GBPUSD—consolidating

I bought yesterday at 1.5825 after decent momentum and a nice hammer formed at support on the three-hour chart. This was after last Friday's move down to 1.5670 which also formed a hammer and led to a nice rise. I was comfortable going back to my original analysis. As I wrote last week, "The drop took place on the last day of the month—it might only mean there was profit-taking in play….I still have a daily bull flag I'm playing off of and this is likely an EW C wave that isn't quite complete. I also have price targets from my point and figure charts that are higher. All those things looks bullish."

Now of course, with respective highs of 1.5923 and 1.5914 during the last 24 hours, I'm going to have to see if 1.5998 (early August price) will still cap it. As a result I took partial profits earlier this morning of +70 pips. If it can't overcome 1.5995 then support is at 1.5750, 1.5670, 1.5549, and 1.5349.

I think there won't be long to wait before an answer of some sort. On the three-hour chart you can see a rough diamond pattern. This is consolidation before a bigger move. As Bulkowski explains in his Encyclopedia of Chart Patterns (2005) a break from a diamond can be a fast-moving one. The problem here if it breaks upward (which could be expected when a diamond forms after an uptrend) is that 1.5998 resistance. But if it can overcome that resistance, 1.64 is possible.












© 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.

EURGBP—constrained by cable

Since I went long yesterday the pair has gone essentially nowhere, no doubt held back by Cable. I closed my long this morning for -3 pips since I think the picture is somewhat muddied. It dropped below what looked like .8662 support. No reason for a chart as there isn't much to show until it either moves above .8740 or drops to .8521.

© 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—doing its time

Will it drop or will it rise? This is the big question while the Euro hangs around doing its time in a fairly narrow range. Yes, it probed 1.3804 last Friday but it hasn't been back there yet, managing only two weak touches of 1.3784. On the other hand, it isn't exactly plummeting downwards.

The evidence is lining up for Euro to drop. The pair is at price resistance (1.3818/38 are Feb./Mar. highs). There are the Elliott Wave followers saying it's at an end of a wave two correction, there's a contrarian point of view that the Daily Sentiment Index is over 90% bulls, there are perma-bears who insist that it must drop to parity. But the fact is that the pair keeps hovering about, seemingly unable to let go for this projected long drop down.

As I wrote at the end of September, "there's a polarity zone that extends up to 1.3850…" and 1.3850 "is approximately 50% of the move from the 2002 low to the 2008 high." But I also suggested higher targets when I wrote, " Using EW theory, it's not unusual for wave C to be the same length as A. This would imply a top of 1.4030. Short covering if the pair got above 1.3850 would fuel this kind of rise." And then of course there are the perma-bulls who somehow still expect it to become the world's most expensive currency for us schlubs who hold dollars.

The weight of evidence is on the side of the shorts. The issue, for those who want to short, is the entry point. To be safest from being stopped out the stop must be above 1.40. This is far away from the current 1.3771 if you're a small trader. A less painful stop is 1.3865 which is still a reach for some. You can also place a stop above 1.3810—not bad at all if you want to go short. If you get stopped out wait for a point a little further on up the road. Certainly if Euro gets to 1.4030, put on your smiling skull ring. (Further on up the road? Smiling skull ring? I've been listening to Bruce Springsteen lately.)

I shorted at 1.3766 earlier this morning. 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.

AUDUSD—Correcting

AUDUSD finally had a little drop overnight. At .9556 it took out the remainder of my long from .8913 for a profit of 643 pips. So far the pair has dropped to .9542 from a high Friday of .9750. As I wrote yesterday, the pair has been in a range between .9625 and .9750 since Sept. 29th. So this is the first probe below this range and below the Sept. 28th low of .9560.

I'd expect to see support at .9417/07, then 9377, the .382 retracement of the advance from .8770. This zone makes for strong support. Additional support is at .9330, .9213 and .9126.

The three-hour candle that is currently forming is an outside candle (price higher and lower than the prior candle). So there's some indecision out there. I will most likely look at any dip as a buying opportunity but I'll keep studying the chart. Ideally it would get lower than where it is now.

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.

AUDUSD—6 solid weeks

I'm still long from .8913. The pair completed the sixth week of higher highs and five consecutive weeks of higher lows. Sounds like an uptrend, right, at least in the intermediate sense? On the weekly chart below, the cause for concern is RSI. There's negative divergence with this uptrend in price. The price has been stuck in a range between .9625 and .9750 since Sept. 29th. This is either consolidation prior to the long-awaited push back to the 2008 .9851 high or it's something that price will eventually break below. If it does do this then the pair should find good support at .9330. Below that is .9213 and .9126. A drop below that would be alarming to bulls.

Here's the weekly chart. My trades don't show on these longer-term charts because I use a different charting package.










© 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—fighting it out

My short from 1.3731 stopped out at 1.3780. (-49 pips). Euro probed 1.3804 before falling back to a low of 1.3667 this morning. It's tempting to say I should have had a higher stop since I wrote it could move into the 1.38 level but that was too much risk.

Not much has changed since I blogged on Friday. I said then that there was a risk for a move to the 1.3860 level and that's still a possibility. From a bearish point of view, I don't like the way prices are holding with dropping RSI on the hourly chart. It definitely doesn't want to fall which means that the bulls and bears are locked in battle because there are many who want/expect it to fall. The pair is at tough resistance (price and fib retracement) and from any reasonable EW point of view we're at the end of a correction.

My tendency is to short but we'll see. The chart will be clearer as we go along.

No chart until there's something more definitive to show.

© 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.

EURGBP—support at .8662

My two long positions—one from .8582 and one from .8638—profit-stopped out at .8680 for +98 and +42 pips respectively. The pair stumbled at .8740 which is fib confluence and my prior profit target.

What seems to be happening, though, is that .8662 served as support in the pullback. This is where it found support on Friday. Momentum, as measured by RSI, fell lower than it had at that price level on Friday, setting up what's known as a hidden divergence. This hints at higher prices. 50% retracement of the move from .8562 to .8740 is .8651. If you study the daily chart you can also make a case for the pair currently tracing out a third wave. Finally, one can make out a cup and handle pattern which I've pointed out on the daily chart below. It's a short-term bullish continuation pattern.

All this leads me to believe the pair will make another run at .8740 and if it clears it will try for .8929 (monthly downtrend line from .9805 high) and possibly .9000, a big psychological level.

However it's also still possible to see further drops to the daily uptrend line at .8521 and there's additional support at .8463. There's continuing pressure on Euro although the pound is a pretty crummy currency right now as well. Longer term you can make the case for an overall downtrend. We'll just have to see but for now I'm long.

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.