Forex Charting Tutorials

Today’s weak Non Farm Payrolls may provide the Market Sentiment needed for some very nice profit taking from the recent USD rally.

Strategy: Look for signals and clues from the charts for any signs of Dollar selling. Monitor the Euro and GBP crosses, the CHF pairs, and the JPY pairs. Look for any strong moves, then wait for retraces to enter after confirmation for a short term scalp or a resumption of the multi-years trends. Be prepared to exit quickly with partial profits, small lot sizes, reasonable stops losses, and take profit targets. Have cash on the side and wait for some very nice trading opportunities soon. Get a good price to buy or sell, depending on the pair you trade.

Price has broken the green 22 simple moving average. Next downside target is the red horizontal trendline and previous swing high (December 2004) at the 1.3665 area. I expect a retrace up to the previous breakout point. All breakouts will retrace and retest that support level that it just broke. This is a pattern that I picked up on after years of watching price action in relation to previous support/resistance levels.

Notice the cluster of red horizontal trendlines sitting above the current price level on the chart. That was solid support from muliple swing high/low’s where price had encountered buying interest, which has now turned to selling interest. Support has turned into resistance. Smart money will sell into any rallies (retrace) upward that touches this cluster resistance.

P.S. Click on the chart 2 times for a zoom in, to see the red trendlines…. 

In this article, we see 2 monthly charts for the usd/jpy pair. Let’s see what we can analyze from comparing the 2.

We see mixed momentum indicators.

We see price being rejected at a 38 Fib and a 50 Fib area, and a previous swing low. Notice how this pair has done the same thing at this level that she did on a previous occasion. THIS IS POWERFUL!

This is a pattern discovered from years of chart study. If you place orders in these areas on any currency pair, your chances of success with very low risk to reward is greatly enhanced. You risk a reasonable affordable loss to begin building positions if and when the trend gets reversed there. Set a reasonable stop loss and take partial profits, then let House Money run for free as long the move lasts.

EASY MONEY…..

New monthly candle for September shows Momentum indicators still below 100 but beginning to turn upwards. The red 200 sma will provide some support. Price has made a new low around 192.06 or so.

If this support breaks, look for the previous swing low at 179.37 from October 2003 to be the next major downside target.

The weekly chart shows the lower low that was made. The 1 candle mom is showing a retrace coming.

After a week off from trading, to catch up on my fishing, I am impressed at the strength of this current USD rally. In my previous articles, I wrote about a 4th corrective wave down that was coming. The charts gave us clues long before it happened, and smart money built USD positions at all time highs for GBP/USD, EUR/USD, and AUD/USD, among others. August was an incredibly easy money month. All ya had to do was sell every rally, or buy every dip, depending on the pair. I monitor and trade around a dozen or so pairs, and they all move in sequence. Well, most of them, anyway…

I exited all my positions the last friday before Labor Day week. Then I scalped short term a few times after that. It was easy money. That last friday I closed 10 short term positions for +931 pips from the previous asian session entries. Didn’t even have them open long enough to collect or to pay swap. hehehehehe

What do the charts tell us now? September is a tricky month. We have NFP week now. Traders will position themselves accordingly. Bulls will have massive buy orders sitting somewhere, which will cause a whiplash effect and large tails on the candlesticks. Trading will get too choppy for large long term positions, unless they agree with the long term trend. I look for some profit taking and consolidation of USD gains before resuming the rally. There will be some stop hunting on low volume periods. It is best to establish a range in your trading pair with trendlines, fibs and sma’s. Place limit orders where the chart tells you price bounced before. It will bounce again around the same area, until it breaks out. A bounce is a rejection of trend, for whatever reason.

The weekly chart for gbp/jpy shows price sitting on the purple 400 sma, which was breached in march 2008. We see the beginning of a 5th wave down from 251, and it is possible to see a double bottom formation around 192, or a lower low. All 4 moms are below 100. This is bearish.

Strategy: Stand aside for now, and sell the retrace from 203 or so.

The monthly chart for gbp/jpy shows a bearish current candle touching the green 250 sma. The 100 and 125 sma’s are sitting just below providing support. Moms are quite bearish. A bounce upward from here would be likely. We are standing aside.

The weekly chart for eur/usd shows a possible reversal formation after 5 bearish candles in a row. At the least, we should see some sideways consolidation trading, and choppy price action short term. The 5 candle mom shows a retrace is in effect. the one candle mom has breached the 100 level.

The monthly chart for eur/usd shows a 1,012 pip drop from the open at 1.5582 to the low of 1.4570 so far this month. It also shows a 1,464 pip drop from the previous high at 1.6035 to the low of 1.4570. That is quite a move in a short period of time. Downside target is the green 22 sma at the 1,4320 area, but we expect some consolidation first. We have closed all positions and we are standing aside until September, or until resistance is encountered around 1.4930 area to 1.5000 area, where we would look to sell again.

 The weekly chart shows a peek above that white descending trendline and retracement down, retesting it, and breaking it. Price is trading below the 5 sma channel, and the green 22 sma. Candlestick formation is showing a bit of an inverted head and shoulder pattern, if you turn your head sideways a bit to look at it. This would be bullish if completed. Moms are flat giving no direction, but slightly bearish. Price action shows sideways consolidation is in force. A range trade strategy could be profitable because a definite range has been established. We do not want to risk trading this week. Price will be choppy in both directions.