A-B-C-D Trade - page 34
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We also had measured the high/low from last Friday, which was shown in black on the charts.
The target reached today, at the FE 100 fib of 1.2871, is also the 78.6% retracement fib of last Friday's move.
Here's the daily chart. I believe the only thing different are the channel fibs, which were added a few days ago.
We "curve-fitted" pull to correspond with the Aug 11th bottom on the 100% expansion fib.
We can see pair conforming nicely within the 127 and 161.8 channel fibs thereafter.
The 50-EMA also acted as S&R since then.
The FE 100 from first ABC (from bottom) also provided support since Friday, along with the fibo fan's 61.8.
Lots of fibs going here. If you have been following, you will understand.
Caution as slew of data due out. First is U.K. CPI at 08:30 GMT.
More data at 09:00 GMT, and into U.S. @ 12:30 GMT.
Asian High = 1.2879
If Point C holds, FE 100 = 1.2918
Set-up and its breakout was so close to data releases at 08:30 and 09:00 that we'd be trading right into the teeth of those releases.
Had Point A at wrong price, as it did not result in Point C as a fib retracement ratio. When we saw this, we adjusted to:
5-min chart
A = 07:25 low 1.2847
B = 07:45 high 1.2879
C = 07:55 low 1.2863
Asian High = 1.2879 (same as Point B)
FE 100 = 1.2895
FE 127 = 1.2904
FE 161.8 = 1.2915 (target - hit)
If traded with stop-loss just below Point C, this would have been a losing trade due to volatility resulting from data releases (see arrows and labels on chart).
Therefore, this serves as a pure technical observation, as well as confirmation that price can whipsaw.
We also had a fibo fan (blue) with pull from:
High = Aug 13th 07:10 high 1.2906
Low = Aug 17thth 00:10 low 1.2812
We also kept the expansion fibs (green) from the previous day, and its FE 127 acted as resistance.
Should add that we were aware of the obvious resistance price level of 1.2906, as that was the significant high from Aug 13th.
Usually, that is a good bounce play. However, with the thrust from the data releases, it was a pass. We're sure that there were traders that traded that bounce anyway.
The FE 161.8 extension had to play out prior to any possible retracement/bounce. That explains the overshoot of 1.2906.
On sidelines ahead of 08:30 GMT BOE Minutes. Attached 5-min chart with arrow for the time of data release.
We can see the pivot to Point C at the 08:30 candle. The subsequent 08:35 candle broke through the Asian high. We also see a couple of red candles that brought the pair back below the Asian high, before ratcheting upwards. Probably early birds taking small profits, or bounce traders.
The correlated GDP/USD was the anticipated most-affected pair. Post-release, it shot back up to previous significant high established on Aug 17th European session. A 61.8% retrace ensued and it's now in consolidation.
We believe that pair dragged EUR/USD up as well, as it often does with cross-currency correlation.
For study purposes:
A = 08:00 low 1.2838
B = 08:15 high 1.2867
C = 08:30 low 1.2856 (38.2% retrace of A-B)
Asian High = 1.2874
FE 100 = 1.2885
FE 127 = 1.2893
FE 161.8 = 1.2903 (target - hit)
Entry BUY = 08:40 open price 1.2877 + spread = 1.2880 (not including wider spread due to data/news release). Reward = 23 pips
Stop-Loss = Just below Point C 1.2856 + 1-pip cushion = 1.2855. Risk = 25 pips.
Risk/Reward = 25/23.
-----------------------
Other notes:
We knew that 1.2903/06 was resistance level based on last few days.
The 12:45 peak of 1.2922 was preceded by a small ABC, with the FE 161.8 at 1.2922.
Edit: If we applied the alternate Point A of 07:40 low 1.2825:
FE 100 = 1.2898
FE 127 = 1.2909
FE 161.8 = 1.2924 (target)
However, due to our stop-loss move rule, we would have stopped out just below the FE 100 since pair retraced considerably.
Have been showing data release times on charts the last couple of days. Aug 19th had 0:830 and 14:00 high-impact data releases.
The European session opened near the Asian Low, after Asia was in a tight range. There were no ABCs that preceded the breakout with a Point B close enough to the Asian High.
If we plot the firs ABC:
A = 08:10 low 1.2780
B = 08:30 high 1.2808
C = 08:40 low 1.2795
Asian High = 1.2827
we would arrive at FE 100 = 1.2839, which was hit. However, with the distance between Point B and the Asian High, this was not a valid risk/reward scenario.
Waiting for the pair to pivot again developed this parameter:
A = 08:40 low 1.2795
B = 09:15 high 1.2843
C = 10:00 low 1.2815 (50% retrace of A-B)
FE 100 = 1.2864 (target)
FE 127 = 1.2877
FE 161.8 = 1.2894(hit)
Entry BUY = 10:10 5-min candle open price 1.2845 + spread = 1.2848. Reward = 18 pips
Stop-Loss Options:
- Just below 23.6 retracement fib of A-B 1.2832 + cushion = 1.2831. Risk = 17 pips
- Just below Asian High 1.2827 + cushion = 1.2826. Risk = 22 pips
- Just below 38.2 retracement fib of A-B 1.2825 + cushion = 1.2824. Risk = 24 pips.
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The distance from A-B was 48 pips, narrowly missing our 45-pip divider. Thus, we target to the FE 100 only.
The only stop-loss option to hold was the 38.2 fib, before hitting profit target.
The choppiness probably due to overall slew of data releases, which is also evident throughout this week.
The 15/15 pip strategy was a loser as pair dipped back below Asian High to form a new pivot Point C.
Once you get better at using the support and resistance tools presented herewith, you'll be able to shave off a few pips.
Attached 5-min chart of the EUR/USD plots the fibo fan:
High = Aug 19th 14:00 high 1.2899
Low = Aug 19th 18:10 low 1.2793
We can see the 61.8% fib act as resistance for downward action that started around 22:00.
Its 78.6 fib caught the high on Aug 20th 05:25 (just a few minutes ago). We would trade to support at 1.2792 plus spread and cushion.
This type of bounce trade allows for a tight stop-loss.
There was also a bounce trade earlier that was identified. Will post next.
Open of Asian Aug 20th saw an immediate small spike down. We knew that support was at 1.2792, as it held twice during the U.S. session. This is also area of our last European session Point A, as described on earlier post.
We measure the ABC right before Asian:
A = Aug 19th 21:30 high 1.2822
B = 23:30 low 1.2801
C = 23:45 high 1.2813
FE 100 = 1.2792
The exercise was done to confirm support for entry BUY. BUY entry order would be pre-programmed for 1 or 2 pips above 1.2792 + spread = 1.2796.
To determine a profit target area, we will plot a retracement set of fibs from A to B. The 3 fib targets for profit are in red on the attached chart.
Highest probability would be the 38.2% fib. The other 2 major fibs are 50% and 61.8%.
38.2 = 1.2803 reward = 7 pips
50 = 1.2007 reward = 11 pips
61.8 = 1.2811 reward = 15 pips (hit)
Stop-loss can be placed just below the FE 127 price of 1.2786 + cushion = 1.2785. Risk = 11 pips
The small stop-loss enables a trader to trade more lots. I posted a scaling and risk calculator in this thread. Type it in the search and you should be directed to that page for download of that excel spreadsheet.
As EUR/USD channels sideways, we move our fibo fan LOW to the next dip on
00:05 low 1.2792
This provided more fibs, of which the 61.8 caught the next peak around our resistance line of 1.2827 (previous day's Asian high).
The first bounce off the fibo fan captured gross 23 pips.
This one thus far is +15 gross pips. We would plot retracement fibs fro 1.2790 to 1.2832 and trade to 38.2, 50, or 61.8 fib.
Stop-loss can be a flat number of pips, such as 10 pips. Otherwise, we would ned to plot an extension.
Edit: The market is recognizing 1.2792 as the low, so make appropriate adjustments to Point A and retracement fib pull.