EURJPY—possible evening star

I'm long in this pair from 112.00 but there's a potential evening star forming on the hourly chart. Since it's near resistance this is ominous if it happens. As a result I just took partial profits at +117 pips. The current hourly candle needs to close near its low for this pattern to be confirmed. If it clears above the top, look for higher highs, possibly to 114.66/75 and beyond.

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.

USDCAD—twirp

I don't mean twirp to be testy as in something that's contemptible although the thought crosses my mind. I meant it as twirp—the USD is like a small bird twirping in a tree. Perhaps the bird is about to be devoured; perhaps the tree will fall from the mighty ax that stands in for economic policy these days—QE.

OK, USDCAD broke down below last week's inside week—not good. The low is 1.0082 so far. The key support is the weekly hammer (three weeks ago) at .9981. Below this could see a resumption of the overall downtrend. I'm not convinced this is going to happen, though. For one thing, you have a nice morning star pattern on the weekly chart with that hammer being the middle of the three-candle pattern. Still, convinced or not, the pair needs to overcome 1.0249 and better, 1.0374 to make a credible case for recovery. Waiting to buy is the conservative course here and of course if it breaks that hammer low you wouldn't buy at all.

Here's a weekly 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—possible long with stop and reverse

I'm leaning long and here's why. We’re near a good support level of 128.00 (yen pairs like round numbers) and near an uptrend line at 129 (another round number). This may only be a correction before further drops but corrections often stay within parallel lines and it could get back to the top of this upward correction. (131.30) The 50% retracement of the most recent down is at 130.73, also a prior high. That's a nothing move pip-wise for this pair. 133.03 is a confluence level and a break above the channel line to here would most likely set off a short squeeze that could push it further upwards. So I may be looking for a long this morning.

When would I know I was wrong if I was long? Certainly below 128.00—so an entry here might carry a bit too much risk for the average trader. One could buy at 128 with a very tight stop (and I do mean tight, i.e. 127.90) but I'd be watching momentum closely at that point. Notice how RSI is coiling within a symmetrical triangle. Stop and reverse would be the probable trade at that point, looking for a retest of 126.44. I have price targets below that from my Point and Figure charts of 121.50, then 120.40, 119.70, and .9990 (gulp).

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.

EURUSD—broke above triangle

Euro dropped to a low of 1.3864. I bought two positions yesterday, one at 1.3885 and one at 1.3883 as it rose from the low. The drop meant the E leg didn't completely form, not unusual for a pair getting ready to thrust upward. It broke out of the triangle at 1.3985 and its high so far is 1.4042. This however is not good enough to go to the bank with. It needs to clear 1.4080 (the prior high) and then, more important, 1.4159, the Oct. 15th high. This brings it near 1.4180, my 45° internal trend line on my Point and Figure chart.

If it clears those resistance levels then, as I wrote yesterday, the monthly chart shows a downtrend line coming in around 1.4535. 1.4448 is the price target for the triangle. This target is around the .618 retracement of the entire move down from 2008 which is at 1.4450. A close above that monthly downtrend line would be one piece of evidence that this correction is over and one might forecast higher highs from there.

Until it clears resistance at 1.4159, there's still a risk the breakout from the triangle is a fake out. This can be tricky to gauge. A retest of the broken line would be good but if it makes an hourly close well back inside the triangle, I'd be suspicious.

For my current two trades I have a profit stop. If it retests the trend line of the triangle I may add a position.

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.

USDCAD—monthly

I haven't blogged about this pair in a while—that doesn't mean I haven't traded it but I can only write so much as I write the blog for free. Price is currently at the bottom of an upward sloping channel. Yes, it could be a bear flag as the pair gets ready for another drop down but there are other interpretations. Time is about equal for the up and down legs of the move so I'd expect a move up. If it went to the top of the channel….well, let's just say that would be a nice tidy profit but I'm thinking that 1.0658, the lower of the three consecutive candle tops (July through September), is achievable. In order for this to happen, the pair needs to scale 1.0374. If you didn't get in at the breach of resistance last week, entering around 1.0130/40 would be at the .618 retracement of the most recent short-term move up. The stop can be fairly close below .9977 (the lower shadow of October's candle).

Even if you're overall bearish on this pair, seeing this as an ABC correction, leg C would have to be up. At .618 of A (1.9058 to 1.3065) that would be a nice long. However in this view it's not clear that wave B is over.

The weekly chart (not shown) showed that last week was an inside week. This indicates indecision but since the pair also breached resistance at 1.0230 (Oct 8th high), it could also signal a bottom is in place. We'll just have to see.

Here's the monthly chart (my trades don't show on the monthly chart because I use a different charting package for weekly and monthly charting).











© 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—three-hour

Dropping down, way down, from the monthly analysis, one can see that on the three-hour chart (and on the daily) there is a symmetrical triangle forming with leg D completed. The Elliot Wave people can bleat all they want about Euro being ready to turn down but a triangle in their view precedes breakouts in the direction of the prevailing trend. Which is up.

In my monthly analysis I wrote about buying a pullback. If I did this I'd want to enter around 1.3762 (the bottom of the triangle to 1.3807 (the recent low). One could also make a case for entering around the current levels because price is at a fib confluence point; however the risk is much higher (stop should be below the triangle but you could set it tighter at 1.3880.). The potential loss has to be weighed against potential gains (risk reward). Conservative traders would wait until the breakout above the top of the triangle with the stop below the downtrend line. My personal strategy is to see if the pair can hold above 1.3890. If it does I may risk a small long. Otherwise, I'll re-enter as it approaches the bottom of the triangle with a stop and reverse in place.

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.

EURUSD—monthly

October was the fourth month that Euro had a higher high and higher low. It didn't close above the psychological 1.40 but a high is a high. As I wrote on Friday, a short look backwards (10 years) shows that Euro has gone up in November in eight of the last ten years. 10 data points does not a statistically reliable study make but it's worth noting. From eyeballing the monthly chart one can see that the downtrend line is coming in above current prices at around 1.4535. As I also wrote on Friday, this is in the range of some price targets and is just above the .618 retracement of the entire move down from 2008 which is at 1.4450. Looking at the red channel lines, one can see that this would be within the range of a correction since many corrections stay within parallel lines drawn off the origin of A to the end of wave B. So a close above that downtrend line would be a piece of evidence that this correction is over. Notice the words, "piece of evidence." Technical analysis is made up of the weight of evidence and those that trade on only one piece (or one indicator) often end up broke. Another way of looking at this is to see the lines within the red channel as representing a massive bull flag (and I do mean massive—a price target from this would be astonishingly high but I'll let you figure that out).

Note the rise from the classic morning star formation. Note, too, that three of the last four candles are very bullish and that even with the upper shadow on the October one, the bulls are coming into the month in control of the situation. To me, unless bears take control soon, this strengthens the argument that prices may rise to the downtrend line and that this November might be another up month in line with the scant, ten-year seasonal data.

When I look at other evidence, such as my daily point and figure charts (not shown), I have an internal downtrend (45°) line coming in at 1.4180 (not too great) but I also have price targets well above that line.

On the other hand, sentiment is very bullish and markets have a way of going against that. On a daily basis it can be reasonably argued that we're at the top of an Elliott Wave correction (see prior posts) although wave c at 1.618 times that of wave A also pushes us into the mid 1.40s. Then there is that pesky harmonic pattern (the bat) that I blogged about at the beginning of October that would a high well above where we are now.

OK, I have some mixed evidence but the weight of it is leaning bullish. Therefore my choice as a trader is to buy pullbacks in the shorter time frame. I'll discuss that in the next post. Price behavior, once it gets to 1.4450 to 1.4579 (the January high) is going to be key. Maybe it will get there this month.

Here's the monthly 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.