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.
Showing posts with label eur/usd. Show all posts
Showing posts with label eur/usd. Show all posts
Wednesday, July 13, 2011
Thursday, October 1, 2009
Thursday morning trades, canoodling with EW Theory, and other thoughts
GBPUSD
Yesterday's short trade is still on. I took a third off the table earlier and have my stop at plus 60 pips. I may move it again soon. I also took another short position earlier this morning and have the stop at breakeven. Note on the three hour chart below how RSI respected its Fib levels. The horizontal orange lines are why I said yesterday I wanted to short around 1.6150. I explained yesterday that I shorted under that because of price behavior. The thing to watch now, in my mind, is how the pair begins to behave as it nears the short uptrend line. Here’s the 3-hour chart but I’ll be watching shorter time frames.
USDCHF
My short was obviously taken out yesterday morning at profit. I entered long on the pullback where it continues to do well. But it’s nearing the top of that channel I’ve shown on prior charts so I need to assess this.
EURUSD
I got in and out of a quick short yesterday. I’m carefully analyzing the recent price activity. My “belief” is that the pair is headed down but you know how beliefs can blind you to what’s really happening? A good price analysis will tell the story.
AUDUSD
Yesterday I wrote that I was out of the Ozzie until I could form a clearer picture. I hypothesized that perhaps we could be in some sort of B wave (Elliott wave speak for corrective waves that are often choppy and difficult to decipher).
I’m not a big fan of the Elliott Wave Theory (EWT) for actual trading because it’s difficult to use it for trades by itself (although I know some people do and more power to them if it is profitable for them). I do, though, count waves. I do spend oodles of time canoodling with my Elliott Wave Principle book (Frost and Prechter).
Why does EWT appear so difficult? Why is it that there are so many interpretations? One reason is that while there are several rules—and these are inviolate—there are many more guidelines. These are just that—guidelines. The guidelines lead to arguments among EWT practitioners. Another reason is that many so-called EWT practitioners don’t seem to have memorized the rules and say things that simply aren’t true. A third reason, as I’ve mentioned before, is that the corrections are devilishly difficult to identify until well after the fact as to what they are and what they mean. While they’re in process they can lead to some strong arguments among practitioners.
Arguing over interpretations of anything on the charts is a valid activity. After all, if one person or theory held the absolute answer then that would be the fountain of youth, Eldorado, and the lost city of Atlantis rolled into one. Wouldn’t all who practiced that theory be lucky? But people that hold strongly to any given theory get extreme in their arguments, often using emotion where reason fails. So you hear such phrases as “I have this on absolute authority from a close relative of Elliott himself who verified it had never been written down and therefore I’m right and you’re not and you’re also stupid.”
Where I find EWT most useful is in gauging market psychology. It supplements my other analysis. I won’t necessarily act on a wave count that seems to be present if it goes against other factors I consider more important.
Briefly, since I don’t have the time to write a treatise on the topic, certain waves are technically strong and have real oomph. Others are not strong at all. Often, such as the B wave I mentioned as a possibility yesterday, they exhibit divergences, non-confirmations and the like.
Getting back to the AUDUSD, I studied charts dating back 30 years yesterday, in an attempt to clear up my confusion over what the pair was doing. I can make a case for three alternative wave counts based on the monthly chart. This is not helpful. One can’t trade this. But it’s a good exercise to write down the reasons for each. Briefly, though, my favored wave count is that we’re in a primary wave two correction (wave one being the steep drop from July, 2008). If this is true then it could retrace most or all of wave one. So it can’t exceed .9851. Since its high yesterday was .8860, this isn’t helpful, either. At least not to me, a small trader, who is not going to buy now, damn the torpedoes, and put a stop quite a distance away. I can make a good case for why I should have gone long at .8590 and stayed in. Had I done that I wouldn’t be doing all this work right now. I didn’t buy but should have doesn’t cut it in trading. Or anywhere else.
So I need to work on a smaller chart, right? Yes. But before leaving the monthly chart I drew an uptrend line from the lows earlier in the decade and it is coming in right about where the pair traded yesterday. Sometimes these old trend lines, once violated, serve as resistance. If I draw a horizontal line back in time to the early 80s on the monthly chart, I also see this is an interesting area known as polarity. Price has roughly used it for support and resistance.
Is it worth a short then? Well this would tie in with my belief we might be in a B wave correction. But there’s a bit of cognitive dissonance here. I’ve been calculating resistance ever since the secondary low in November, 2008. At each key resistance level I dutifully lightened or closed my longs, only to have to find a way to get back in. I’ve been trying to go long since the beginning of September and had some decent trades, e.g. one at 90 pips, but, for the last couple of weeks, have only found short setups where I’ve made small amounts of pips or taken small losses. (I’m not trashing 20 pip profits—they can add up—but one hopes for better than that, usually).
Here’s my opinion. It’s in an uptrend although it seems to be struggling with robust, sustained up moves. It’s at a resistance level that held once, yesterday. I may short it if it reaches .8860 again, depending on the behavior on the charts. Or I may go long if I can find behavior to support that position. That’s the best I can do at this point. Wait and see.
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.
Yesterday's short trade is still on. I took a third off the table earlier and have my stop at plus 60 pips. I may move it again soon. I also took another short position earlier this morning and have the stop at breakeven. Note on the three hour chart below how RSI respected its Fib levels. The horizontal orange lines are why I said yesterday I wanted to short around 1.6150. I explained yesterday that I shorted under that because of price behavior. The thing to watch now, in my mind, is how the pair begins to behave as it nears the short uptrend line. Here’s the 3-hour chart but I’ll be watching shorter time frames.
USDCHF
My short was obviously taken out yesterday morning at profit. I entered long on the pullback where it continues to do well. But it’s nearing the top of that channel I’ve shown on prior charts so I need to assess this.
EURUSD
I got in and out of a quick short yesterday. I’m carefully analyzing the recent price activity. My “belief” is that the pair is headed down but you know how beliefs can blind you to what’s really happening? A good price analysis will tell the story.
AUDUSD
Yesterday I wrote that I was out of the Ozzie until I could form a clearer picture. I hypothesized that perhaps we could be in some sort of B wave (Elliott wave speak for corrective waves that are often choppy and difficult to decipher).
I’m not a big fan of the Elliott Wave Theory (EWT) for actual trading because it’s difficult to use it for trades by itself (although I know some people do and more power to them if it is profitable for them). I do, though, count waves. I do spend oodles of time canoodling with my Elliott Wave Principle book (Frost and Prechter).
Why does EWT appear so difficult? Why is it that there are so many interpretations? One reason is that while there are several rules—and these are inviolate—there are many more guidelines. These are just that—guidelines. The guidelines lead to arguments among EWT practitioners. Another reason is that many so-called EWT practitioners don’t seem to have memorized the rules and say things that simply aren’t true. A third reason, as I’ve mentioned before, is that the corrections are devilishly difficult to identify until well after the fact as to what they are and what they mean. While they’re in process they can lead to some strong arguments among practitioners.
Arguing over interpretations of anything on the charts is a valid activity. After all, if one person or theory held the absolute answer then that would be the fountain of youth, Eldorado, and the lost city of Atlantis rolled into one. Wouldn’t all who practiced that theory be lucky? But people that hold strongly to any given theory get extreme in their arguments, often using emotion where reason fails. So you hear such phrases as “I have this on absolute authority from a close relative of Elliott himself who verified it had never been written down and therefore I’m right and you’re not and you’re also stupid.”
Where I find EWT most useful is in gauging market psychology. It supplements my other analysis. I won’t necessarily act on a wave count that seems to be present if it goes against other factors I consider more important.
Briefly, since I don’t have the time to write a treatise on the topic, certain waves are technically strong and have real oomph. Others are not strong at all. Often, such as the B wave I mentioned as a possibility yesterday, they exhibit divergences, non-confirmations and the like.
Getting back to the AUDUSD, I studied charts dating back 30 years yesterday, in an attempt to clear up my confusion over what the pair was doing. I can make a case for three alternative wave counts based on the monthly chart. This is not helpful. One can’t trade this. But it’s a good exercise to write down the reasons for each. Briefly, though, my favored wave count is that we’re in a primary wave two correction (wave one being the steep drop from July, 2008). If this is true then it could retrace most or all of wave one. So it can’t exceed .9851. Since its high yesterday was .8860, this isn’t helpful, either. At least not to me, a small trader, who is not going to buy now, damn the torpedoes, and put a stop quite a distance away. I can make a good case for why I should have gone long at .8590 and stayed in. Had I done that I wouldn’t be doing all this work right now. I didn’t buy but should have doesn’t cut it in trading. Or anywhere else.
So I need to work on a smaller chart, right? Yes. But before leaving the monthly chart I drew an uptrend line from the lows earlier in the decade and it is coming in right about where the pair traded yesterday. Sometimes these old trend lines, once violated, serve as resistance. If I draw a horizontal line back in time to the early 80s on the monthly chart, I also see this is an interesting area known as polarity. Price has roughly used it for support and resistance.
Is it worth a short then? Well this would tie in with my belief we might be in a B wave correction. But there’s a bit of cognitive dissonance here. I’ve been calculating resistance ever since the secondary low in November, 2008. At each key resistance level I dutifully lightened or closed my longs, only to have to find a way to get back in. I’ve been trying to go long since the beginning of September and had some decent trades, e.g. one at 90 pips, but, for the last couple of weeks, have only found short setups where I’ve made small amounts of pips or taken small losses. (I’m not trashing 20 pip profits—they can add up—but one hopes for better than that, usually).
Here’s my opinion. It’s in an uptrend although it seems to be struggling with robust, sustained up moves. It’s at a resistance level that held once, yesterday. I may short it if it reaches .8860 again, depending on the behavior on the charts. Or I may go long if I can find behavior to support that position. That’s the best I can do at this point. Wait and see.
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.
Wednesday, September 30, 2009
Uncertainty
AUDUSD—standing aside for now
I’ve been a bit buffeted by the Ozzie during the last several days. I’ve been out at breakeven or tiny little profits in its sideways movements. I stopped out overnight at .8770 with a loss of 48 pips. This morning I took a closer look.
From the longer term charts—monthly, weekly, and daily—we’re still in an uptrend although the movement has been strongly sideways the last couple of weeks. Lately it’s been waffling with ranges, false or premature breakouts from ranges, negative divergences, etc. Now it looks as though it may be pushing up which is what I thought it would do in the first place.
Why, I ask myself, would a pair behave this way? I mean besides the obvious reason that nobody can make up their mind about what to do—is the sky falling or is it not? Maybe that is the reason but what else comes to mind? I think about what Frost and Prechter wrote in their book, Elliott Wave Principle (New Classics Library, 10th ed. 2005), about B waves on page 81:
B waves are phonies…sucker plays, bull traps, speculators’ paradise….[They’re] rarely technically strong, and are virtually always doomed to complete retracement by wave C. If the analyst can easily say to himself, “There’s something wrong with this market,” chances are it’s a B wave.
That’s what I’ve been thinking to myself—there’s something wrong with this market. Of course there may be something wrong with me and my analysis but I’m not going there right now.
OK. What do I have? A belief we’re in an uptrend although Dow Theory tells me it could be an intermediate correction. A market that seems unclear. What choice do I have? I can only stand aside. As Gann wrote, if you “don’t know what to do, there is but one thing to do. Get out and wait until you know there is a definite trend.” When I see something more clearly and have a good entry point, I’ll trade it.
USD/CHF
I’m out of this pair I bought at 1.0288 and have a short on from near the top of the channel at 1.0386. Remember that yesterday I wrote it could bump its head and scoot back to its lower trend line? Well it did. Look at the candles as it approached the top of the channel on the hourly chart:
Now it’s falling out of its channel. Is this a fake move prior to all the news today? (ADP, GDP, Corporate Profits, and CPI). Look at how RSI is dipping. Note the negative divergence. All this is not good. I am, after all, in an overall downtrend as I pointed out yesterday. I’m uncertain here, too, but will stay in the trade until I’m stopped out at profit. Hmm. There seems to be a theme of uncertainty this morning.
EURUSD
I stopped out overnight with 100 pips profit. Not bad, but what’s up with the Euro? I’m analyzing it now and will post later. Hopefully I won’t have to say I’m uncertain, LOL.
GBPUSD
Thank goodness I don’t have to say I’m uncertain! Alas, there’s no trade at the moment. I consider the market to be contracting and I’m waiting to sell, hopefully at or above 1.6150. I’ll post more, later.
None of the above is a trade recommendation. These are just my early morning thoughts. 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.
I’ve been a bit buffeted by the Ozzie during the last several days. I’ve been out at breakeven or tiny little profits in its sideways movements. I stopped out overnight at .8770 with a loss of 48 pips. This morning I took a closer look.
From the longer term charts—monthly, weekly, and daily—we’re still in an uptrend although the movement has been strongly sideways the last couple of weeks. Lately it’s been waffling with ranges, false or premature breakouts from ranges, negative divergences, etc. Now it looks as though it may be pushing up which is what I thought it would do in the first place.
Why, I ask myself, would a pair behave this way? I mean besides the obvious reason that nobody can make up their mind about what to do—is the sky falling or is it not? Maybe that is the reason but what else comes to mind? I think about what Frost and Prechter wrote in their book, Elliott Wave Principle (New Classics Library, 10th ed. 2005), about B waves on page 81:
B waves are phonies…sucker plays, bull traps, speculators’ paradise….[They’re] rarely technically strong, and are virtually always doomed to complete retracement by wave C. If the analyst can easily say to himself, “There’s something wrong with this market,” chances are it’s a B wave.
That’s what I’ve been thinking to myself—there’s something wrong with this market. Of course there may be something wrong with me and my analysis but I’m not going there right now.
OK. What do I have? A belief we’re in an uptrend although Dow Theory tells me it could be an intermediate correction. A market that seems unclear. What choice do I have? I can only stand aside. As Gann wrote, if you “don’t know what to do, there is but one thing to do. Get out and wait until you know there is a definite trend.” When I see something more clearly and have a good entry point, I’ll trade it.
USD/CHF
I’m out of this pair I bought at 1.0288 and have a short on from near the top of the channel at 1.0386. Remember that yesterday I wrote it could bump its head and scoot back to its lower trend line? Well it did. Look at the candles as it approached the top of the channel on the hourly chart:
Now it’s falling out of its channel. Is this a fake move prior to all the news today? (ADP, GDP, Corporate Profits, and CPI). Look at how RSI is dipping. Note the negative divergence. All this is not good. I am, after all, in an overall downtrend as I pointed out yesterday. I’m uncertain here, too, but will stay in the trade until I’m stopped out at profit. Hmm. There seems to be a theme of uncertainty this morning.EURUSD
I stopped out overnight with 100 pips profit. Not bad, but what’s up with the Euro? I’m analyzing it now and will post later. Hopefully I won’t have to say I’m uncertain, LOL.
GBPUSD
Thank goodness I don’t have to say I’m uncertain! Alas, there’s no trade at the moment. I consider the market to be contracting and I’m waiting to sell, hopefully at or above 1.6150. I’ll post more, later.
None of the above is a trade recommendation. These are just my early morning thoughts. 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.
Tuesday, September 29, 2009
Observation, Generalization, Verification--Euro and other trades
I’m still short the Euro from the sell order that was triggered last Friday at 1.4712. I moved my stop to 100 pips profit if taken out. In addition, I this moment (10AM EST) took a third of my position off the table at 170 pips profit.
I wondered yesterday if I’d see another push up in the Euro. It hasn’t happened yet. One can see a few reasons for being short this pair. Some of them (from the three hour chart below) are:
1) It broke below an uptrend channel (on daily as well as the 3- hour)
2) There was prior divergence between the RSI and the upward movement in price
3) The 1.47 area was proving to be resistance
4) It broke below trough (1.4723) of a double top on the 3-hour chart
5) Long bearish candles were taking out small bullish candles
Some might argue a Head and Shoulder (H&S) pattern was forming on the three hour. If so, it’s a bit messy. More important is that it’s currently loitering just below the neckline. Until that’s definitively broken, there is no pattern. This is something new traders often forget. “Double top!” they’ll say, or “Head and Shoulders!” They correctly detect the beginnings of the pattern but don’t wait until it proves itself to be really that. Good observation of the possible but too much generalization and no verification. Trading is a matter of patience (forbearance, I wrote earlier this month).
But there is enough here to say, in short, a short. If it continues down and definitively breaks the upward channel on the weekly chart this could be the beginning of something big. Before one starts counting profits, though, note the three hour bullish divergence on the three hour chart. We’ll just have to continue watching. Here’s the three hour chart:
Last week I wrote that I shorted the AUD/USD at .8738. It stopped yesterday at 20 pips profit. Talk about sideways movement. I shorted again at .8722. As soon as I finish writing this I’m going to analyze this again. This is how I spend my days as a trader. Analyzing and re-analyzing price movement from several different points of view. When I first started trading I heard many stories about how people would trade from the beach, grabbing 500 pips here or a thousand pips there. It hasn’t proven to be the reality for me. I have to work at this stuff.
The GBP/USD has had its fun with me, stopping me out yet again at break even. Talk about the need for more analysis. I’m also out of GBP/JPY.
None of the above is a trade recommendation. You have to develop your own ideas. I only hope to show some of the tools I use that can help you do so. Remember that trading involves substantial risk. Get written permission from Mommy before you attempt it but only if you and Mommy have a good financial cushion and are risking money you can afford to lose.
© 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.
Friday, September 25, 2009
Is it really Friday?
First, a word cloud based on the text of the FOMC minutes from Wednesday. I hope you had a chance to read the lighthearted take on the minutes I posted a couple of posts ago. This word cloud tells me that their most frequently used words are federal, committee, economic, and markets. Why am I not surprised?
I’m still in the AUD/USD (currently at 78 pips) and USD/CHF (currently at 38 pips) trades from yesterday. The USD/JPY trade stopped out at 20 pips profit. GBP/JPY stopped out at a 40 pip loss and I’m currently short in this pair with my stop at breakeven. Since the AUD/USD and USD/CHF both have stops at a profit point and the GBP/JPY is at breakeven they are “free” trades. Traders love those things because once the stop is at or above breakeven you can't lose money or are profitable. But I’m in these trades thinking bigger things could happen. Whether they will or not is the question.
Today began looking like one of those days when the USD could continue to strengthen. Why? Equity futures are bidding down. Plus there’s lots of buzz and chatter out there about how the equity markets have seen their highs and a turning point is here. Of course some of those buzzing have been saying this for at least six weeks or so, some longer. Much in the area of market prediction is downright silly. That said, I do believe the market provides clues and markers for those alert to them. Seeing them requires awareness, something I’ll write about this weekend.
Ten days ago I did an Elliott wave count on the EUR/USD. I’ve updated it in the daily chart below. The trouble with Elliott Wave is that when you’re in a correction it’s difficult to reach agreement on what it is until after the fact. This makes it less than tradable in most cases. But I do believe it reflects a market psychology. I still believe we’re in wave C of a correction on the daily chart. Once the Euro reached past 1.4720 I put a sell order in at 1.4849. My thinking was that it would reach towards its September ’08 high of 1.4868. It climbed only to 1.4845 so it didn’t quite reach the order. Frankly, I’m a bit surprised. A sell order I put in place this morning at 1.4712 was just triggered. I’ll move my stop to breakeven (if possible—it can reverse quickly but it’s a tight stop so I won’t pay too stiff a price) as soon as it looks as though it’s going to continue down. I won’t be troubled if I’m taken out since there may be one last push up. In any case, the pair is looking a bit top heavy.
Today began looking like one of those days when the USD could continue to strengthen. Why? Equity futures are bidding down. Plus there’s lots of buzz and chatter out there about how the equity markets have seen their highs and a turning point is here. Of course some of those buzzing have been saying this for at least six weeks or so, some longer. Much in the area of market prediction is downright silly. That said, I do believe the market provides clues and markers for those alert to them. Seeing them requires awareness, something I’ll write about this weekend.
Ten days ago I did an Elliott wave count on the EUR/USD. I’ve updated it in the daily chart below. The trouble with Elliott Wave is that when you’re in a correction it’s difficult to reach agreement on what it is until after the fact. This makes it less than tradable in most cases. But I do believe it reflects a market psychology. I still believe we’re in wave C of a correction on the daily chart. Once the Euro reached past 1.4720 I put a sell order in at 1.4849. My thinking was that it would reach towards its September ’08 high of 1.4868. It climbed only to 1.4845 so it didn’t quite reach the order. Frankly, I’m a bit surprised. A sell order I put in place this morning at 1.4712 was just triggered. I’ll move my stop to breakeven (if possible—it can reverse quickly but it’s a tight stop so I won’t pay too stiff a price) as soon as it looks as though it’s going to continue down. I won’t be troubled if I’m taken out since there may be one last push up. In any case, the pair is looking a bit top heavy.
Besides that I went long the pound this morning at 1.5987. I don’t have time to include the chart right now but I have a tight stop on it.
None of the above are trade recommendations. Remember that trading involves substantial risk. My hope is that by posting this analysis on some of the trades I take, people can start to learn an approach for themselves. The biggest part of trading is handling emotions and this is something I'll be dealing with in future posts.
© 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.
Friday, September 18, 2009
Other trades this week
To be honest, I usually am exhausted by the end of the week. TGIF and all that. I frequently lighten up or go flat. Often I don’t trade at all on Fridays.
But I wanted to touch on the other trades I was in this week.
On Tuesday I went out at 90 pips profit on the Ozzie. That was a mistake since I'd forgotten to move my profit target up as I moved my stop up. That was .8660 and I was looking for a place to go long again. It's high was .8775 for the week so I definitely, stupidly, missed out on more profit but since I would have kept moving my stop and target up, I wouldn't have gotten all of it. So it's not too big a disappointment. I put in two buy orders, one at the top of the range and one at an uptrend line. I also shorted the Ozzie at minor support of .8720 yesterday (gosh, was that only yesterday? It feels like such a long week with the sideways movements on the charts). Since that point it dropped back to the top of its range (As in home on the range? Mama? It’s me, your pogo sticking but not too high, wayward child) and triggered my buy order at .8678. It's ranging around this point so one position is slightly in profit and one is slightly underwater. Back to the charts for that one.
I also shorted the drearily dwindling USD/CHF at 1.0309 on its tiny rally yesterday. One would think there’d be at least a dead cat bounce soon, wouldn’t one? By gosh, the 1-, 5-, 15-, 30-minute and even one hour chart is showing an uptrend. It’s nasty little low yesterday at 1.0275 must have brought out the bottom fishers as well as those that love to buy lows whether or not there is any near term support under them. A quick look at the three-hour chart isn’t all that encouraging. The three white candles could be interpreted as something Steve Nison calls the Three White Soldiers (aka Three Advancing Soldiers). These can indicate more strength is coming if they appear after a period of stable prices or a low price area. (Japanese Candlestick Charting Techniques). Well the prices have been low but they haven’t been lingering there long. The three white candles could also be interpreted as what he calls the Three Methods. This is a long black candle followed by three small, often white real body candles that “hold within the first session’s high-low range.” (Ibid. p. 276) It’s bearish. Thank you, candlesticks, for those two equally interesting interpretations. But I don’t mean to sound sarcastic. I do use candles but as Steve himself would be the first to say, they can’t be used in isolation. Also, to be fair, the third candlestick shows some weakening with its upper shadow. And then there’s that bearish shooting star. This uptick doesn’t look sustainable right now but as I said earlier, there’s a dead cat bounce in here somewhere. My suspicion is it will retest those yesterday lows at least. Here's the three hour chart:
But I wanted to touch on the other trades I was in this week.
On Tuesday I went out at 90 pips profit on the Ozzie. That was a mistake since I'd forgotten to move my profit target up as I moved my stop up. That was .8660 and I was looking for a place to go long again. It's high was .8775 for the week so I definitely, stupidly, missed out on more profit but since I would have kept moving my stop and target up, I wouldn't have gotten all of it. So it's not too big a disappointment. I put in two buy orders, one at the top of the range and one at an uptrend line. I also shorted the Ozzie at minor support of .8720 yesterday (gosh, was that only yesterday? It feels like such a long week with the sideways movements on the charts). Since that point it dropped back to the top of its range (As in home on the range? Mama? It’s me, your pogo sticking but not too high, wayward child) and triggered my buy order at .8678. It's ranging around this point so one position is slightly in profit and one is slightly underwater. Back to the charts for that one.
I also shorted the drearily dwindling USD/CHF at 1.0309 on its tiny rally yesterday. One would think there’d be at least a dead cat bounce soon, wouldn’t one? By gosh, the 1-, 5-, 15-, 30-minute and even one hour chart is showing an uptrend. It’s nasty little low yesterday at 1.0275 must have brought out the bottom fishers as well as those that love to buy lows whether or not there is any near term support under them. A quick look at the three-hour chart isn’t all that encouraging. The three white candles could be interpreted as something Steve Nison calls the Three White Soldiers (aka Three Advancing Soldiers). These can indicate more strength is coming if they appear after a period of stable prices or a low price area. (Japanese Candlestick Charting Techniques). Well the prices have been low but they haven’t been lingering there long. The three white candles could also be interpreted as what he calls the Three Methods. This is a long black candle followed by three small, often white real body candles that “hold within the first session’s high-low range.” (Ibid. p. 276) It’s bearish. Thank you, candlesticks, for those two equally interesting interpretations. But I don’t mean to sound sarcastic. I do use candles but as Steve himself would be the first to say, they can’t be used in isolation. Also, to be fair, the third candlestick shows some weakening with its upper shadow. And then there’s that bearish shooting star. This uptick doesn’t look sustainable right now but as I said earlier, there’s a dead cat bounce in here somewhere. My suspicion is it will retest those yesterday lows at least. Here's the three hour chart:
Finally, ta-da, the Euro. It’s currently up 110 pips from last week. Wow! For this we waited? The resistance it’s encountering is real so we’ll just have to wait and see for that one. I’m out of it for now.
None of these are trade recommendations. All 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.
None of these are trade recommendations. All 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.
Tuesday, September 15, 2009
Waiting it out
AUD/USD
Can the market move any slower? Well, yes, I guess it could. My long that I entered yesterday at .8570 has gone up as much as 70 pips but has now fallen back.
I closed half my position at 50 pips and have moved my stop to breakeven. It’s either going to make it up to the top of the range or it won’t. It’s like watching paint dry. But little has changed since my analysis so there’s no reason to do anything else but wait. This situation won’t last forever.
EUR/GBP
Can the market move any slower? Well, yes, I guess it could. My long that I entered yesterday at .8570 has gone up as much as 70 pips but has now fallen back.
I closed half my position at 50 pips and have moved my stop to breakeven. It’s either going to make it up to the top of the range or it won’t. It’s like watching paint dry. But little has changed since my analysis so there’s no reason to do anything else but wait. This situation won’t last forever.
EURUSD
I was stopped out yesterday on the brief move to 1.4653. After looking at the price action on the 15 minute chart I decided to short again. I entered at 1.4632. What made me do so? Remember, I had lightened up on my short position yesterday because of overall bullish sentiment, a slight expansion on the hourly chart, and the fact of triple witching this week which traditionally has resulted in a positive week for the Euro.
Look at the candles on the 15 minute chart below. The upper shadows were long, suggesting that the higher price was being rejected. A gravestone doji formed. This was bearish. The price had rallied, yes, but was dragged down to the low of the 15 minute session. Steve Nison wrote in his book that “the gravestone doji represents the gravestone of the bulls that have died defending their territory.” (Japanese Candlestick Charting Techniques, 2001). There was also divergence between price and RSI. The small triangle represents my entry. 
As with the Ozzie, price will not stay in this narrow range forever. Yesterday afternoon I plotted out my interpretation of the Elliott waves on a daily Euro chart which is below. I don’t consider Elliott Wave Theory (EWT) tradable in and of itself but I do believe one can gain insight into the market by looking at it from this viewpoint. The problem of course is that if you have five EWT analysts in a room you usually have six interpretations. One reason this is true is because of the nature of corrections—it’s often hard to see them until well after the fact.
My interpretation is that we’re in a correction known as a zigzag. This is a three wave correction (ABC). EWT involves rules (which are inviolate) and guidelines. The rules for a zigzag are simple and are found in Frost and Prechter’s book, Elliott Wave Principle. First, it always subdivides into 3 waves. I think wave C is forming now, making it the third wave. Second, wave B always subdivides into a ZZ, flat, triangle, or combination thereof. That’s pretty broad, guys, but what I’m labeling B conforms to this. Third, wave B never moves beyond start of wave A which it did not. Finally, wave C always subdivides into an impulse or diagonal. An impulse is five waves up which I’ve labeled with 1 being in March of this year at 1.3740. So, by this interpretation, we’re in the fifth wave up.
Now the question is where might it end? Ha! That’s always the question.
The guidelines for zigzags say wave C is often about the same length as A and usually ends beyond end of wave A. If this is true then we could expect it to end above 1.4720 which is where wave A ended in December of last year. Another guideline says that a line connecting waves A and C is often parallel to a line connecting the end of wave B and the start of wave A. If that’s true then again we’re looking at about 1.4720.
I could buy all this but I think even if it’s true that there is some serious sideways action going on in the Euro (in most pairs actually) and one can make a few pips while it works itself out.
Frost and Prechter also write about the Golden Section. The golden section has to do with how you divide a total length of something. It’s applied to wave theory in that the distance between the start of wave 1 and the bottom of wave 4 will be either .618 or .382 of the whole. You can decide which one by observing how wave five behaves. You need to know whether wave 5 “extends” or not. This is where EWT makes me grind my teeth and clench my jaw. If I have to wait until the end of wave 5 the first question is how will I know it has ended? But never mind that.
I’m going to make an assumption both ways and see what it gets me. If I decide that the distance from the bottom of wave 1 at 1.2456 to the bottom of wave 4 at about 1.38 is only .382 of the whole length, well you can see that the Euro could go up rather sharply to about 1.73. That would be interesting, for sure. If I make the opposite assumption—that .618 of the entire move had already occurred at around 1.38 then the entire move would end at 1.4663. This to me seems very reasonable especially combined with the wishy-washy way the pair has been behaving.
You could say this entire correction isn’t a zigzag at all but a flat. But I’m not going there. For one thing, I have a life to lead. Also, there are other pairs I want to look at.
Remember where I’m at right now. I entered at the top of this little range with a tight stop so the worst that can happen is that I’ll take a small loss. If I take that loss the market is telling me something important and I’ll have better information to base the next trade upon. I can also move to breakeven as it hits the lower part of the range so I’ll have no loss at all if taken out.
GBP/JPY
Yesterday I also want long GBP/JPY. I’ve moved my stop to 60 pips profit. This was a straightforward buy at support after a steep fall. It’s as simple as falling off a log, not that I’ve ever actually fallen off a log. It’s my favorite kind of trade—very small risk because you can set a tight stop and good upside potential. To be honest it’s probably time to start looking at shorting it but I’ll keep you posted. Ranging, sideways markets seem to be the rule right now.
EUR/GBPFinally, I think the EUR/GBP is interesting. Take a look at my 3 hour, 3 box Point and Figure chart. It consolidated tightly and had a simple quadruple top before breaking out. The many small columns tell me there could be accumulation taking place. It now has drifted back near the breakout point. I’ll study this one further and keep you posted. 
None of the above is a trade recommendation. All my analysis may well be wrong, wrong, wrong. Trading carries a substantial degree of 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.
None of the above is a trade recommendation. All my analysis may well be wrong, wrong, wrong. Trading carries a substantial degree of 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.
Monday, September 14, 2009
EUR/USD Monday Morning
I'm still short the Euro but I did close out more than half of my position a little while ago. Take a look at the following 3 hour chart. It's still showing the weakness in the shorter time frame that I wrote about last week and some nice selling came in early in the Asian session last night. Then you see the hammer so the behavior of the current candle is going to determine whether the pair will continue to break down or whether it's going to pick up strength. Given the overall bullish sentiment and given the fact of triple witching this week (see my Sunday post), it's time to lighten up shorts for now. My stop is above the high this month of 1.4635 but I closed enough of my position that I will still be at slight profit on the trade as a whole if it takes out my stop. 
The hourly chart also supports my decision to lighten up on my short. Although there is still weakness showing--the divergence between RSI and price and the breaking down through the upward trend line for both RSI and price, the market is slightly expanding rather than contracting. It will take a high above 1.4622 to maintain this expansion (and since high from last week is 1.4635 it would ideally close above that to show a continuing pattern of higher highs and higher lows). Why not take the paltry profit and get out completely at this point? Well, we're at a very interesting price level based on my Gann analysis on the numbers of extreme highs and lows and of the fib level 1.4623 from high of 1.6041 to low of 1.2329. So we'll just have to see and the only way to see is to watch the price action.
None of the above is a trade recommendation. It's only my musings. We all know that trading carries a substantial degree of 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.
Sunday, September 13, 2009
Triple Witching Week
This week is triple witching week which happens once a quarter on the third Friday of March, June, September, and December. For the last five years, pairs such as the Euro, GBP, and AUD have usually ended such weeks up although five years does not a statistical study make. All the expiration activity doesn't seem to predict future prices but of course your limit and stop orders can sometimes be triggered. Just one more variable that can interfere with technical analysis.
Waiting for Entries
What will the Euro do this coming week? It doesn’t take much in the way of technical analysis to see that the pair is in an uptrend. Then there was the strong move up this past week—it started the week at 1.4295 and ended it at 1.4570 (the high for the week was 1.4635). Sentiment is bullish, judging by the news reports (see the word cloud from the last post). Even if you believe that this is a primary wave correction (Elliott wave speak), there’s little doubt, it seems, it could go higher, possibly up to 1.48 or so. But as I said in my last post it’s not moving right now. If you want to go long you’d have to wait for a reasonable entry point. So two questions:
1) If you were going to go long where is a reasonable entry point?
2) What do you do while you wait for it to get to that point? That’s the forbearance part I mentioned last time.
The first question is easy. Depending on your approach you can answer it a number of ways. I could use my 3 hour P&F chart I posted last time and hope for a retracement back to 1.4420/45. The pair closed Friday at 1.4570; its daily average true range (ATR) is 129. So that wouldn’t be such a stretch. Or I could use Fib levels, which would also bring me in at 1.4410/55. Finally, I could wait for something with more upside potential such as letting price come back to an uptrend line drawn from May which also coincides roughly with the 50 EMA on the daily chart. That would mean I’d enter around 1.4225/75. That would probably require waiting a few days at least. (Note that if I did take that approach, I’d want to carefully assess market conditions when it reached that point). Or I could wait for it to break out of some major resistance levels which would involve the highs in late 2008.
Why not just go long now if you think the Euro is bullish? Jessie Livermore answered it best when he wrote, “In a narrow market when prices are not getting anywhere to speak of but move within a narrow range, there is no sense trying to anticipate what the next big movement is going to be—up or down. The thing to do is to watch the market…and make up your mind that you will not take an interest until the price breaks through in either direction.” (Reminiscences of a Stock Operator, 1993)
Regardless of approach, what do you do while you’re waiting for your entry? If you think a market is going up you can fall into being fearful that you’ll lose out. This can make you jump in when the market is at a top. One answer is distraction. This can be as simple as putting on your headphones and listening to some music or doing the analysis on another pair. Or focus on how much you can lose if you’re wrong. Actually write down the numbers or plug them into Excel. Read them out loud to yourself. Traders often trade from the silence of their inner thoughts or with the babble of financial news in the background. Hearing your voice speak the results of an analysis, especially if it involves potential loss, can be effective in combating the urge to just put on a trade.
Relaxation anchoring is another technique. You do this by practicing progressive relaxation and then, when deeply relaxed, breathe in with the phrase, “I am relaxed,” and exhale with the phrase, “I am calm.” Each time you say the word “relaxed” squeeze your right thumb. If you practice this a few times it will only take squeezing your right thumb to bring on a more relaxed state during your normal activities. You can also anchor to a pleasant experience. I’ll include some audio links sometime in the future with both these approaches. Email me at dianne@feldyusa.com or post a comment with your email if you want to be on a list to receive them.
None of the above is a trade recommendation—in fact I’m short the Euro right now but that’s not a trade recommendation either.
© 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.
1) If you were going to go long where is a reasonable entry point?
2) What do you do while you wait for it to get to that point? That’s the forbearance part I mentioned last time.
The first question is easy. Depending on your approach you can answer it a number of ways. I could use my 3 hour P&F chart I posted last time and hope for a retracement back to 1.4420/45. The pair closed Friday at 1.4570; its daily average true range (ATR) is 129. So that wouldn’t be such a stretch. Or I could use Fib levels, which would also bring me in at 1.4410/55. Finally, I could wait for something with more upside potential such as letting price come back to an uptrend line drawn from May which also coincides roughly with the 50 EMA on the daily chart. That would mean I’d enter around 1.4225/75. That would probably require waiting a few days at least. (Note that if I did take that approach, I’d want to carefully assess market conditions when it reached that point). Or I could wait for it to break out of some major resistance levels which would involve the highs in late 2008.
Why not just go long now if you think the Euro is bullish? Jessie Livermore answered it best when he wrote, “In a narrow market when prices are not getting anywhere to speak of but move within a narrow range, there is no sense trying to anticipate what the next big movement is going to be—up or down. The thing to do is to watch the market…and make up your mind that you will not take an interest until the price breaks through in either direction.” (Reminiscences of a Stock Operator, 1993)
Regardless of approach, what do you do while you’re waiting for your entry? If you think a market is going up you can fall into being fearful that you’ll lose out. This can make you jump in when the market is at a top. One answer is distraction. This can be as simple as putting on your headphones and listening to some music or doing the analysis on another pair. Or focus on how much you can lose if you’re wrong. Actually write down the numbers or plug them into Excel. Read them out loud to yourself. Traders often trade from the silence of their inner thoughts or with the babble of financial news in the background. Hearing your voice speak the results of an analysis, especially if it involves potential loss, can be effective in combating the urge to just put on a trade.
Relaxation anchoring is another technique. You do this by practicing progressive relaxation and then, when deeply relaxed, breathe in with the phrase, “I am relaxed,” and exhale with the phrase, “I am calm.” Each time you say the word “relaxed” squeeze your right thumb. If you practice this a few times it will only take squeezing your right thumb to bring on a more relaxed state during your normal activities. You can also anchor to a pleasant experience. I’ll include some audio links sometime in the future with both these approaches. Email me at dianne@feldyusa.com or post a comment with your email if you want to be on a list to receive them.
None of the above is a trade recommendation—in fact I’m short the Euro right now but that’s not a trade recommendation either.
© 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.
Friday, September 11, 2009
EUR/USD
The EUR/USD had a nice run up earlier this week but it's not moving worth a sou right now. Where's the action? But this is what trading is all about--waiting for another move that will be definitive. Trading is nothing if not about patience and yet patience is the one trait many traders seem to lack. Actually, patience isn't the bon mot. It's too bland. Forebearance would be better--a determined struggle to not give in to negative feelings. How many times has someone bailed out of a trade after the pair waffled back and forth and then watched as it took off in whatever direction one was originally in? Or, getting into a trade, one starts to second guess oneself?
There are various ways to cope with this and I'll be getting into some of them over the weekend. For now, I thought I'd amuse myself by building a word cloud of some of the recent news about the Euro. Isn't that cute?
The first chart is my 3 hour/3 box P&F chart, based on close. It shows the uptrend, an engaging consolidation period, and the pair is now at a key resistance level. If it can break through....but I'm getting ahead of myself. Note the symmetry in time of the last moves up. It evokes the three-drive pattern from which one could expect a break down.
The last chart is the hourly updated from yesterday. One could still make the case for the broadening pattern but there is also the appearance of an upward wedge with its two upsloping lines and multiple touches. However, one could also argue for a pennant.
More important to me is that there has been selling that has come in several times when the pair has achieved this level (take a look at the 15-minute chart). So even in the face of the strong uptrend, I feel OK with my short with its teensy-weensy, yellow polka dotted stop. Remember, I will reverse myself if and when taken out, depending on what the market shows me.
Now I have to remind anyone reading this that these aren't trade recommendations. They're just my musings. All trading carries significant risks the lawyers tell us to say. And you know something? They're right. That's why I keep my stops small.
Thursday, September 10, 2009
EUR/USD
Well here's the deal with this pair. It's been in an uptrend on the monthly, weekly, and daily charts (as well as on the 3 hour since early September after a consolidation period). With that kind of trending one wants to wait for a pullback to enter.
Had I been on top of things the last hour or so I might have gone long on the pullback on the hourly this morning to 1.4503 with the close at 1.4534. Especially since that was a nice little Fib retracement from the prior low at 1.4467. I wasn't. I didn't.
But there are some other interesting things going on in this pair. Look at the hourly chart above and notice the uptrend lines in both black and orange. Price dipped its teeny tiny toes below the orange line (baby, it's cold down there) and fell below the RSI orange uptrend line yesterday. (sorry, for the funky dates on my charts from Oanda. Today is the 10th but they show it as the 9th--this plays hell with any cycle work I'd be inclined to engage in, I can tell you. Or movements of the planets...oh well, let's save that topic).
The black uptrend line on price shows a divergence with the black downtrend line on RSI. So price going up and momentum is going down. Uh-oh.
The other chart shows a broadening formation on the hourly. I take these seriously. Taking something seriously doesn't mean I'd trade it in and of itself. But now I've got three rather bearish indicators on the EUR/USD hourly. If I look at the candle formations themselves I see a nice strong black candle three bars back and also some indecision with the candle shadows. But this is only the hourly so let's not get too, too carried away with the analysis or start hopping to conclusions. What I'd like to see next is another touch at the high of the broadening formation or a bit higher. Then I might try a short and I can use a fairly tight stop to get me out if price merrily continues past that point, assuming if it happens, that the trend is still very much in force.
Watch the price; watch the price; watch the price. Too many times we trade our expectations. "I'm bullish on the Euro; therefore it must continue up." Or "The Euro is over-valued given economic conditions in Eurozone; therefore it must go down." Uh-uh-uh. While expectations can help us make sense of situations in life--i.e. we can fill in a conversation if we miss a word or two or u cn rd a txt msg despite missing letters--it can cause traders to make stupid and foolish errors, i.e. "Me think bull so I'll ignore the bear signs," or "me big bear so even if it's going up the pair can't be bullish."
Don't trade your expectations.
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