A-B-C-D Trade - page 81
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We have some time to update our Dec 5th Gann_Box_144 plot for USD/JPY. That can be found on post #737, page 74. That was plotted on a 15-min chart.
The attached chart is the same plot with a start point of Dec 1st.
Switch to 30-min and the same support is very apparent. Earlier in box, the blue 72 horizontal line (1/2 level of box) 82.58 provided support. More recently, after upswing, the blue 36 (1/4) line price of 83.40 has provided support. Pair now testing that support.
As we run out of space, we can switch to 1-hour interval with the same plot. From this view, we can also see the blue diagonal ¼ fan line which acts as support.
Back to EUR/USD. The 23.6% retrace was bottom and pair is now testing early December highs at the 1.3420 level, during second-half of the U.S. session.
Protect profits, especially on quick hitting bounce trades. Bounce trades are designed for quick exits with no regrets.
To those of you not familiar with divergence, it is a technique used to anticipated turning points. This is a very basic technique, but we have never reviewed it before.
Attached is a 15-min EUR/USD chart from last week. We have the crossover indicator and 2 oscillators below it. The middle one is the Fisher_Yur4K. The one on the bottom is a standard MACD.
We painted red trend lines on the Fisher where sets of 2 humps are located. The second hump must be decreasing in size, while candle action is going in the opposite direction moving down, to predict an uptrend, and vise-versa for a downtrend. Red arrows point to the candles at turning points.
We featured the Fisher, comparing it to the vanilla (standard) MACD. To be honest, sometimes it's hard to tell the difference between 99% of the oscillators. Often, the difference is only due to speeding one version up to avoid the lag. That can be dangerous in that it could trigger false signals.
Using them for divergence is another matter. Therefore, when selecting an oscillator, make sure you can see divergence.
Using the ABC (fib expansion) and fib extension with the retracement tool also help in determining the future destination. The 2nd arrow points to start of a move on early Asian Dec 7th, pulls back 61.8%, and extends to its 161.8. This top is also the spot of the next (3rd) arrow, courtesy of our divergence identification skills.
Cheers
Working on a new Gann Box plotting theory. It has produced the attached 4-hour picture.
Our criteria include taking a recent move and centering the high or low in the middle of the chart. We then switch it to a 4-hour interval.
Start = Nov 30th 12:00 low 1.2968.
Pivots occurred at the 18 and 36 vertical interval lines, as well as the yellow VLine1 (one-third).
We're coming up on the next vertical line at 08:00 GMT (#54) for possible turning point. Considering recent activity, this is to say it would have to trend down to validate the turning point.
There is a slew of data today, including 09:00 through 10:00 that is within this time-line. So, we'll see.
Nostradamus aside, we see that EUR/USD has extended to its 161.8 of 1.3469, probing slightly higher to 1.3475. Plot from US high to Asian low. Immediate support at 138.2 1.3455. Thereafter, 1.3432 as that is the 100% (high).
Pair got volatile again around 06:30, with many fundamental traders setting up ahead of the FOMC at 19:15 GMT. Understand that if there is any clear verbiage on a possible QE3, the USD would weaken, at least initially.
Reviewing EUR/USD as Europe ends their session. Aside from economic data, market moving issues included impending FED FOMC at 19:15 GMT, as well as bond rates.
About mid session, U.S. bonds were reported strengthening while the German Bund was trading lower with yield.
Tax cuts ratification, etc.
From technical view:
Pair made 138.2 regular extension (1.3496) from Asian Low (1.3372) to Asian High (1.3462) plot.
This is the same top 138.2 if plotted on 1-hour chart Dec 13th low 1.3261 to Dec 13th high 1.3432.
1-Hour Gann_SQ9 247.5-degree 1.3496
At time of this writing, 16:45 GMT, there is little price change from day's open of 1.3392.
***
Gann Box research prediction for pivot at 08:00 turned out to be good. All we need is to do it a few dozen more times.
A USD strengthening move downward on EUR/USD, would produce a Head and Shoulder formation. See 1-hour chart. Base can be at pivot levels of about 1.3260 or 1.3180.
FOMC at 19:15.
No surprises from 19:15 GMT FOMC. Rate unchanged, will keep rate low. Verbiage includes:
"Recovery insufficient to bring down unemployment".
No mention of possible QE3, as they did last time. This is last FED meeting for the year.
EUR/USD showed a little whipsaw action during this release time, about 32-pip range. Currently 1.3409 at 19:20.
Bond rates have been pushed higher, which is opposite FED's intention.
EUR/USD testing minor retrace 78.6% fib price of 1.3379, with 100% price of 1.3362 next support.
The 138.2% regular extension price of 1.3333 is key level as was past pivot point on longer interval charts.
Below that is the 161.8% = 1.3315
Here's another example of identifying divergence, and pulling all of the tools together in a trade. Divergence can be used on longer interval charts, therefore we are featuring it on the 4-hour chart of EUR/USD, which is swing trading.
The Fisher_Yur4ik is used once again. We marked the uptrend in candle action with a trend line. This started with bottom on Oct 22nd 00:00 price of 1.3719. The top was Oct 25th 04:00 candle, which happened to be a near colorless Doji.
On the Fisher, we drew a trend line over the 2 humps, with the 2nd hump being smaller. This is opposite of the candle direction and hence the description "divergence".
To trigger an entry, we can wait for the 1st red histogram bar on the Fisher_Yur4ik to register. Entry at the open of the next candle period. In this example, it is the 12:00 candle, opening price of 1.4036.
With the divergence, we were able to "take a look around the corner", without actually standing on the corner yet.
The Fractal indicator also registered a pivot after the 08:00 candle closed, just in time for our entry at 12:00.
After 3 down candles, the pair pivots. We proceed to plot an ABC using the fib expansion tool. This gives us profit target levels. Make sure to add FE 78.6 and FE 127, in addition to default levels of FE 100 and FE 161.8.
Generally with intra-day, when the A-B leg is large (over 45 pips), we stick to trading to the FE 100 (1.3808). However, traders can assess this themselves.
The stop-loss options include just above the 1-hour 10:00 candle high price of 1.4061. This would make risk about 28 pips.
Looking at the choppy move down, it would have been easy to stop out if utilizing a tight stop-loss. After you experience enough of these moves, you'll come up with a S/L strategy that make you comfortable. Using the fibs is a good idea.
The extension hit the FE 127, with the Oct 27th 16:00 candle body indicating close of that period just above the FE 127 price of 1.3761. Profit potential about 225-270 pips depending on which FE level you trade to.
A trade lasting under 2 days can fall under the description of "swing trading". It is longer than intra-day (day trading) and shorter than "position trading" (lasting several days, weeks, or months).