A-B-C-D Trade - page 95
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EUR/USD probing below support.
As mentioned, 1.3083 area is next support, which would basically complete a "M" Pattern.
1.3050/54 as strong due to being low from Dec 23rd.
WE almost run out of superlatives when describing the EUR/USD performance to the downside.
Pair finished its FE 161.8 from plot of:
A = Jan 5th 12:50 high 1.3243
B = 15:15 low 1.3129
B = 17:30 high 1.3185
Blew by support of 1.3054 pivot from Dec 23rd. Next major is Nov 30th low of 1.2968.
The 360-degree from 1-Hour SQ9 indicator is 1.2972.
Longer term 61.8 fibo fan (Nov 4th - Nov 30th) also provided support at current price area.
Dec 6th EUR/USD Recap
Fundamental dinner conversation first.
One day ahead of the U.S. Change in Non-Farm Payrolls (NFP), we saw heavy selling with this pair. After a large jump in the ADP figures earlier this week, the market looks to be anticipating either a hit on projection (+150,000) or better.
More EU debt concerns, including a new EU proposal, and a Spain bond sale contributed to slide today. Tomorrow also contains FED chief Bernanke’s testimony before the Senate budget committee.
To make things even more interesting Friday, there is a cluster of EUR data plus CAD employment.
Technical from start of week.
Week started with our so-called “Sunday Reversal Candle” on the daily chart, a candle with a small body from 19:00 through 23:59 GMT (no or little price change). This was followed by a Long-Legged Doji on Jan 3rd.
Ref: https://www.mql5.com/go?link=http://www.investopedia.com/terms/l/long-legged-doji.asp
1) Previously mentioned Fibo Fan pointing up plot on 4-hour = Nov 30th low to Dec 14th high. These 2 points were the recent significant low/high. Confirmation include the Dec 31st high being caught by the fan’s 61.8.
2) Using 4-hour chart, plot from Dec 28th low to Dec 31st high produced a 50% fib that was met during the Jan 3rd 04:00 candle.
3) A retreat back to the top provided a bounce short trade opportunity on Jan 4th.
4) Retracement down moved rapidly, paused at the 38.2% and 50% fibs. The fibo fan’s 78.6 fib was right at the 50% horizontal fib area. Break of this support occurred during early European Jan 5th.
5) Pair completed a “M” Pattern during early European Jan 6th, blowing past 1.3085 support.
A fib plot from Jan 4th 1.3316 to Jan 5th 1.3129 resulted in a regular 138.2 extension price of 1.3013. This destination is similar to Jan 5th ABC plot as mentioned on previous post. The 161.8 = 1.2922, but prior to this level is the 138.2 ( 1.2956) from paragraph #2 plot. Nov 30th low was 1.2968.
6) The daily chart shows clear S&R levels from plot Aug 24 th low 1.2587 and Nov 4th high 1.4281. The next support fib is 78.6 price area of 1.2950.
7) Breakout of Asian Low was fraught with false dips as market cycled through data. Several 15-min candles failed to close below 1.3098 during mid-European. It wasn’t until the 15:00 candle that we saw break. This required a re-plot of our ABC parameters to swings of 07:15/13:00/ 14:45. This produced the FE 161.8 price of 1.3001 that market rested on at bottom.
8) Posted updated GannBox in Gann Is The Man indicator thread. We fitted first turn of Dec 5th, and every subsequent turn at vertical 1/8th intervals were monitored. The result was quite satisfactory, hitting 6 out of 7 times. The box was completed, and EUR/USD made a perfect return to starting price of box, just one day outside of the 144 marker.
We’ll keep this plot, but switch it to a daily to see what comes, and look for new 4-hour plot.
*****
Clearly, the European session traders did not want to be caught long on EUR/USD ahead of NFP. Heavy money to the downside made any thoughts of trading a bounce upward (at support levels) a fleeting one, with the exception of 1.3000.
We can see the ferocity of the extension when it dismissed and hurdled the FE 100 (1.3046) near the end of the session. It did bounce off of the FE 127 prior to advancing.
Early lurkers at the 1.3000 level observed or traded first approach from 1.3005 to 1.3033. The FE 127 provided resistance. In our opinion, when an early bounce occurs, it theoretically reduces probability of bounce at closer point to the support/resistance price.
There was a precise hit during 18:15, probing to 1.2997, and making 23 gross pips on the bounce to 1.3023.
Update: The 23:45 candle indeed touched the Nov 30th low of 1.2968. Due to its significance, pair bounced and made 1.3015 early Asian Jan 7th. No data of higher impact until 06:45 GMT.
England raises terrorist threat level to severe this morning, during early Asian.
Sources: Security threat level for London raised to 'severe' - CNN.com
Looks like GBP/USD made a brief reaction to the downside but recovered. This probably dragged corss-pair EUR/USD.
For EUR/USD, moved fibo fan low to Sept 10th 1.2643, and high of Dec 17th 1.3359. Can switch to the daily chart for better maneuverability.
This results in fan's 61.8% fib acting as support right now.
Attached is a 15-min chart from Jan 4th European session. We've drawn a trend line upwards below candle lows, from late Asian to the top of European sessions.
The 2 Ehler's Fisher Transformer indicators (they do not repaint) show humps sloping downward.
An ABC plot from top provided exit FE levels. ABC swings times (5-min) were 13:15/14:15/14:25. The trend line acted as resistance for the pullback of Swing C.
Entry trigger can be by break of Swing B price, or open of next candle after the break candle closed.
Another guide for trigger is the Ehler Fisher Transform's 2nd negative histogram bar. In this example, this entry trigger is the same candle after break candle. An arrow points to that 14:45 candle, with price of 1.3378.
The Ehler cross-over Fisher Transform cross over at the same time the histogram version change from a thick bar to a thin bar. We've changed the color of the thin bars for better viewing.
If the histogram hump is above zero line, the thin bars are red. If humps below zero line, thin bars are blue.
The RSI-TC indicator also showed a lower high as price peaked.
Note that the ABC swings were on 5-min chart, but to see divergence, use the 15-min chart.
This trade was also mentioned as a bounce trade from the top that day. If we put all of our observations together, certain set-ups can become quite clear.
1. Bounce off previous significant high
2. Trend line break
3. Divergence
4. RSI
5. ABCD
Thought I'd post an old indicator that is still useful. It is the LSMA Channel indicator, LSMA stands for Least Square Moving Average, and also uses linear regression. Great for seeing diagonal support/resistance.
Ist attached chart is "before", and 2nd chart is "after". Can see the last channel line provide support where EUR/USD just bounced. Other diagonal lines were good too during span.
Edit: added 3rd chart with extension fibs, that show 138.2 being hit where channel line caught bottom.
IF you switch the LSMA from 15-min to 5-min, we can see price action on a smaller scale respect the channel lines. This indicator is good for shaving a few pips, as an accessory to fibs.
Dec 7th EUR/USD Recap
Heading into Dec 7th, set-up plots include:
1) Fib retracement tool:
High = Jan 6th 14:45 1.3122
Low = Jan 6th 16:15 low 1.3005
138.2 = 1.2960
161.8 = 1.2905
Aware of 1.2968 as major support from Nov 30th low.
2) Fib Expansion tool (ABC):
We must analyze swings prior to entering the Asian session. This is a good example as it was not necessarily evident. Switching to the 5-min can help. Pullback should preferably be 38.2% or 61.8%.
A = Jan 6th 15:15 high 1.3076
B = Jan 6th 16:15 low 1.3005
C = Jan 6th 16:45 high 1.3033 (38.2 retrace of A-B)
3) 1-Hour with Fib Retracement tool:
High = Jan 6th 14:00 1.3122
Low = Jan 6th 23:00 1.2968
138.2 = 1.2909
161.8 = 1.2873
As pair dipped during the last hour ahead of Asian, it marked the low for plot.
********
Ahead of the much anticipated U.S. Change in Non-Farm Payrolls (NFP), market was trading in a tight range during U.S. and Asian sessions. The breaking news that England increased its terrorist level to severe was also in the mix early Asian.
The ABC plot projected FE 78.6 of 1.2977 which was as far as pair got. A “scalper” trader who is a master of support and resistance can still be profitable during this type of market condition.
Although the market touched significant support price of 1.2968, almost as a courtesy, the ABC plot ruled, with its FE levels being obeyed. The 78.6 held until the European session, when we saw a quick dip to the FE 100 1.2962.
A slew of low and medium-impact European date preceded the NFP. It was mixed but the 10:00 EU GDP (quarter-to-quarter) was down slightly. That may have been enough to generate a muted downward push.
The FE 127 was touched just prior to NFP, during the 13:15 candle (15-min). The NFP, due out at 13:30 GMT, is accompanied by the unemployment rate.
***
Although the ADP figures released earlier in the week is not considered a prelude to the NFP, there was much sentiment by market fundamental traders. We saw estimates range from +150,000 to +175,000.
NFP came in at a disappointing 103,000, and unemployment at 9.4 (positive).
The 13:30 15-min candle whipsawed 68 pips, retouching the Asian high and a new low of 1.2935. Pair chopped around until 15:15 before resuming its bearish trend.
Since this is not an ideal market condition for us, we stood on sidelines (after shaving during Asian).
The 138.2 (1.2909) from the 1-Hour plot was hit at the 17:00 period. Plotting with the whipsaw 15-min candle high/low also produced a decent 138.2 of 1.2903.
Other observations
The downturn from Jan 4th has been so strong that the SQ9 indicator did not generate a new zig-zag swing up. Today’s low is near the 405-degree price of 1.2916.
The take-out of 1.2968 support is significant. Pair now trading below its 50-EMA of 1.3380, on the weekly chart. Swings on long-term charts are lower highs and lower lows from all-time high top.
Next support seen at 138.2 price of 1.2885 from plot of Dec 14th high 1.3497 to Dec 23rd low 1.3054. The 161.8 = 1.2780.
Commodity prices pulled back.
Under separate post, we wish to highlight the use of the SQ9(Price)22.5 Factor 56 indicator on the EUR/USD daily chart. See the Gann Is The Mann thread for download on indicator.
Set start price to 1.1876 and direction up to "true". We used that price as it was the most significant recent low. This indicator does not readjust, which serves a purpose that is useful to view S&R with the bigger picture.
We also plotted retracement tool and can see top as the 161.8 extension. Sure we posted this before, so excuse us.
We can see the break of the pivot 1.2968, which is near the 23.6 fib and 203-degree level. Next is the 180-degree of 1.2873.
Closing price of this week at 1.2909 can also be seen as near price levels from peaks on Aug 18th and Sept 6th.
The RSI-TC indicator is in oversold, below its 15 level. This is telling us a retrace is necessary prior to any further advancement down.
Should pair thrust down further, we see the 1.2600 level as major support.