A-B-C-D Trade - page 59
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EUR/GBP data released at 08:30 caused spike down in this pair and dragging EUR/USD
EUR/GBP Asian High to low produced 161.8 regular extension of .8682. Pair bounced off of that fib.
Because we were aware of data release time set for 08:30, we could attempt to make a trade prior to that, as described in last posts.
Pair ended up making a 138.2 regular extension (plotted from Asian High to Low), partially driven by that 08:30 GBP data, which also dragged this pair. It was an example of cross-pair correlation.
These observations are important in understanding what is happening at the moment. This recognition may end up assisting a trader at a latter time, such as for entry and exit.
We needed to plot fibs on the EUR/GBP as well. As mentioned, when it hit its 138.2 extension, a natural bounce can be anticipated. This also affect EUR/USD.
***
Attached is a 5-min chart with data arrows fib plots during the European session. We had data at 12:30 and 13:55.
We can see the U.S. GDP came in at 12:30 and the pair pivoted up on the data, thus forming Point A at the price of 1.3846.
Point B formed at 12:55 high of 1.3916.
A 61.8% retrace occurred, stopping there at next data, the U.S. University of Michigan Consumer Confidence. This was Point C at 1.3872.
Those are the ABC swings. To attempt to enter at the Swing C location was not viable considering data released.
Entering at break of Point B only produced activity to the FE 78.6 1.3829. This fib is also the same as the 78.6 from the Asian High to Low retrace.
It was not until the 20:55 candle that it hit the FE 100 of 1.3943, which is the same as the regular 138.2 extension. That area is resistance from the previous day.
Waiting that long was impractical of course, especially since it is the end of the week.
In summation, we sensed it might be difficult to squeeze in a trade between data at 08:30 and 12:30, and focused on the Asian opportunity.
The gain in the above ABC plot was about 13 gross pips. Being that close to the end of the European session and end of the week can make us vulnerable to the end-of-week "squaring of positions". This simply means some profit taking, and positioning for next week.
Next week of course is important since the market has been anticipating QE2 by the U.S. and elections are on November 3rd, along with the next FED meeting.
Here is a 1- Hour chart showing the ABCD Oct 26h - 27th, and subsequent price action through end of week.
The black fibs cover extension of D-C, upwards to its 138.2
We did not review the Yen pairs, so good time to throw out a test.USD/JPY - Oct 26th GMT Chart Time1) Using a 15-minute chart, apply the fib retracement tool to significant high/low during European session incorporation 08:30 GBP data.A) What are the 138.2 and 161.8 regular extension prices?There were 2 valid plots:
1) Low = 05:30 80.62 High = 07:45 81.20138.2 = 80.43
161.8 = 81.56Pullback was 38.2 based on close of candle price.
2) During European session:
Low = 08:30 80.91
High = 12:15 81.41
138.2 = 81.61
161.8 = 81.73
B) Using the closing price of candles, what was the pullback (retrace) fib ratio during the European session, prior to extension into the U.S. session?Pullback was 38.2 based on close of candle. See the body of the candle sitting above the 38.2 fib with 14:15 candle. C) Was there a bounce trade during extension, and when, what price, and targets?Bounce was off of the 138.2 at 81.42 during 14:00 candle. Bounce went back down to pivot price (high) of 81.20, probing to 81.19. This is a 50% retrace from: 80.97 to 81.42. Other targets include the 38.2 & 61.8 retrace fibs.2) Zooming in at the peak price during the U.S. session, plot an ABC downward. If the FE 61.8 price is 81.37, what are the ABC prices? What was the pullback ratio?A = 18:00 high 81.65
B = 19:15 low 81.44
C = 19:45 high 81.50
FE 61.8 = 81.37 The pullback (Point C) was a 23.6% retrace of A-B.The extension eventually moved to the regular 161.8 extension price of 81.31, from the retrace plot.
3) Switch time interval on the chart to 1-Hour. Using the low of Oct 25th 08:00, and today's high, what fib did pair bounce off of during the 21:00 candle?
It retraced back down to the 23.6% fib price of 81.36 during he 21:00 candle.
This week will be very active with the U.S. Mid-Term Elections, FED meeting, and Central Bank interest decisions/verbiage in several countries
The Nov 1st Asian session opened with a bang at 00:00 GMT, as apparent BOJ intervention resulted in a spike up in USD/JPY, and dragging majors with it.
The effects did not last very long however, with pair returning to pre-spike levels around 05:30 GMT. USD/JPY was dangerously close to the 1995 low of 79.75 prior to the spike.
Looking at EUR/USD with a 15-min chart, we’ll pick it up after the spike. This pair formed an ABC that saw a modest extension upwards to its 78.6 of 1.4010 at 06:00
Data forthcoming was:
08:30 CHF
09:30 GBP
12:30 and 14:00 USD
From the top of the last Asian extension, pair made an ABC with 06:00/ 07:15/07:30 swings. This extension that only made it to the FE 61.8.
As it pivoted back up to 1.3993, we recognize this as a new Point C. This pullback was generally accepted as 61.8% of the 06:00/07:15 swings (A-B), based on approximate closing price. Plot retracement fibs A-B and see the body of the 09:00 candle.
Since this activity is in the mist of the 08:30 and 09:30 data releases, we are monitoring and making adjustment(s).
The break of Point B price of 1.3946 occurred during the 11:15 candle period. Considering the distance size of A-B, we are targeting the FE 100 of 1.3928, which was realized during the 12:00 candle, just ahead of data.
Each FE level was met with FE 161.8 of 1.3988 reached at 14:15.
This trade opportunity was under a 1:1 risk/reward, about 26/16, considering best stop-loss was just above the 11:00 pivot. Additionally, the time window was very narrow, with data coming at 12:30.
If we waited for a 5-min candle to close below Point B, that occurred during 11:55 at price of 1.3937. That would make the reward only 9 pips, trading to the FE 100, and therefore a non-trade.
The updated ABC (2nd) was:
A = 09:15 high 1.3993
B = 12:45 low 1.3912
C = 13:45 high 1.3951
FE 100 = 1.3871 (hit 15:30)
*****
While this downward move looked easy, the above explains that it was not, when we factor in the data.
The only way a trade was palatable, within our style, was to wait for a pivot after the 09:30 data. This occurred with small swings of (15-min chart):
A = 09:15 high 1.3993
B = 10:30 low 1.3952
C = 11:00 high 1.3970 (38.2% retrace of A-B)
FE 100 = 1.3928 (hit 12:00 candle)
S/L was about 25 pips, which made risk/reward about 25/24 gross.
**
Using the same small swings, an alternative was to enter at Point C. This method has been discussed as an intermediate technique.
Entry at Point C was counter-trend based on the Forex Freedom Bars. Only the 15-min indicated a downtrend.
We need secondary reasons for entering here. Close by was the top edge of the Ichimoku at 1.3964. The actual 61.8 fib was 1.3968.
The candle bodies were never above the 1.3968 price. Worst case, in the event we want further confirmation, entry at open of next candle was 1.3954.
***
Next is Nov 2nd EUR/USD Asian in a few minutes.
EUR/USD – Nov 2nd
Australia heads the news thus far as they raised their interest rate by a quarter-point. The 03:30 data release caused USD crosses to weaken against the USD.
From a technical standpoint, a 15-min chart with swings at 01:45/03:30/04:15 produces:
FE 61.8 = 1.3988
FE 78.6 = 1.3946 (hit 06:15)
FE 100 = 1.3957
Plotting a previous retracement:
Low = 19:00 1.3889 to
High = 00:00 1.3915
Produced regular extensions:
138.2 = 1.3991 (hit 04:30)
161.8 = 1.3941 (hit 06:15)
The current level is the 50% fib of:
High = Nov 1st 06:00 1.4011
Low = Nov 1st 15:45 1.3863
In keeping with this wider view, take that low and use the high of 00:00 1.3915, and we arrive at:
138.2 = 1.3935 (hit 05:15)
161.8 = 1.3947
Pullback was 61.8%.
*****
Data ahead for Nov 2nd:
08:55 & 09:00 EURO
09:30 GBP
Nov 2nd U.S. - Polls open for mid-term elections.
Nov 3rd 18:30 GMT - U.S. FED rate decision/verbiage on QE2
Nov 4th 11:00 GBP rate decision and 11:45 EUR rate decision
Let’s complete the Nov 2nd review, during the European session
Data at 08:55, 09:00, and 09:30.
1) Fib Expansion Tool (ABC):
Swings on 15-min were 07:30/09:30/11:00 (ABC).
Pullback = 61.8% of A-B
FE 100 = 1.4026 (hit 12:15)
FE 127 = 1.4047 (hit 13:45)
2) Fib Retracement Tool:
Low = 07:30 1.3915 (Swing A)
High = 09:30 1.3993 (Swing B)
Pullback = 1.3948 (61.8%)
138.2 = 1.4023 (hit 12:15)
161.8 = 1. 4041 (hit 12:30)
3) Forex Freedom Bars = Blue (Up)
Distance from pullback to 138.2 = 75 pips
Distance from High to 138.2 = 30 pips
Nov 2nd U.S. - Polls open for mid-term elections.
Nov 3rd
08:15 GMT - CHF
08:30 GBP
12:15 & 14:00 - USD
18:30 GMT - U.S. FED rate decision/verbiage on QE2
Nov 4th
08:00 - EUR
08:15 - CHF
09:00 - EUR
11:00 - GBP rate decision
11:45 - EUR rate decision
12:00 GBP
14:00 CAD
14:30 USD
Nov 5th
JPY interest rate decision this day, moved up 3 weeks!
00:30 - AUD
08:30 - GBP
09:00 - EUR
10:00 - EUR
11:00 - CAD
12:30 - US Non-Farm Payrolls
14:00 - USD
Nov 3rd EUR/USD - Asian Session
1) Retracement fibs
Low = Nov 1st 15:45 1.3863
High = Nov 2nd 17:51.4057
23.6 = 1.4011 (hit 01:45) same as FE 100
2) Expansion Tool:
A = 17:15 high 1.4053
B = 19:45 low 1.4023
C =00:15 high 1.4046 (61.8% retrace of A-B)
FE 100= 1.4011 (hit 01:45)
FE 127 = 1.4002
FE 161.8 = 1.3991
Updated swings:
A = 00:15 high 1.4046
B = 02:00 low 1.4008
C = 03:45 HIGH 1.4017 ( 38.2% retrace of A-B)
FE 100 = 1.3983
FE 127 = 1/3972
FE 161.8 = 1.3960 (same as 50% fib from retrace of Nov 1st to Nov 2nd per previous post)
There should be a bounce *off of the 1.4008 Point B. Experienced traders will be quick if utilizing manual execution.
If Point B broken, should extend to the FE 161.8 of 1.3960.
Keep eye out on data times as it gets closer to the European session. 3 out of 4 Forex Freedom Bars indicate up trend. Market also reluctant short this pair as anticipating U.S. QE2. Major question is how much is package of stimulus.
* Edit: note this is 2nd approach to low, not 1st.