A-B-C-D Trade - page 61
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EUR/USD made its extension during 08:00 to 08:30 period, partially fueled by negative CHF data at 08:15.
We had presented a 1-Hour ABC previously and its FE 127 = 1.4215 has just been reached.
1) Here are swings on 15-min chart for easier viewing:
A = Nov 2nd 01:45 low 1.3881
B = Nov 2nd 17:15 high 1.4057
C = Nov 3rd 06:15 low 1.3991
FE 100 = 1.4167 (near spike top at 18:15)
FE 127 = 1.4215 (hit 08:30)
FE 161.8 = 1.4276
2) Flipping back to 1-Hour chart, use retracement tool:
Low = Oct 27th 17:00 1.3733
High = Oct 25th 07:00 1.4080
138.2% regular extension = 1.4215
161. = 1.4297
3) Retracement tool;
Low and high same as A & B in Plot # 1
138.2 regular extension = 1.4236 (hit 19:00)
161.8 = 1.4276 (same as FE 161 in Plot #1)
Nov 4th EUR/USD 4-Hour Chart
Wanted to show how the price action indicate some traders were unsure about the high price in plot of the regular extensions. We list both highs below. Both extension levels were respected.
Low = Oct 20th 00:00 1.3697
High = Oct 21st 08:00 1.4050
161.8 = 1.4268
Pair hit the fib during the 12:00 candle.
***
@ High = Oct 25th 04:00 1.4080
138.2 = 1.4226
We can see that the closing price on 08:00, 12:00, 16:00, 20:00 failed to confirm above the regular 138.2 extension. Visually, the bodies of the candles are essentially below that fib.
Repeating the schedule of data for this day.
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
****
The BOJ left interest rate the same, as anticipated. However, it was very unusual that they moved up the November rate decision by 3 weeks.
We're guessing that it was an attempt by Japan to follow-up the U.S. QE2 announcement by stating they will further ease as well, in an attempt to weaken the Yen and not allow USD/JPY to spike down (edit).
Thus far, after it was announced during early Asian, Yen weakened slightly for about 2 or 3 hours after the announcement, before snapping back.
***
EUR/JPY and EUR/USD had late Asian bounce off lows. First of a full slate of data was GBP at 08:15.
Big one is U.S. Non-Farm Payrolls.
***
Previous day's result saw EUR/JPY conduct a regular 161.8 extension downward from high during Euro session. That level was also the FE 127 when applying the ABC tool (expansion tool).
From there, it retraced 61.8% to 115.04, where a Doji formed. Pair moved back down to the regular 138.2 price of 114.57 from original plot. This was about the same as the FE 100 of 114.59.
After a bounce, it was revisited during the 06:00 hour (edit), and bounce up again.
***
We'll recap EUR/USD in more details at end of Friday.
EUR/USD Nov 5th
1) We set up our fibs and therefore support and resistance ahead of a particular session.
Utilizing the fib retracement tool, we want to frame the next session, making sure we have a high that is higher and a low that is lower. These points also should be distinctly swing points.
Going back more sessions for the plot for a larger picture is always prudent, along with the smaller plot.
The plots in this case had to consider:
Q) Where are we now and how can I curve-fit the Asian session on Nov 5th to conform to S&R?
A) We know the high was Nov 4th 13:00 1.4281. For low, we shall try 1-Hour pivots of:
- Nov 4th 05:00 1.4112
- Nov 4th 01:00 1.4102
- Nov 3rd 15:00 1.3998
- Nov 3rd 06:00 1.3991
- Nov 2nd 01:00 1.3881
- Nov 1st 15:00 1.3863
For the tight plot it would be Nov 4th 01:00 pivot. Using this low, we saw retrace hit the 38.2% fib during the previous U.S. session with the 17:00 candle. We can also see other conformation with bodies of candles against fibs.
After positive U.S. data in Non-Farms Payrolls (NFP) at 12:30 GMT, which was surprisingly high, pair spiked down and extended. Using the above pivot provided support at the regular 138.2 extension price of 1.4034. This was reached with a quick spike after NFP, bounced and revisited at 15:00. Market used this level as firm support and at the time of this writing, it looks like it will end the week this way.
For the wider plot, we liked Nov 1st 15:00. It was quite evident that this low provided solid support during both the previous U.S. and Asian sessions with the 23.6% fib.
Using this plot, we would see the post-NFP action using the 50% fib as temporary support during the 12:00 candle, when it closed at that approximate price.
The plot’s 61.8% retracement fib would eventually be the final support price of 1.4023. It bounced off of this fib back up to the 50% fib which acted as resistance.
2) Next we look for a pivot after the initial reaction to NFP at 12:30 and ahead of 16:30 data (U.S. Pending Home Sales).
Keeping the above wider plot, we switch to a 15-min chart.
Fib retracement tool:
High = 08:15 high 1.4229
Low = 11:00 low 1.4082
138.2% = 1.4026 (hit 12:30 & 15:45)
161.8% = 1.3991
The pullback was 38.2%, which is the Swing C on an ABC.
Fib Expansion Tool (ABC):
Using this tool attempts to be more precise, and the 2 plots arrive at practically the same target. We also had the wider plot’s 61.8 in the same area.
A = 09:45 high 1.4177
B = 11:00 low 1.4082
C = 11:45 high 1.4126
FE 100 = 1.4031
***
The quick spike during the 12:30 candle after NFP, to 1.4032, was unlikely to have triggered a take profit. Therefore, if one was in this trade, a little waiting was required. The Swing C price level acted as resistance, prior to revisit at the end of the European session.
If we used the Forex Freedom Bars, we can see 3 out of 4 time-frames indicating down trend during the entire process. The Ichimoku indicator also had price action in downtrend (below clouds and Sen lines crossing).
3) Entry at break of Point B 1.4082. We had to wait for NFP, and look for a pivot. The closing price of the 5-min candles at 14:00, 14:25, and 15:20 were candidates for entry with the opening price of the following candle. These were deemed safely far enough away from NFP release time of 12:30.
Since Swing C was 38.2%, it allows the trader to use that as the stop-loss, adding cushion.
Stop-Loss = 1.4129
Entry = 1.4080
Target Profit = 1.4033
Risk = 49 pip
Reward = 47 pips
Don’t be afraid of the number of pips. This scenario is within our comfort zone since it is practically a risk/reward of 1:1. We simply scale the number of lots to conform to risk allotment. If our risk is 2% per trade, the 49 pips stop-loss should represent that.
A SCALING & RISK CALCULATOR (EXCEL) CAN BE FOUND ON PAGE 10 IN THIS THREAD, POST #97.
Note: we erred in listing a 14:00 data for Nov 5th. Always check a full economic calendar.
Attachment: 15-min chart. Blue fibs = wider retracement plot. Black fibs = retracement plot. Green fibs = ABC plot.
Have a nice weekend.
EUR/USD strength is continuance due to positive U.S. Non-Farm Payrolls from last Friday, which was approximately twice projected.
At 08:00 GMT, pair currently resting on support 1.3942/44.
This is 138.2 regular extension from previous Friday's 08:00 high & 16:00 low*.
This is also 61.8% retracement fib from wide plot of Oct 27th low and Nov 4th high.
Next support levels:
Regular 161.8 = 1.3896 *
78.6 Retrace fib from wide plot = 1.3850
*Edit: Alternative low = Nov 7th 20:00 low 1.4016, which results in:
138.2 = 1.3935
161.8 = 1.3884
EUR/USD – Nov 8t
This is a follow-up on the last post. After determining the support based on the regular extensions (1-hour chart for easier view), we turn to the shorter time-frames such as the 5-min or 15-min chart.
1) Recognize the 08:05 pivot from 1.3936 (Point B) to 08:45 1.3966 (Point C).
2) Let’s assume a trader is not sure where to plot Point A. Using theFib Retracement Tool, place the low at 1.3936 (B). Then, move the high until 1.3966 (C) represents a 38.2% pullback. This will result in regular extension levels of:
138.2 = 1.3906 (bounce 09:15)
161.8 = 1.3887 (hit 15:10)
Pair broke 1.3936 Point B at 09:05 and bounced slightly to 1.3948, prior to extending to the regular 138.2 of 1.3906 at 09:17.
3) A significant bounce occurred off of the 138.2 back up to 1.3941. That was capped as resistance level, and previously was the support level as mentioned on last post.
Even if you have to use a fresh chart, due to the numerous plots, an analysis of the bounce should take place at this point. With a 5-min chart, plot fib retracement:
- High = 08:45 1.3966
- Low = 09:20 1.3904
This will show that the bounce was a 61.8% retrace.
The closing price of the 09:50 candle was at the 50% retrace fib. That closing price of 1.3936 is also the Point B price. This observation can assist intermediate/advanced traders should they still be in the position (all or part), attempting to exit at the lower 161.8 level.
Recognizing the pullback also allows a trader to enter at that price area. Knowing that 1.3942 was the 61.8 fib, the stop-loss for such a trade would be reasonable.
The 78.6 fib price was 1.3953. Add spread and cushion, S/L = 1.3957. If entry effected at 1.3940, the risk = 17 net pips.
Based on target of 1.3896, projected reward = 40 net pips.
That’s a risk/reward ratio of 17/40. The reward is 2.35 larger than the risk. Some call this 2.35:1 (reward/risk ratio).
One of the reasons that recognizing price action is effective is that most indicators are “lagging”. This means that they will react too slowly, in most cases pertaining to this type of intra-day scenari
We like to monitor trend, to ensure that any entry at pullback price will be with the trend. As mentioned, the Forex Freedom Bars indicator is effective. Similar is the Multi-Time frame HAS (MTF HAS).
Generally, trades with entry at the pullback price area will have a higher failure rate. However, the reward/risk ratio is higher than the “Break of Point B Entry
Also impacting success rate, of course, is whether the trader targets beyond Point B. As previously mentioned, the 61.8 pullback entry allows for exit at fib levels prior to or up to Point B.
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Just want to attach an indicator that recognizes Doji candles. Sorry if it's been posted already on the indicator thread.
We can adjust the parameters for maximum length of wicks (up and down), as well as maximum size of candle body.
As long as we understand that, in our opinion, using candle formation should not be a stand-alone indicator for Forex. We like to use it as an accessory to fibs.
There is also an alert function which can be of great help.
Just want to attach an indicator that recognizes Doji candles. Sorry if it's been posted already on the indicator thread.
We can adjust the parameters for maximum length of wicks (up and down), as well as maximum size of candle body.
As long as we understand that, in our opinion, using candle formation should not a stand-alone indicator for Forex. We like to use it as an accessory to fibs.
There is also an alert function which can be of great help.
Let's look at the EUR/USD Daily chart.
1) With the DojiReader2 on settings:
FindRegularDoji
MinLengthOfUpTail = 0
MinLengthOfLoTail = 0
MaxLengthOfBody = 5
2) Plot retracement fibs;
Low = June 29th low 1.2151
High = Aug 6th high 1.3333
We can see the pair bounce off of the 50%, 61.8%, and 138.2 regular extension fib.
The Doji_Reader_2 indicator caught:
Aug 8th just after high was established.
Aug 15th Gravestone Doji just above the 50% fib.
Aug 24th Regular Doji in proximity of the 61.8% fib.
Oct 3rd Regular Doji near the Regular 138.2 Extension had too large of a price difference between open and close price (19 pips). That being said, some will trade it and deem it of lesser strength. However, being right near the 138.2, it makes it stronger in our opinion.
Other non-conforming Doji fib bouncers include Aug 29th (6 pip difference open/close price) and Sept 5th (8 pips).
Note that on the longer term charts, the exactness of prices, in relation to fibs, are going to suffer.
EUR/USD testing support of 1.3846 nearing end Asian.
1382. = 1.3815
161.8 = 1.3797
Simliar action with EUR/JPY testing 112.11.