Notice how the price has retraced almost to the yellow 5 sma just as the charts told us they would do. The momentum indicators can be used as a leading indicator and will show the action before it happens.
Easy money…
The new weekly 1 candle mom is pointing down, showing a retrace is coming to retest the 5 sma high or the 5 sma close price.
Beautiful example of a bullish flag or pennant formation. Notice the breakout retracing to retest.
JPY pairs have some large gaps. Dont be surprised if the japanese government intercedes in their currency by flooding the market with yen, thereby weakening it.
P.S..
Booked a quick several hundred pips profits exploiting the gaps in all the jpy pairs. Made my weekly quota for now.
We have gaps in the asian open. Do you feel lucky?
This weekly chart for euro/usd shows shows a bearish picture with all 4 momentum indicators agreeing to the downside in slope and direction, and sitting way below the 100 level, which is the bullish/bearish dividing line. Price has broken below the pink colored 300 sma, making lower lows and lower highs.
A correction upward is due. Bears will need to consolidate their positions and build a base from which to push down from. The new weekly candle on the Monday Asian Session at 0:00 GMT time will give us a clue as to where she wants to go. Breakouts usually retrace and retest previous support levels that were broken.
If the weekly momentum indicators begin to form a “vee” bottom and retrace past the 100 level, then we know that a correction/retrace is due at some point during that weekly chart current candle.
The daily chart shows a bearish candle, and all 4 moms agreeing to the downside.
The 4 hour chart shows some exiting of short positions over the weekend, but a continuation of trend downward at this point in time.
What can we see by examining this monthly chart for eur/usd?
The first thing we notice is the absolute bearishness of this pair for the past 4 monthly candles. Corrective wave 4 down has turned into a reversal of trend. Price has blown away all support from the high of 1.6035 to the low of 1.2495 in a very short period of time. That is a drop of 3,540 pips. If you read back through my past articles, you will notice that the charts were telling us that a big move down was coming well in advance of the fact, even though retail traders were continuing to take long posiitons and buying this pair, and fundamentals were bullish euro, and Market Sentiment was USD averse.
Things have certainly changed on the fundamental side of the bigger picture. But there is a good lesson to be learned from this. Fundamentals will lag behind technicals. Smart money will exploit this situation by finding out approximately where the selling interest occurs and where the buying interest is sitting, and placing positions at strategic locations, waiting patiently for the market to fulfill its destiny.
Smart money is looking for opportunities to make easy money and exit before retracements, or to cover their positions with a positive hedge to collect any lost profits during retracements. Smart money is quick to exit positions in a volatile market, and waiting for signs of a bottom to become established, and consolidation to present itself.
Smart money has different trading strategies for different situations. Smart money places positions for long term, mid term and the short term. Smart money divides his account balance into risk capital, and retirement type percentages. Smart money uses strict discipline with money management for each of those percentages.
Small lot sizes and trailing stop losses help to protect that position that is taken from logical analysis and strategic entries. Partial profits are taken at strategic locations and house money is used for resumption of trend for the remaining partial position. When you close a trade in the MT4 platform, you have the choice to close all of the position or part of the position. With the huge swings in price range that we are seeing now, traders are often exiting their positions too early, and taking profit too soon. At other times, they leave a position open too long and their profits get eroded, or the position reverses and turns negative on them, before turning positive again. Taking partial profits, scalping retraces, and trailing your stop losses will help you to maximize your profits in this volatile market. Dont be afraid to hold a long position and a short position on the same pair at the same time, as long as the price is swinging wildly in both directions.
This monthly chart for eur/usd shows us not much support remains to the downside until the confluence the aqua colored 100 sma (1.1740 area) and the red 200 sma (1.830/50 area).
Risk aversion liquidation of carry trades is making it difficult to find a bottom. Euro and gbp are getting hammered.
Be patient. Wednesday is triple swap day, so expect a retracement at some point before swap is paid.
Watch for market sentiment, and a possible short term bottom in the carry trade pairs. Global government intervention will have a temporary bullish affect, as will the U.S. elections. Now is the time to develop strategies for longer term positions, by exploiting whatever effects an Obama victory will experience.
The monthly chart for eur/aud shows us a very strong move up during Risk Aversion market sentiment, and a considerable retrace testing the yellow 50% fib of the monthly candle high/low. If she retraces more than 50% with daily and weekly candle closes below that 50% fib, then some doubt is present concerning any continuation up. This pair is contra-trending to jpy pairs, in that she goes up when they go down. This is a reverse correlation.
Monitoring the cross pairs will help your trading on the major pairs.
All 4 momentum indicators are agreeing upwards with steep angles, as of the time of this article. All moms are way above 100. This is bullish long term. Price is trading way above the 5 sma channel. We still have 2 trading weeks remaining before candle completion, so things could change in the short term.
Now let’s look at the weekly chart. She tells us a different story. Look at the bearish moms pointing down indicating the retrace. We will get a new weekly candle on the monday asian session at 0:00 GMT time. Moms are still mostly above the 100, except for the 1 candle mom, which is showing us the retrace. The weekly candle closed as a spinning top. This is indecision, and could go either direction. We see an inside bar from the previous candle with a lower high. We see a higher low with the tail bouncing up off that yellow 61% fib of the monthly candle high/low. There is also a longer term fib sitting there, making for cluster support there. Notice how the price encountered heaving buying interest there, indicated by the large whiplash tail. Price tested the weekly 5 sma high, breached it and bounced (rejection) at the double fib. Red horizontal trendlines indicate previous swings (bounces).
Now we look at the daily chart. It is showing a bull flag pattern which tells us that this pair will continue upwards after consolidation, thereby agreeing with the monthly bullish analysis. When and if the new weekly chart turns bullish, and we have agreement on all 3 charts then you know to be long this pair.
Until then the strategy is to use a channel trading technique, which we call Range Trade technique. Find the highs and lows on the daily, 4 hour, and hourly chart. Draw trendlines. Place buy orders near the bottom of the range, and ride them to the top of range, where you will take partial profits, leaving a small position open with a positive stop loss (trail it) to possibly catch a break out to the upside if it comes.
You also begin to place sell orders near the top of the range to capture retraces or reversals. Use break even stop losses as long as these are contra trend longer term positions. Your long position profits will lessen, but you will capture any lost profit on the new short position. The break-even stop loss will remove any risk of loss on this position. If this position stops out, that means your long position is in profit.
