A-B-C-D Trade - page 62
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Last 15 mins of Asian and European open resumed pressure on EURO, sending EUR/USD below support 1.3846. Testing previous spike low of 1.3835, probing to 1.3827.
Our original plot from:
High 23:15 1.3926
Low = 00:00 1.3846
138.2 = 1.3815
161.8 = 1.3796
Tight plot has next support areas;
Reg 138.2 = 1.3822
Reg 161.8 = 1.3813
EUR-USD Nov 9th
Downward pressure on EUR/USD probably due to renewed concerns about a PIGS nation's debt. This time it's Ireland. Seems like they rotate them (concerns with each PIGS) when needed. We like it as it moves the market. We saw smooth swings which were easy to plot, etc.
1) Asian 05:00 High 1.3870 and 05:30 Low 1.3835 produced a 138.2 regular extension of 1.3823, which was hit precisely during 08:25 candle on 5-min chart.
2) A larger (wider) ABC plot during Asian resulted in a FE 100 of 1.3825.
3) Market reverses up. Plot 07:45 High and 08:25 Low with retracement tool.
138.2 = 1.3903 (hit 09:50)
161.8 = 1.3917 (hit 10:00)
261.8 = 1.3975 (hit 12:40)
4) Tight ABC:
A = 09:40 low 1.3878
B = 10:40 high 1.3939
C = 11:15 low 1.3907
FE 100 = 1.3968 (hit 12:00)
5) Recently we mentioned that if we are unsure of Point A, we can try curve fitting Point C, to produce anticipate regular extension levels. It was easy to recognize Point B and C per above paragraph #4. Now, we need to adjust the LOW until Point C is a 38.2% retrace of A-B. In this case, it resulted in a 138.2 = 1.3971 (hit 12:00).
6) Pair formed an imperfect “M” pattern with double top action (bounce). A bounce trade would take Low (1.3907) to High (1.3970) retrace levels for exit options.
23.6% = 1.3855
38.2% = 1.3946
50% = 1.3939
61.8% = 1.3931
78.6% = 1.3820
7) Pivot up occurred to effect a 61.8% retrace to 1.3952 during 15:00 candle period. We use the fib expansion tool to plot an ABC for more precision. This produced:
FE 100 = 1.3890 (hit 15:45)
FE 127 = 1.3874 (hit 16:10)
FE 161.8 = 1.3852 (hit 17:45)
8) And finally, we plot a 2nd ABC from top. Swing times 15:00/15:45/16:00 resulted in FE levels per below.
Once again, notice Point C was approximately same price as Point B from previous ABC. This happens often. Point C was a 38.2% retrace of A-B.
Pullback was also at the FE 61.8 of 1st ABC. Taking European Low to High, this pullback was at the 38.2 fib.
These important observations can assist an experienced trader with ENTRY at Point C.
Entry at Point C 1.3914 can use a stop-loss just above the 50% fib price of 1.3922. Add 4 pips for exit spread and cushion, S/L = 1.3926. Risk = 12 pips.
First exit option is Point B price of 1.3891. This would result in + 19 net pips profit.
Subsequent exit levels of course are at FE prices.
FE 100 = 1.3854 (hit 17:45 for + 56 net pips) Reward/Risk ratio = 4.7:1
FE 127 = 1.3837 (hit 18:25 for + 73 net pips) Reward/Risk ratio = 6:1
FE 161.8 = 1.3816 (hit 18:40 for + 94 net pips) Reward/Risk ratio = 7.8:1
The FE 100 for this 2nd ABC is the about the same as the FE 161.8 from 1st ABC (paragraph #7).
Here's a belated reference for DST sorted by country.
When is Daylight Saving Time worldwide?
European Union (except Iceland)
Start: Last Sunday in March at 1 am UTC
End: Last Sunday in October at 1 am UTC
USA (except Hawaii)
U.S. and Canada (changed) beginning in 2007:
Start: Second Sunday in March
End: First Sunday in November
USA, Canada back on Standard Time until 13 March 2011
UK / Europe: Clocks back on Standard Time until 27 March 2011 at 01:00 GMT
Japan and China does NOT observe DST.
EUR/USD making a major thrust down. It has bounced off of FE 236.2 of 1.3770, near Oct 28th low of 1.3778. Next is test of 1.3733 support, which is Oct 27th low.
That area is also near significant Oct 19th & 20th lows. Should it make these level, a big bounce should occur as a temporary halt or reversal.
EUR/USD Nov 10th
Picking up where we left off. Pair bounced off of 1.3736, which is near the Oct 27th low, the regular 161.8 extension from Nov 9th 08:00 and 12:00 plot, and the tight intra-day ABC’s FE 161.8
1) Lurking bounce traders proceeded to trade it back up to the 23.6 retracement fib (1.3792) based on obvious European High 12:30 GMT 1.3973 and Asian Low 00:15 1.3736.
Profit available was a gross 56 pips. Utilizing a 10-pip stop-loss would make this bounce trade about 5:1 reward/risk.
Even if we placed the high at another peak, profit was nice and more than the required minimum 1:1 reward/risk ratio.
2) Second test of 1.3736 during 02:45 candle on 15-min chart, and subsequent times during Asian..
3) On the Daily chart, the 50 EMA is right at the support area.
4) Pair did not crack support during Asian and revisited session high near aforementioned 23.6% fib. This was first revisit to a significant S&R, which means a bounce can be traded. Plotting a retracement from session low to high produced a hit of the 50% fib with a quick probe near the 61.8.
5) Just entering European. No high or medium data until 10:30 GMT Bank of England’s Quarterly Inflation Report.
The G-20 meeting in South Korea takes place tomorrow for 2 days. Plenty of traders squaring positions and we foresee some jitters.
** Please note that we'll only have abbreviated comments Nov 11th and will not post comments from Nov 12th through 14th.
EUR/USD breakout to upside. 138.2 = 1.3822.
Cross-pair EUR/JPY it resistance on revisit of regular 138.2 extension. EUR/USD attempting to clear its 78.6 of 1.3808.
FE 100 = 1.3822 while
Reg 138.2 = 1.3825
We also have Nov 9th low of 1.3823 as resistnace.
That level is our target. Set at 1.3821.
Hit profit target for +15 net pips.
Let's go back and recount the parameters of the last trade.
On 5-min chart, swings were 02:45/07:20/08:10.
FE 100 = 1.3822
FE 127 = 1.3840
FE 161.8 = 1.3863
Using the retracement tool and pulling from A to B resulted in:
Regular extension 138.2 = 1.3825
161.8 = 1.3840
Pair came to 1.3821, which was where we set our take profit (we use 1 or 2 pips cushion + spread on buy exits).
Bounce went to 1.3806. Lurking bounce traders. These significant support and resistance levels make for trading bounces with tight stop-loss which increase reward/risk ratios, amongst other benefits.
Pair now retesting 138.2
Note that 1.3823 was also previous day's European session low which is significant. Will take some more strength to break through this resistance level.
1.3826 is 38.2% retrace from European high to Asian low.