A-B-C-D Trade - page 66
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In the backdrop of the Frankfurt conference of Central Bankers, let's look at the price action. The attached split-screen encompasses 2 charts of 15-minute interval.
The chart on the left utilizes normal Japanese candlesticks, while the chart on the right applies the Heiken Ashi Smoothed (HAS) candles.
We marked the approximate start time of the Frankfurt speeches at 10:30 GMT with a "X", by Central Bankers, most notably Ben Bernanke of the U.S.
We'll cover details and Mr. Bernanke's defense of QE2, along with other views, later. He's come under criticism both domestically and internationally.
As we can see with the regular candles, the market whipsawed during the 10:30 candle period. Very high volume with 55 pip swing from high to low in that candle.
The HAS takes the choppiness out visually. Just understand that it will have serious lag time as well. Attached is a HAS indicator with alert for change of direction. Note that it may trigger multiple alerts when a pair is fluctuating between long and short direction.
The HAS therefore is a trend indicator. We've identified this as an interesting tool to "trend the balance" of a position after exiting at least 50% of lots.
***
The 2nd attached chart is a 4-hour with the 200 EMA and our fib plots. THis gives us a big picture of EUR/USD since late October.
Low = Oct 27th 1.3733
High = Oct 20th 1.3697
A = Nov 9th 12:00 high 1.3973
B = Nov 12th 04:00 low 1.3573
C = Nov 12th 08:00 high 1.3745
D = 138.2 regular extension 1.3474 and FE 78.6 = 1.3460 (hit Nov 16th 16:00). Clearly consolidation here at this level.
E = Oct 27th low 1.3733 (1.3731 hit Nov 19th 08:00)
Thanks to Valarie Bednarik via fxstreets.com, for reminding that the 4-hour 200 EMA is acting/assisting in resistance.
EUR/USD attempting to break out to upside after setting off some stop losses at top near 1.3700. Regular extension:138.2 = 1.3732161.8 = 1.375410:15 starts slew of Central Bankers speaking.*****Let's pick up where this comment left off.The extension levels listed came from the Asian Low to High plot. On the 15-min chart, the times were 04:00 and 07:45 GMT. The 138.2 was hit at 10:45. As mentioned, 10:15 was the scheduled speech time for FED Chief Bernanke and we saw a whipsaw prior to the 138.2 hit. We have to treat this type of event in the same way as economic data, by staying out. These events are listed on sites that features a full economic calendar.So, how do we trade this pair with this in mind? Let's make sure those of you that cannot view the charts plot the fib retracement. Pull from the Asian low of 04:00 1.3608 to top of 10:45 1.3731.That plot was easy to see and produced our retracement levels, which include minor fibs of 23.6 and 78.6. Key was when pair broke back below the Asian High of 1.3698. This is also below the psychological round number of 1.3700.Highest take-profit levels are at the 38.2, 50, 61.8 fibs. Some traders will use an overbought-oversold indicator to assist at this point. There are so many OB/OS indicators that we'll have a hard time offering opinions. We do however, favor multi-time frame indicators. Attached is the RSI_DynamicZone_RSI_BzFLBL_mtf_20080806.
This indicator will satisfy fib, bands, OB/OS, and crossover aficionados. Compared to the reading on the FX Sniper Ergodic CCi & Trigger, it registered a little more time at the bottom before reversing up.
The OB/OS levels are fib ratios. As with most cross-overs, there may be lag time. If one waited to exit based on a crossover of the blue Signal Line and the red MA line, it would have resulted in exit price of 1.3644 at the close of the 17:15 candle period.
Exiting when the DynamicZone RSI's blue signal line hit the 38.2 indicator level would have occurred during the 14:45 candle period. This coincides with the chart's 61.8 retracement fib. Fib price =1.3655.
Entry = 12:30 open price 1.3693
Exit = 14:45 fib price 1.3655 or close of candle price 1.3654
Note that the market hit the 61.8 fib earlier at 13:50. For those that simply targets a fib, that would have been the exit time.
View price activity by switching to a 5-minute chart. We can see how the market obeyed the fib retracement levels. Conversely, notice that the DynamicZone_RSI was also very choppy.
Using the DynamicZone_RSI 5-min cross-over for exit would have resulted in the exit price of 1.3674 at the close of the 13:45 candle.
If a trader used the HAS (see previous post), and exited at the close of the first opposite color (blue) candle, this occurred at end of 18:30 period on the 15-min HAS candle, with price of 1.3665.
In the end, the retracement reversed at the minor 78.6% fib (1.3634). at 16:00.
** Attached is a 15-min chart with the entry point, fibs, and marking the 2 exit point based on the DynamicZone_RSI strategies.
Here is the page with details on how to read/use the RSI_DynamicZone_RSI
However, it looks to be different that the one we just posted. I'll check around.
https://www.mql5.com/en/forum/197500
Open of Week Nov 21st GMT
As we mentioned, albeit briefly, the Sunday daily candle is an interesting one. It is of very short duration, from 19:00 through 23:59 GMT.
The Asian session* opens at midnight 00:00 GMT. We have it running through 07:59 GMT.
We noticed when the market has been trending until the Sunday candle, and the Sunday candle is a colorless or near colorless candle, it usually reverses for at least one day after the Sunday candle. With this in mind, we’ll call this the Sunday Reversal Candle or SRC.
We posted a daily chart of EUR/USD with arrows pointing to the SRC. You can also use the Doji_Reader_2 indicator to identify them for research. That indicator is adjustable to desired length of wick and length of body. For the daily charts, might be a good idea to use a maximum body size more than zero, such a 2 to 5 pips.
Right now, it is 20:15. EUR/USD gapped up about 28 pips at the opening of the week. Friday’s close was 1.3685 and today’s open was 1.3713. Let’s monitor the closing price of the SRC to see how much it deviates from 1.3713. If it’s within 5 pips, we may have a reversal.
Now, let’s discus the strategy employed by Mr. Parsons with regards to Doji candles. We posted it a few days ago. He advocates entry after the break of the Doji high or low, in either direction.
If the SRC closes within 5 pips of 1.3713, which means a band of 1.3718 maximum high and 1.3708 maximum low, it is considered a signal within the context of this discussion.
Let’s say we want the best of both worlds with the entry. We believe in Doji reversals, when applied with other tools, etc. Yet, we also respect Mr. Parson’s strategy. Therefore, if the SRC meets body size requirement, we shall look to short EUR/USD, when it breaches the SRC's lower wick price.
There are fibs above the current price acting as resistance on the daily chart. We also need to plot exit strategy, with our profit target. Let’s switch to a shorter interval chart and wait for a pivot for an ABC plot.
* Note that Japan does not use Daylight Savings Time. The Opening of the Asian session generally was based on the opening of the Japanese stock market.
Meanwhile. sell orders lurking at recent significant high (previous European session) price of 1.3731.
EUR/JPY pulling EUR/USD up
Ireland's bailout loan now confirmed. Article released at 16:27 GMT.
BBC News - Ireland confirms EU financial rescue deal
EUR/USD probed above last Friday's European high of 1.3731, reaching 1.3745. That is the exact price of the 138.2 regular extension derived from a plot of:
Low = 19:25 1.3705
High = Last Friday's 1.3731
Pair now resting at the 50% fib from that plot. We are looking at a 5-min chart.
Fallout reaction to Ireland's bailout loan caused Euro to collapse by about 200 pips from the Asian session high.
1) Plotting a fib retracement from the Asian High of 1.3785 and early Euro open low of 08:00 1.3723 resulted in regular extensions of:
138.2 = 1.3699
161.8 = 1.3685
261.8 = 1.3623
Based on the close of 15-min candles, pullback was 38.2%
Doji candle formed at 13:30, time of U.S. data, and retraced 38.2% based on pivot high of 11:45 1.3722. Doji area is also the 261.23 fib.
New ABC based on last swings have FE 61.8 = 1.3595/FE 78.6 = 1,3577/FE 100 = 1.3577
2) Friday's ( Nov 19th) European High of 1.3731 and 16:00 low 1.3630 produced:
138.2 = 1.3591 (hit just now today at 16:00)
3) Daily chart perspective:
High = Nov 11th 1.4054
Low = Nov 16th 1.3448
Retraced to 50% fib area of 1.3751 on Nov 21st, based on candle close price.
EMA 20, as well as multiple fibs acted as resistance.
Pair dropped back down to the 23.6 fib of 1.3591 just now at 16:00 GMT.
Doji formed on 1-hour chart after closing the 16:00 candle.