A-B-C-D Trade - page 189
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EUR/USD intra-day horizontal extension plot was Low = 1.43561 and High = 1.44348.
161.8 = 1.44834
gbp/usd which gdp came below expected .7 from pre 1.6 figures giving high levels have look on it ??? thanks
gbp/usd which gdp came below expected .7 from pre 1.6 figures giving high levels have look on it ??? thanks
The U.K. GDP "Year-On-Year" came in worse than expected. However, GBP had a thrust up after data was released. So it looks like the traders are more concerned with the near-term problem with the U.S. debt ceiling issue.
Since we don't trade the news (data), for this very reason of unpredictability and whipsaw action for intra-day positions (small stop-loss), we'll give post-data comments.
Attached is 30-min GBP/USD. Plot has yellow ABC, which resulted in price rising just short of FE 100, with red Moon 90-degree acting as resistance.
A = 00:00
B = 05:30
C = 08:00
White fibs are retracement, and pair declined to the 50% level 1.63700 just now during 14:00 candle period. This frames the bounce/retracement opportunity.
Let's look at EUR/CHF which, like many other pairs, gapped down at week's open. We numbered the 3 dips at the July 25th bottom on the attached 30-min chart.
Per recent post, we applied indicator SQ9(Price) with start price of 1.14032 and direction up.
2 fib plots are:
Regular extension plot (blue):
High = July 22nd 1.8910. The Low was moved to July 25h 05:00 1.16582.
ABC Swings (not shown) were all on last Friday:
A = July 22nd 07:30 high 1.18910 (top)
B = July 22nd 14:00 low 1.16917
C = July 22nd 19:00 high 1.175412
FE 100 = 1.15471
***
Dip #1 saw a close of the July 25th 07:00 candle at the regular 138.2 extension level.
Dip #2 was at the FE 100.
Dip #3 was at the regular 161.8 extension, which was also near the yellow 90-degree SQ9.
There was divergence at both the #2 and #3 dips.
If trader entered BUY based on 2nd dip, which had a very small bounce, the deployment of money management can keep this from being a loss.
Stop-Loss Options:
Below 90-degree price 1.15102
Below regular 161.8 extension 1.15143
Below micro-extension's 138.2 of 1.15074, based on plot:
High = 09:30 1.15885 Low = Dip #2
Below FE 1272. of 1.14913
Targets for take-profit (TP) would be based on the 1st 2 plots, per above, as well as retrace plot. Based on Low = Dip #2,
38.2% = 1.15984, 50% = 1.16195, 61.8% = 1.16407
Let's use an entry price just above Dip#2 (also FE 100) 1.15550. If S/L was placed just below the regular 161.8 of 1.15143 + cushion, the risk is about 45 pips.
Here are Reward/Risk to each TP:
38.2% = 40/45 net pips
50% = 62/45 net pips
61.8% = 82/45 net pips
***
After price made Dip #3, these calculations need to be adjusted. Use Dip #3 as the Low for retrace plot. We'll let you go through that exercise.
Price pulled back and faced resistance at the 127.2 level before reaching the Low.
As the U.S. debt ceiling continued to be unresolved, USD remains weak across the board. After EUR/USD establish its high during yesterday's Asian session, it retrace 38.2% in the following European session.
The attached 1-hour is a zoom-in focusing onward from that pullback level at the open of the U.S. session (brown shaded area).
Low = 13:00 1.44552 High = 16:00 1.45088.
We marked the hit to the 127.2 extension 1.45234 during 18:00 and it became the 1st peak (X). The 2nd peak at today's Asian open had closed the 00:00 candle (X) at the 138.2.
The BAJA bearish divergence in RSI(4) was 86 and 80, and thus hinting at loss of strength. This formation/technique is "leading" as opposed to lagging. Money management still must be practiced.
Understanding the fibs gave trader advantage to enter at the 138.2 area, after the 00:00 candle closed. Let's call it a SELL fill at 1.45285
Waiting for the 15-min EFT trigger had entry at 01:45 open price of 1.45151.
Stop-loss just above the 161.8 price of 1.45419 + spread and cushion = 1.45470. Risk = 20 net pips (using better entry).
Move plot's high to top 1.45350, to ascertain retracement levels.
Take-profit (TP) target at 50% retrace fib 1.44951, which is near previous pivot low at 09:00. Add spread and cushion = 1.45010. Reward = 27 pips.
Reward/Risk ratio (R/R) = 1.35:1
Looking at the 15-min chart, we can see price hit the TP during the 02:00 candle period. This was a counter-trend trade during an environment where USD is under pressure. Have to make it quick and stay conservative.
We had posted a daily chart showing BAJA bearish divergence, and awaiting 4-hour EFT trigger. The 2nd peak was the July 24th daily candle.
The attached is a zoom-in on the 1-hour chart. The Low-High plot of 1583.35/1607.10 was easy to see.
After a 38.2% pullback on July 22nd, price hit the 161.8 with a large thrust candle July 24th 22:00 period. Bounce traders lurking there took it down to 1607.75 on July 25th 01:00, for about +14.00.
If we waited for the July 24th period to close, the 00:00 open price was 1615.25. Plotting retracement using 16:00 pullback for Low produced the 61.8 at the $1607 level. This option more difficult as we lost pips after bounce.
The revisit of the top on July 25th 10:00 was another opportunity to short with better R/R. Trading to just above the 38.2% or 50% retrace levels turned out to be good. We described opportunities like this as bounce trades upon first revisit.
The blue price label of 1614.84 at the July 25th 20:00 candle marks the 4-Hour EFT trigger entry. Quite a difference in entry price, and thus R/R.
Currently testing July 24th high.
Attached is update of last 1-Hour EUR/USD 30-min chart posted, with BAJA bearish divergence.
After the quick hit retrace opportunity, pair was rejected near high at the end of the Asian session. The aforementioned pivot (same area as 23.6 on chart) acted as support and was aggressively tested during the 06:00 hour.
The 07:00 open of the European session (blue box) broke through and closed below that level. Pair returned to yesterday's Asian Low 1.43561 at the end of the European session.
Other USD pairs, such as GBP/USD experienced the same pull back. Tone still remains cautious and bearish with USD due to debt ceiling talks impasse.
Gold also had a sell-off after the U.S. session opened.
GBP/USD usually trade in the same direction (in tandem) as EUR/USD. We have the PSQ9 template applied, which is the same as the one used for EUR/USD. The setting uses 5 digits and multiplier of 0.0001.
We marked the July 21st Low/High, and the subsequent 138.2% extension hit on July 26th/27th. We mentioned the Moon 90-degree (diagonal dotted red lines) acting as resistance.
Similar to EUR/USD, we had a 2nd peak BAJA bearish divergence on the 00:00 candle.
Another aspect to study is the RSI(4). It attempted to break the 50 level on several occasions during small pullbacks to the downside. It finally happened during the July 27th 05:00 candle period, which closed with a reading of 46.
The 05:00 candle also closed as a cross-over on the EFT. The red thin histogram bar locked in, and does not repaint. The cross-over version of the indicator is also on the chart to emphasize how to read the histogram version.
We repeat the histogram version default colors should to changed to:
0 = blue
1 = red
2 = red
3 = blue
4 = default O.K.
The Width remains the same as default setting, with thicker width on #0 and #2 colors.
The EFT staying below the zero line tends to mimic a Heiken Ashi Smooth (HAS) for trend.
Post #906 on page 91 has both versions of the Ehler's Fisher Transform (EFT) for download.
Post #935 on page 94 contains a pdf file explaining the EFT indicator.
The 1st chart is a daily with indicator SQ9(Price) set with start price of 1.49388, which is this year's high established on May 4th. We turned off the 22.5 levels by inputting none for its color.
We can see the pair make a precise hit to the 720-degree on May 23rd. 720 is 360 X 2. The number 360 is significant as Gann considered it a full cycle. This level was hit again on July 11th and 12th, with price closing above it on July 12th.
The 2nd chart is a 4-hour, with July 21st Low/High plot of 1.41719/1.44367 for extension. Price failed to confirm above the 127.2 extension (same as 315-degree), and registered a BAJA bearish divergence formation.
If entering near 127.2 fib, stop-loss can be placed just above the 138.2.
We can see formidable support at the blue 38.2 fib 1.43225 and the yellow 450-degree line.
Support and resistance (S&R) can provide the trader with an advantage. Add a couple of accessory indicators, and look for S&R clusters (including diagonally).
This is an updated chart on that pattern. We identified the flaws differentiating it from Guru Carney's perfect pattern in yesterday's post.
We couldn't do anything about Point B, which should be no more than a 50% retracement of X-A. We can however, monitor Point D. Obviously, this is the potential point of entry.
We plotted white horizontal fibs, with the 88.6 level (1.44925) being the ideal Carney Point D. Price action chopped around and probed to 1.45350.
Generally, these can be swing trades lasting more than one day. Therefore the stop-loss amount is usually larger than the day trader normally utilizes. Scaling number of lots to trade protects the trader from over-trading. In this example, there are 2 obvious options:
1) just above the 100% fib 1.45769
2) The gold color line that is partially framed by the red box. This is the 200% extension of leg B-C, as labeled. This price level of 1.45484 is 56 pips above the 88.6 fib.
Generally, some traders will apply a trigger for entry near the 88.6, if they accept this pattern. We have shown a couple of these, with divergence.
Price declined to support area, as discussed on last post. There was about 160 pips between the 88.6 and the support area. Risk was about 65 pips. R/R ratio was 2.5:1.
This is an example of having an advanced plan. While we understand the market is jittery and the USD has come under pressure, we can still analyze the technical aspects.