem to be a strong direction but the Euro was resisting falling with momentum holding its own on the daily chart. Thus, if momentum on the short-term chart fell into line with that on the longer term chart, I’d want to be in that direction. This is exactly what happened on the hourly chart.

Euro dropped to a low of 1.4808, just below the support level it’s been holding on prior drops. The fact that it dipped just below is telling, though. It might drop lower the next time down. Regardless, the hourly candle closed at 1.4829 with RSI oversold at 20.90. I stayed in my short because I had no other clues to work from. The next candle closed at 1.4846 with RSI staying oversold but rising to 28.57. To say the pair had my attention is understating the case. Then, the third candle closed at 1.4856 and RSI was out of oversold at 32.74. This was what I was watching for. Clearly, the drop was over for now. I closed my short at 1.4854 (profit of 107 pips) and bought at 1.4864. Obviously, I’m profit stopped at this time since it climbed from there.

Let’s see where it goes. The place where it tops out this time should be informative. I will be ready to short again because the overall direction is unclear. Might as well grab some pips where they are. Here’s the hourly chart:


© 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.

AUDUSD--Hesitating

As I blogged on Friday, I bought two positions in AUDUSD on Thursday’s dip. One hit its profit target at 9313 for 63 pips profit. The other, bought at .9242 is still open and is profit stopped at 50 pips.

The pair is still in an overall uptrend, yes, but it’s going through one of its periodic, “I don’t know if I can make it,” stages. Last week its high was .9370; so far it has had several candles reach .9353 on the hourly chart before falling back. It has dropped back to the short term trend line on the three- and one-hour chart. (RSI has already broken its uptrend line) The trend line needs to hold at .9315, the price that is also the floor of what will be the double top (on the three-hour chart) if it breaks. But there’s not a lot of downside based on the calculated profit target from this. The daily trend line comes in at .9040. Here’s the one hour chart:


© 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.

EURUSD—How much longer is this going to last?

I finally shorted the Euro after I blogged yesterday, picking up some pips, but I closed and went long after the dip near support appeared to hold. The support was also at polarity, a level that has served as support and resistance in the past. Finally, the pair’s RSI was also climbing out of oversold. All reasons to go long so who am I to argue?

The pair fell out of its “broadening” formation that I wrote about yesterday, before its completion. I suspect it will find resistance at the lower line of that formation and plan to lighten my long there if not close it entirely. I may even short. If it makes it back into the pattern, I still believe the pair has formed a top and will turn again. But regardless of my “belief”, the pair is in an overall uptrend that has not yet been definitively broken—the daily uptrend line from March is coming in at around 1.4750. This was the reason I bought on the dip. Here’s the three-hour chart:


© 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.

GBPUSD—Back in the channel

Last Friday I opened two shorts in GBPUSD, one at 1.6555 and one at 1.6530. The 1.6530 trade hit its profit target this morning and earned 225 pips. The other one is still on. You can put on trades that earn over 200 pips as well. It’s a matter of doing the analysis, picking careful entries, and keeping your stops tight to keep the losses small.

Apparently the price point I indentified yesterday (where the two trend lines crossed) was not only uninteresting to GBPUSD but absolute anathema. A look at the three hour chart shows it is back inside its channel. This doesn’t mean it won’t climb out again, especially since it’s at a support line (the orange line). I wrote yesterday that the point where the red and blue lines come together shows a symmetrical triangle. While it fell below the uptrend line it could climb back in—pairs do it all the time. If it does, that might be a clue to lighten shorts and/or go long.

While the pair broke below the blue trend line, RSI is currently at its trend line. Normally I’d like to see RSI break the line first and then let the price break confirm the RSI break. But if RSI breaks, too, you have confirmation of the price move.

The current 3-hour candle (as of 6:30AM EST) is not yet decisive. Since my position is currently up 250 pips and I already have one profitable trade closed, I won’t do anything right this moment. But you can bet I’ll be watching this and the shorter time frame charts. The 15-minute has formed a hammer and price rose but has since dropped back. The one-hour chart is unremarkable at the moment except for some candles with upper wicks (a hint that higher prices are being rejected). Here’s the 3-hour chart:

© 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.

USDCAD—still chopping around

Nothing much has changed with USDCAD. It has encountered resistance on the weekly chart and is fighting through a congestion area on the hourly P&F chart as I wrote yesterday.

The three-hour chart today shows the pair bumping its head on a downward sloping trend line. It’s well above its original uptrend (black) line which shows strength, as is the RSI. On the shorter uptrend line (in blue) it is reflecting divergence with RSI.

Ideally the indicator should move in the same direction as price. When both move together the indicator is confirming the price. If they move in opposite directions—price is moving up but the indicator is moving down or vice versa—it’s called divergence. It’s a hint of market weakness. Divergence can signal price is ready to reverse but it’s only that—a signal and not a guarantee. One big mistake a trader makes is to base trade decisions on only one thing. Divergence is a piece of the puzzle but it’s not enough to base a trade upon.

In this case, since the pair is obviously fighting resistance I’m not too worried about it. But I’m on guard and probably would not open new positions until it clears some of these hurdles or has a good pullback. A pullback to the blue uptrend line would be a buying point (around 1.0700/50 but you’d want tight stops) as would a pullback to the black uptrend line (around 1.05). There are not good hints for a short here but if one did so the stop should be above the recent high of 1.0875. Here’s the three-hour chart:

I am still in three positions. I lost one of my recent ones when it stopped out 10 pips above breakeven last night in a downdraft. The oldest one is up 378 pips, the second oldest 153, and the third 77. Unless we have another good pullback I’ve stopped buying until the pair shows it can clear the hurdles ahead.

© 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.