A-B-C-D Trade - page 199
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Bloomberg conveyed that a Swiss news outlet reports that the SNB have been involved with intense discussions to develop a target exchange rate for the CHF.
Details are sketchy and the market is jittery. EUR/CHF gapped up about 75 pips upon opening on Sunday.
Attached 1-hour chart plots Low = 1.02515 and High = 1.09190
Pair hit the 161.8 extension during 02:00 candle period. Mars 90-degree there as well, acting as resistance thus far.
***
Eur/USD being dragged up. Attached chart plots Low = 1.41215 High = 1.42743. Pair hit the 127.2 extension during 01:00 period.
Moon 90-degree and MurreyMath1.0 also has its 5/8th (green) line there. Bounce down to the 4/8th MML.
We spoke about the weekly breakout method with the EUR/USD. The attached EUR/USD 4-hour has period separators partitioning each week.
Low = Aug 4th 1.40545 High = Aug 7th 1.44005
The Sunday candle on Aug 7th was large (113 pips) due to the Friday S&P downgrade action on the U.S. The ascent was short-lived and pair proceeded to make a strong move down to the 78.6% fib, for +159 pips.
Things got choppy with whipsaw action throughout the week. However, the Sunday High held its ground as resistance and rejected tests on 3 occasions.
A 2nd breakout of the Sunday Low occurred during the Aug 10th 12:00 candle period. That move too, hit the 78.6 fib, probing lower for + 185 pips.
While all hell was breaking out in the markets, opportunities did exists. For this technique, draw 2 horizontal lines to bracket the Sunday High/Low and see the breakouts and S&R adherence.
Add your money management rules. R/R depended on where S/L was placed.
Interesting article for your dinner conversation, from a former IMF chief economist, and current MIT professor.
The Real U.S. Crisis Is Not a Debt Downgrade: Simon Johnson - Bloomberg
The one glaring objection we have is the author's quote from a MIT colleague.
"The U.S. also needs to improve its patent system and allow more skilled foreign workers into the country, Acemoglu says"
Why not train U.S. citizens?
Let's review and mark the opening activity.
EUR/CHF gapped up from Friday's close of 1.10766 to 1.11508
Sunday Low = 1.11469 Sunday High = 1.12980
Fib plot: Low = 1.11508 High = 1.12980
200% extension 1.14491 is current top hit 06:00 for +165 gross pips above Sunday High.
Pair retraced to plot's 38.2, and now at the 23.6 price of 1.12623.
***
EUR/USD Sunday Low = 1.42479 Sunday High = 1.42831
Fib plot: Low = Aug 12th 1.41485 High = Aug 12th 1.42902
Pair hit 127.2 extension price of 1.43287 today during 06:00 period, for +45 gross pips above Sunday High.
Bounce down now sitting on fib plot's High. Sunday High also provided support, although probe did go to 1.42622.
***
USD/CHF registered +82 gross pips above Sunday High, when it hit the 138.2 extension. pair currently at the plot's 23.6 and near Mars 180-degree.
AUD/USD made +32 gross pips above Sunday High. Pair made a 138.2 extension off wide plot and bounced down.
Might as well mix things up again, and throw in GER30, which tries to mimic the DAX. Instrument gapped up upon week's open but has now closed this gap.
This week feature EU and German GDP data figures Tuesday.
This instrument is a Contract for Difference (CFD) that tend to mimic gold futures. It does not posses physical ownership of gold. Trading of CFDs are not allowed by a U.S. citizen.
1st chart is a 30-min with BAJA bearish divergence at the end of the 22:00 candle. We have wide fib plot in yellow:
High = Aug 10th 22:30 1814.94 and Low = Aug 12th 14:30 1723.17
50% = 1758.69
Retrace fib plot is better confirmed after price rested on 23.6 fib23:00-23:30:
Low = Aug 15th 17:00 1752.53 High = Aug 15th 22:00 1769.77
The 1-hour chart shows divergence with MFI sloping up while RSI(4) going down.
Price is now at the 50% retrace fib of 1761.15. Caution as pullback may soon be over.
Let's review and mark the opening activity.EUR/CHF gapped up from Friday's close of 1.10766 to 1.11508Sunday Low = 1.11469 Sunday High = 1.12980Fib plot: Low = 1.11508 High = 1.12980 -----CORRECTION: the fib plot's low was 1.11469, same as the Sunday Low.
High = May 31st 103.35 Low = June 23rd 89.59
78.6 = 100.41
The July 21st candle was the first one to close above the July 7th 1st peak. This is the 2nd peak. Plot a vertical line there.
Switch chart to 4-hour interval. We make sure to look for an EFT trigger after July 21.
The July 22nd 12:00 EFT histogram closed in red, denoting a cross-over to the downside.
Entry is the open price of the next period, at 16:00, price of 99.30.
Stop-loss with cushion should be above the 78.6 fib. Just above the 88.6 fib of 101.78 is also an option for the swing or position trader.
The Low was shattered on Aug 4th, one day before the S&P downgrade of the U.S.
Price bottomed out at the 200% extension of 75.83 on Aug 9th.
The default period setting for the RSI of 14 did not reveal the divergence. The BAJA utilizes the 4-period setting.
The EFT can be used as a trigger. Default settings, except for colors, which should be Blue, Red, Red, Blue, DimGray.
Pair it up with S&R. If you like it, try it on different instruments and time-frames.
Looking ahead, there should be a natural bounce off the Low price level of 89.59.
As the European session draws to a close, let's examine some of the price activity with various instruments.
1st chart: 1-hour XAU_USD (Gold CFD) pivoted at the aforementioned 50% fib of tight plot and made a 200% extension to $1787. Whipsaw candles 13:00-14:00 due to reaction to U.S. data.
2nd chart 30-min EUR/USD with MurreyMath1.0 and PSQ9.
Low = Aug 11th 12:30 1.41020 High = Aug 15th 06:00 1.43283
161.8 = 1.44682 hit Aug 15th 14:00, same as Mars 90-degree (red) and 5/8th MML (green).
Retracement plot: Low = Aug 15th 1.42815 High = Aug 15th 14:00 1.44760
61.8 = 1.43558 hit Aug 16th 10:30, same as red Mars 0-degree.
The market essentially shrugged off negative German and EU GDP released at 06:00 and 09:00.
This may be attributed to rumors about the meeting between the Merkel and Sarkozy.
Sarkozy just released statement regarding a proposed EU Economic Council. A press conference is forthcoming, so we'll take a break here.
Next chart is 1-hour EUR/CHF with PSQ9. We highlighted the Sunday High and Low (range) in lime green.
The yellow fibs derived from plot using Sunday's range. We mentioned the 1st hit to the 200% on Aug 15th 06:00.
Price eventually drifted down to the 88.6 fib today at 11:00. The BAJA caught this bullish divergence. The lesson learned here is:
The BAJA divergence rule points to the first candle dropping below the 1st dip, as the 2nd dip.
1st dip = Aug 16th 06:00
2nd dip = Aug 16th 11:00
Price may continue in the direction of the trend. In this example, continue down. This is where the role of the Ehler's Fisher Transform (EFT) indicator will assist.
In an effort to avoid false or premature entries, we drop down in time-frame and wait for the histogram cross-over for trigger.
It is important to note that the cross-over is not a cross-over of the zero line. The cross-over version of this indicator will show it, but we like the histogram version as it gives us a better view.
Therefore the EFT histogram version must have its color adjusted. We just posted that setting: Red/Blue/Blue/Red/DimGray.
The 15-min EFT trigger chart has arrows pointing to the entry at the 12:30 open price of 1.11768.
Either way entry is conducted, the stop-loss options include placing it just below the 100% retrace fib of 1.11463. Therefore risk = 35 pips.
Trading up to the Sunday High of 1.12980 = gross 121 pips
After deducting spread and slippage, R/R about 3:1.
In hindsight, pair blew past Sunday High, making any positions still in tact that much more profitable. Always manage trade by protecting profits at that point.
Very interesting show today with bloomberg's host Tom Keene. They are focusing on the Swiss discussion on a possible peg of their currency to the Euro.
Japan is also being aggressive in their attempt to weaken the Yen. We've mentioned the damage a strong Yen can have on Japan's economy.
These are times of uncertainty and flight to safety occurs.
This program should be available for replay on their web site.