A-B-C-D Trade - page 46
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Back to the featured technique. EUR/USD nw at the FE 161.8 target of extension after breakout of Asian High.
A = 07:05 low 1.2997
B = 07:35 high 1.3035
C = 08:30 low 1.3010
Asian High = 1.3035
FE 100 = 1.3048
FE 127 =1.3058
FE 16.8 = 1.3071 (target - hit)
All 3 pairs that we were monitoring made their respective extensions.
Euro strength propelled EUR/USD and EUR/JPY while USD/JPY was pulled in both directions, achieving a later extension.
As mentioned, all 3 pair pivoted about the same time early European, moving in unison. As data and news of EU discussing sanctions against member nations failing to comply with budgetary/debt limits, Euro gained strength.
There were options for tight or looser Point A placements for the ABCs. Let's look at a revised EUR/USD ABC plot.
A = 06:10 low 1.2978
B = 07:35 high 1.3035
C = 08:00 low 1.3010
Asian High = 1.3035
FE 100 = 1.3068
FE 127 = 1.3083
FE 161.8 = 1.3103 (hit)
Swiss Interest Rate decision at 12:00 remained the same.
US Data moved pair slightly down and created choppy trading for balance of Euro session.
Market will respect more than one particular ABC plot. In this case, this looser plot is better. Thrust by 08:45 5-min candle shot straight to the FE 100 and bounced. After pausing at the FE 127, made peak at the FE 161.8.
This area is full of resistance, including round number 1.3100. The DAILY chart also has a 200-EMA currently at 1.3080. Pair will likely close at or around this level by 00:00 GMT. We also had a 1-Hour FE 236.2 at 1.3103.
*****
EUR/JPY
Moved in tandem with EUR/USD due to Euro strength. Aside from meeting all FE levels on short time-frame charts, we plotted an ABC on the 1-Hour. Results hit the FE 127 of 112.37. ABC plot covered previous 3 sessions to last Euro session.
*****
USD/JPY
We plotted an 1st ABC end Asian (blue):
FE 100 = 85.55
FE 127 = 85.60
FE 161.8 = 85.66
2nd ABC (Breakout of Asian High) (black):
A = 08:00 low 85.37
B = 08:35 high 85.62
C = 08:45 low 85.50
Asian High = 85.62
FE 100 = 85.75
FE 127 = 85.82 (hit)
FE 161.8 = 85.91
1-Hour plot also nailed it (swings from previous day):
A = Sept 15th 05:00 low 84.72
B = Sept 15th 08:00 high 85.51
C = Sept 15th 10:00 low 85.01
FE 100 = 85.82 (hit Sept 16th 13:00 GMT candle)
We knew that the thrust on Sept 15th after intervention established a high of 85.76, which was revisited once during the subsequent U.S. session.
Brave short traders had nice bounce opportunity there that traveled down to 85.22, which was aforementioned key support from Sept 3rd high.
More importantly, we wish to highlight the false breakout of that high 85.76. Some traders may have gone long (up) once it breached that price. If they did, they have to wait for pullback off the FE 100 85.82.
It is now U.S. session and bounce made it to 85.62 before a revisit to 85.82 area which just occurred during 18:00 GMT hour.
What the lesson here teaches is that if there is significant support or resistance just beyond target entry, it's worth waiting. This applies to intra-day trading, which is the technique of this thread. This style utilizes smaller stop-loss levels and bounces may stop us out before breaching secondary S&R, such as the 85.82.
Attached is the 1-Hour chart.
Spike up on USD/JPY on 02:45 GMT candle (5minute). About 20 pips.
Since pair is not even close to previous intervention level of sub-83.00, this is good example of warnings (from us) to use caution on shorts or avoid all together.
Once we find out what happened, if anything, we'll post.
As we are at week’s end, we want to illuminate with more S&R details in our chart today. The attached 5-min EUR/USD covers Asian and European sessions, with focus on the European session
Fibo Fan: LOW = 00:55 1.3060 HIGH = 03:25 1.3109
ABC with Point B closest to Asian Low:
A = 11:30 high 1.3103
B = 11:55 low 1.3057
C = 12:05 high 1.3066
Asian Low = 1.3060
FE 61.8 = 1.3038
FE 100 = 1.3020 (hit)
FE 127 = 1.3008
FE 161.8 1.2992
Wide ABC:
A = 07:55 high 1.3159
B = 13:15 low 1.3038
C = 13:40 high 1.3095 (non-conforming retrace ratio)
FE 61.8 = 1.3020 (hit)
FE 100 = 1.2974
Data Release Periods:
Euro Data = 06:00
US Data = 12:30 & 13:55
Red “ marks bounce spots.
Solid Red Horizontal Lines = Asian High and Low.
Dotted Red Horizontal Line = Previous Asian session (Sept 16th) High
Comments:
EUR/USD made a gradual 100-pip gain during Asian practically with low at start and high at finish. The only data of concern was the 06:00 German PPI which had only a very temporary and small negative effect. When we left our fibo fan at original plot, its 50% diagonal fib caught the pullback at 06:45.
Speculation that Ireland is having debt problems permeated the European session, although the country denied it. Ireland is one of the P.I.G.S., Portugal, Ireland, Greece, and Spain - all of which have debt levels of concern.
The Forex market is dominated by large entities such as investment banks and hedge funds. Prior to opening for outsiders of the financial industry (such as ourselves), it was dominated by 6 or 7 investment banks, representing about 70% of the trading.
These large players are very sensitive to the fundamentals as well as sudden news or anything of concern like this. Therefore, it assisted in driving the market.
The chart has a set of 1-2-3-4 labels, which are the same as A-B-C-D.
1 = Pullback at the 61.8 fibo fan line. Zoom in to get a better view. This was also a 50% retrace from last pivot high of 1.3140.
2 = This pivot is a product of a micro extension to the FE 100. You can see it on the 1-min chart.
3 = Retrace of 1-2 and basically caught by the fibo fan’s 78.6
4 = Completion of the ABCD/1234 pattern, same as Point D. The plot is not on the attached chart, only the 1-2-3-4 labels, for better overall viewing.
U.S. data at 12:00 and 13:55 pushed pair down each time. Significant bounce occurred after each.
The session bottom/low of 1.3019/20 is a fib location of both ABCs per above.
It is the FE 100 of the tight plot, and the FE 61.8 of the wide plot.
The pullback/retrace of the wide ABC plot was conforming to a fib ratio (38.2%) if we consider the body of the 5-min and 15-min candles. The previous pullback to that was a 61.8% from preceding A-B swing.
We can enter trades based on these pullbacks/retracements. This is integration/highlight of “trading between the fib,” as referenced in our tutorial
2 or 3 nice opportunities:
* Enter SELL at Point 3 on chart, which was a 50% retrace of 1-2 and met resistance of fibo fan’s 61.8. Price was1.3103 at the top of that pivot. We would target the FE 100, which is labeled Point 4 (same as Point D), price of 1.3045.
This represents about 55 net pips. However, to be conservative, we also knew that the Asian low was 1.3060 (red dotted line). Upon first approach, there is ALWAYS a bounce. Therefore, it would be prudent to exit just ahead of this level. If exited at 1.3065 after spread and cushion, profit would have been about 38 net pips.
Stop-loss levels can be based on retracement levels of A-B. A tight S/L was very possible and dutiful to make this a good risk/reward trade. If placed just above 61.8 at 1.3115, risk = 12 pips.
Risk/reward = 12/38.
** Enter SELL at pullback of wide ABC plot. This was a 38.2% retrace. Using an entry price of 1.3084 (38.2% fib) and trading to Asian Low of 1.3065 = 19 pips gross profit potential and 17 net pips.
S/L just above next retrace fib (50%) 1.3098 + 4 pips = 1.3102. Risk = 18 pips
Risk/reward = 18/17.
Other opportunities included the bounce off Asian High near Euro open, and bounce off fibo fan (Point 1).
The breakout trade from Asian Low was a loser, unless we simply took 10 pips. Market indecision (to drop further) may have been due to upcoming U.S. data release as well as end of week.
If we plot an ABC (change to 15-min chart for better view) with the Asian High as Point A, and use Point 2 and 3 as B-C, the FE 100 = 1.3020 (bottom of market). This only thing about this is that the pullback was not conforming to a fib ratio, stopping just short due to fibo fan resistance.
Trading below the Asian Low should utilize money management techniques that lock in some profit as well as move the S/L on remaining portion. We’ll discuss this aspect in more detail soon
We haven't post a plot using the fib arc tool for quite a while. Attached chart is a 30-min with 2 arc plots.
1) Fib Arc - Pull from:
High =Sept 6th 07:00 1.2918 to
Low = Aug 24th 12:00 1.2587
Draw a horizontal line for the low. Then drag arc vertically,from top to bottom in a straight line downward.
This is for you to see prior respect of curvatures.
2) Current Fib Arc from:
High = Sept 17th 07:30 1.3159
Low = Sept 14th 09:30 1.2829
3) To complement both arcs, pull retracement fib tool from low* to high.
Note: the arc fib ratios are upside down, but is in effect, the same ratios. The 38.2 is same as the 61.8 level (inverted). We like it this way compared to opposite pull direction, as witnessed by the curvatures met by the currency pair.
4) We also added a fibo fan in addition the current arc plot.
Low = Sept 10th 02:00 1.2643
High = Sept 15th 15:00 1.3036
End of week settle at the 38.2% horizontal retracement fib. We also have fitted the fibo fan to have its diagonal 38.2 at that point.
We fitted these tools in order to have S&R going forward. We can choose to have the current fib retracement LOW at either the fibo fan low or:
* Sept 14th 09:30 low 1.2829, which gives up more fibs to work with on a near-term basis. This is the same low as fib arc low.
We also have to option to move the fibo fan's high, as the market moves.
This current arc plot will be of use ONLY if EUR/USD moves further DOWN, staying below the high. Let's come back on this to see how accurate it became.
Pertaining to our last post on S&R, let's add a Fibo Fan point down too.
High = Aug 6th 14:00 1.333
Low = Sept 10th 02:00 1.2643
With this plot, we have the 78.6 fitted to the recent high during the last European session.
Attached is EUR/JPY 30-min chart with Fib Arc. Parameters:
High = Sept 17th high 112.46
Low = Sept 17th low 111.85
Same pull with retracement fibs.
As we can see, last Friday's U.S. session and today's open, and current Asian session conforms to curvatures. This should have been fitted at 23:00 GMT today. The 04:00 GMT perod conforms after a couple of bounces off the 23.6 retracement fib.
This is not the textbook way to use the fib arc. We are supposed to pull tool with a trend line.
This method is curve-fitting.
We can also drag from one pivot to another. More later on that.
This is a tighter pull than the one posted last Friday. This one applies to market NOW.
Pull fib arc tool from:
Sept 17th 07:30 high 1.2159....to
Sept 17th 14:30 low 1.3019
We mus see confirmation on left side.
Drag same with fib retracement tool to also give you horizontal S&R.
The fib arc gives us another "dimension" of S&R.
Add ABC pointing up:
A = Sept 17th 14:30 low 1.3019
B = Sept 19th 20:30 high 1.3067
C = Sept 19th 23:30 low 1.3034
FE 100 = 1.3082 (hit this Asian session)
EF 127 = 1.3095
FE 161.8 = 1.3112
The EF 100 hit at 3:30 candle also met the 50% fib arc.
EUR/JPY counter-trend trade.
Chart 1
15-min. low was 06:30 GMT candle price of 111.96 and high 07:00 112.29.
The high was also the 38.2 fib per last post for this pair.
Thus, this was a bounce trade. We measured low to high for retrace fib levels. targeted 61.8% price of 112.09 since the A-B was small. Stop loss tight above 112.29 + spread and cushion = 112.33.
Even if one was uncertain, the 07:00 candle was a reversal formation Doji, colorless. This means the open and close price for the candle was the same, indicating indecision by the market.
If we entered at the open of the next candle, price was 112.22.
Chart 2
Split screen with 15-min and 1-Hour charts.
Pair's high of 112.29 was also the 50% fib from last Friday's European high to low. We also had the fib arc, and 2 fibo fans criss-crossing.
The 38.2% fib from last Friday's Euro session is 112.12. We opted to exit here.
Bounce eventually went down to 112.05 and shot up again. That's O.K., we are always content as these are conservative trades.
Remember, it's not the number of pips made as trade can be scaled. This trade if entered 1 pip below resistance =
Entry = 112.28
Exit = 112.12 + spread and cushion = 112.16
Profit = 12 net pips
Risk = 5 pips (we can always add 1 or 2 more pips for cushion)
BTW, Japan is closed today for holiday. Since this is the largest market in the world, there are other trading. This is another reason to shave a few pips as opposed to looking for more.
As Asian session closing, USD/JPY brke support and extended to FE 100 of 85.50 and bounced. This price is also the 61.8 fib from Sept Sept 17th Asian low to Sept 17th Asian high. Currently pair at 85.54. Next support levels =
85.33, 85.27, 85.22
***
EUR/USD reached the FE 161.8 of 1.3112, per previous post. The next ABC has following FE levels:
FE 100 = 1.3115
FE 127 = 1.3128
FE 161.8 = 1.3145