EURUSD—daily chart

On the daily chart, one way to interpret the action from 1.1876 is from a bullish point of view as Euro makes its way up an upward sloping rectangle. The wave action would be:

Wave 1: 1.1876 to 1.2467 (591)
Wave 2: 1.2467 to 1.2152 (315)
Wave 3: 1.2152 to 1.3335 (1,183)
Wave 4: 1.3335 to 1.2588 ((747)
Wave 5: 1.2588 to either 1.4159 (1,571 pips) at which point began an ABC correction or to 1.4274 (1,686 pips) which then initiated a correction down to 1.2874.

That meets the three inviolate rules of an impulsive wave—wave three is not the shortest wave; wave four does not poke into wave one's territory, and wave two doesn't retrace more than wave one. The purpose of an impulsive wave is to make forward progress and price did do so. The action from 1.2784, though, is less clear. Bulls might say that would be the beginning of wave three. However, if it was then:

Wave 1: 1.2874 to 1.3862 (988)
Wave 2: 1.3862 to 1.3429 (433)
Wave 3: 1.3429 to 1.4942 (1,513)
Wave 4: Either it completed at 1.3970 or it is still in process. If it is still in process, then B topped at 1.4697 and C can go no lower than 1.3862 (because wave four cannot enter into wave one territory). In a zigzag, wave C is usually .618A, equal to A, or 1.618A . If it is .618 of A then that price is 1.4096. To equal A, the price would have to drop lower than 1.3862 which should not happen to preserve the Elliott count.

Euro touched a low of 1.4288 and now seems to be struggling to recover from there. If one examines a cloud chart (which I try to do as little as possible but as they become more popular it's worth glancing at them), Euro has descended down to the bottom of the cloud. However, since it entered from above, this is still bullish and supports the ABC correction theory.

However, there is another way to examine the price action from 1.1876 and that is as a large correction, made up of a double zigzag. I have marked the letters for this correction, a double zigzag, on the daily chart below and this fits in with weekly price action as well which is a big plus in my mind. If this is true, then there is a big drop ahead as we'd be in a third wave.

This just goes to show how loopy Elliott Wave can be if you attempt to use it as a trading tool. However, it can be evidence and it can indicate market psychology. The nice thing about either of these interpretations is that unless the 4th wave discussed above is complete, the most likely scenario is for additional moves down under either interpretation.

Looking at possible support, regardless of Elliott, when the price dipped to 1.3970, the 100-daily SMA held as support. Currently, the 100 is at 1.4143. That is very close to 50% of the move from 1.3429 to 1.4942 (1.4186) and .382 of the move from 1.2874 to 1.4942.

For resistance, the high today is 1.4404, just completed on the hourly chart. That was just above confluence but it was also a doji. Above that is 1.4450 and 1.4500. At that point, price would have regained the broken, short-term, hourly uptrend line.

Here's the daily chart:

© 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.

EURUSD—met H&S price target

Euro met the head and shoulders price target of 1.4419. In doing so, it has dropped to a low of 1.4402, breaking below both a descending triangle on the hourly chart and a short-term uptrend line. My short position, even from the poorer entry of 1.4581, has done well and is still on. Still, this is near support so some profit-taking at +170 pips is in order. A .382 pullback of the current move up was at 1.4419 and the monthly pivot was at 1.4445.

The next target is the .50 retracement at 1.4334. A close for the week below 1.4378 is bearish.

Here is the hourly chart:

© 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.

EURUSD—hourly head and shoulders

I shorted yesterday at 1.4644 but moved my stop too quickly and was taken out at break even. I shorted again at 1.4581 and while price so far is dropping, I would not start filling out deposit slips yet.

Still, there are some bearish signs. I wrote yesterday about an Elliott double zigzag that topped at 1.4942. On the hourly chart, a confirmed head and shoulders pattern is in place. The neckline was 1.4558 and the potential price target is 1.4419. Price has touched 1.4478 so it is not that far away. The 1.4419 target ties in with both a .382 pullback of the current move up at 1.4419 and the monthly pivot of 1.4445. Beyond that target is a .50 retracement at 1.4334. A short-term uptrend line on the four-hour chart comes in at 1.4326.

If this head and shoulder pattern should fail, then it would be wise to remember that such patterns often are part of an Elliott expanded flat and price could move up quite nicely. A move above 1.4734 (.786 retracement of the move down from 1.4942) would make this more likely.

Here is the hourly chart:

© 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.

GBPJPY—dropping

My short stopped out at +20 so I'm glad I took some profits when it was up at +68 pips. On the daily chart, the pair has dropped below the uptrend line from the March 16 low (see yesterday's blog). The low so far is 130.61, just a bit below Friday's low of 130.67. The May low of 130.29 is next, unless it can rally. Unless this is a fake-out, it's probably best to short rallies. There is positive divergence on the four-hour chart so a bounce may be in the works.

Resistance is at 132.08, 132.77 (June high) and 132.95/133.03/133.25, the 20- and 10-weekly EMA and 100 daily SMA respectively. After that are 134.50 (the daily chart downtrend line) and the May high of 135.14.

© 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.

EURUSD—near strong resistance

Euro is approaching strong resistance and looks as though price action might be bearish around 1.4720. On the daily chart, one can trace out an Elliott Wave corrective count with the double zigzag peaking at 1.4942. If the pair closes above 1.4734, this count will be invalid. This would be .786 of the move down from 1.4942 and would suggest further price moves up. However, the lovely thing here is that one can short and have a tight stop since the market would be giving a strong message with moves higher than 1.4734. If anyone reading this is long, tighten stops and possibly take some profits.

Beginning on May 26, yesterday was the eighth bar of a Tom DeMark sell setup with today being the ninth candle. The candles since the 1.3970 low have been robust—they have opened near the low and closed near the high so this is bullish. Price has also exceeded the .618 retracement of the move down from 1.4942. However, the bullishness may be close to a point where a consolidation would make sense. A .382 pullback would bring prices down to 1.4419 (close to the monthly pivot of 1.4445) and 1.4334 would be 50%. A move below 1.4300 would be very bearish.

On the four-hour chart (not shown), there is negative divergence with RSI—prices moving up but RSI moving down. My plan is to enter short and see how it goes.

Here is the daily chart:

© 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.

GBPJPY—struggling

In line with my blog yesterday, I went long in GBPJPY at 131.08. I've locked in some profits at +68 pips but I'd like to see the pair do better than this. As it is, it's struggling with the 132 area, having reached a high of 132.08 this morning. That is only one pip higher than yesterday's high of 132.07. The .618 retracement of the move from 130.29 to 135.14 is 132.14.

One can trace out a five-wave decline on the hourly chart and, if this is so, the pair should be in a C wave with a potential high of 132.45 (where C would equal A) and 133.46 (where C is 1.618 that of A).

Resistance is at 132.08, 132.77 (June high) and 132.95/133.03/133.25, the 20- and 10-weekly EMA and 100 daily SMA respectively. After that are 134.50 (the daily chart downtrend line) and the May high of 135.14.

Support is at 131.89/71 (daily 200 SMA and the low for the prior two hours), 130.67 (Friday's low), and 130.29 (May low). Below 130 would likely see additional price drops.

Here is the hourly chart:

© 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.

GBPJPY—Friday doji

The Guppy dropped to a low of 130.67 on Friday, closing the day with a dragonfly doji. This can be a bullish signal as it means price had lower lows but price closed at the high of the day. Usually, though, it is more bullish if it occurs after a rise in price rather than a drop. Price has been dropping since the May 31 high of 135.14. One could view it as a hammer since there has been a drop in price. Price in the 130 area has served as support on several occasions and 130.29 was the low for May. The combination of the doji and being at support is enough to say that if price drops below 130, there may be further weakening. However, one could take a long position below 131with a stop below the doji. I will be watching momentum on the shorter time frames (4- and 1-hour) to see if I want to get into this trade.

If price manages to rally, resistance is close by at 132.77 (June high) and 132.95/133.03/133.25, the 20- and 10-weekly EMA and 100 daily SMA respectively. This is also near a round number. After that is 134.32 and 135.14, the high for May.

Here is the daily chart:

© 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.