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FOREX PRO Weekly August 08-12, 2011

Discussion in 'Sive Morten- Currencies and Gold Video Analysis' started by Sive Morten, Aug 6, 2011.

  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Monthly
    US has shaken markets with problems of debt ceil and yesterday S&P has decreased credit rating of US to AA+ - 1 grade lower with negative forecast. It means that rating could be reduced to just AA during nearest 1-1.5 year if nothing will change. I suppose that it will happen, since increasing of debt ceil does not change the core – they can’t increase it infinitely. Even now demand for France, Germany and Canada bonds exceeds demand for US Treasuries. By reducing rating of US S&P increases cost of borrowing for them, since their payments to serve its debt will become even higher. Approximately 1 grade of rating costs 0.5% of yield. It means that those steps that they was intended to take to reduce budget deficit will be insufficient, since they will have to pay more on debt serving. Even more, the cost of loans inside of country will grow – it could lead to reducing of borrowing in mortgages and consumer credits, so the second leg of recession now as close as never. Taking into consideration poor pace of economy (1.8% in QII) and stagnation in real estate and unemployment, consumer credit and retail sales could lead to dire consequences. But this is a bit extended perspective.
    EU, in turn, shows problems of Spain and Italy and there are more and more thoughts that they could not escape Greece’s path. Second impact right in the back of ECB was by Bundes Bank. Its authorities told that they do not support buyback of problem debt – Greece and potentially Spain and Italy.
    So, currently market stands in some stupor – too much events and they are too significant. That’s why now we see outstanding plunge in equities and other risky assets and growth in demand for safe-haven – JPY and CHF, Germany bonds, may be Australia and Canada bonds. Despite the interventions, probably we will see further growth in Swiss franc till current doom and gloom will not be resolved somehow or calmed down a bit. Investors need time to think, to assess current situation…

    Current trading environment on monthly time frame is a bright example of indecisive sentiment of market participants. Since as US as EU hit market with turmoil, trades just can’t decide which problems are worse. Trading range on monthly chart has contracted significantly, June was inside month and August has all chances to become inside one also.
    But technical analysis shows a bit clearer picture and it shows that EUR stands in favor. Monthly trend remains bullish so as price action. Recent AB-CD pattern develops strictly as in book – market has hit 0.618 Fib extension target and monthly overbought and turned to retracement. But this retracement is very shallow – as it has to be. Market could not even reach Confluence support and holds above nearest Fib support 1.4140 - it looks more like W&R of previous lows. Furthermore, price action shows strong purchases by candles’ long tales during recent 4 months. Bullish pennant is forming currently here. Market has corrected overbought and reached the middle between the blue bands of oscillator predictor.
    So, as we’ve said in previous research recent price action is not match to market that turns in reversal. It’s more common for continuation market. Overall small signs, if we will take them together, tell that up move continuation is very probable.
    Nearest target stands at 1.5081 – just above the previous highs – this is 0.618 extension from most recent AB-CD pattern. Next area to watch is 1.5272, but potentially it could turn to butterfly “Sell” pattern. The target of this pattern is 1.27 extension at 1.6027. Also it almost coincides with 1.27 target of bullish AB-CD at 1.5925 and with 1.0 Fib extension of most recent smaller AB-CD. By the way, from classical standpoint upward move should be equal to the mast of the pennant – that is 1.5866 area.
    The crucial area for bullish perspectives is 1.3650 – down break of pennant and Confluence support will tell us that probably we can’t count on upward move in nearest time.
    [​IMG]

    Weekly
    Weekly trend holds bearish. First, I just want to remind you our suspicions that we’ve discussed in previous research. If we will take a look at overall picture then we’ll see that the nature of up move and current move is different. Current action is not thrust. It looks like retracement, and probably upward move could continue. Who knows, may be current pullback is just a respect of strong support, but market has not quite reach it (monthly Confluence support). That’s why it’s hardly so. I don’t know but currently personally for me this environment looks more bullish rather than bearish. Here are some reasons for that. First, we clear see bullish dynamic pressure here. Look, market holds bear trend, but price action does not support that, market does not accelerate lower. Second, from classical perspectives, we see that bullish wedge or flag is forming. Since on previous week market has created additional candle, so you can draw it differently – may be somebody draw it more as parallel channel – this does not change the core. This is still a consolidation but not an impulse move. Hence, this is a retracement.
    Also we can treat this recent price action as Gartley “222” “Buy”. Now pay attention how price action has developed on current week – market has shown deep move to 1.41 area but returned right back above monthly pivot point. This is a bullish sign.
    Speaking about the targets – nearest one is 1.5081 – 0.618 Fib extension from AB-CD pattern, that is also a weekly overbought. Although dynamic pressure minimum target is clearing out the highs at 1.4925 – there are a lot of stops just above it. So, since they will be triggered, market definitely will accelerate further. Second area of targets is 1.5250-1.5270 - monthly AB-CD target.
    [​IMG]

    Daily
    Finally daily time frame gives us clearer picture, because during previous two weeks it was really the task to analyze the market and make forecast. So, let’s start as usual from initial AB-CD pattern. Market has hit 1.0 Fib extension at 1.4433 and turned to retracement. And we said, that this pattern still has chances to show continuation to 1.618 target at 1.4708 while market will hold above 0.618 Fib support at 1.4080.

    So, what do we see currently? Market has shown huge “Piercing in the clouds” pattern right from this support level. This gives us some advantages. First, we can use particularly this pattern and base our entry just on it. The low of this pattern is a crucial level for bullish scenario. If market will take it out – it will erase this pattern and probably initial AB-CD. This will be strongly bearish. But I somehow have some confidence that this will hardly happen. Second advantage is that crucial level stands very close to current market and it allows us significantly reduce risk of potential position.
    Also market shows greater AB-CD with the same target at 1.4744 but it stands beyond daily overbought, so nearest target for coming week is 1.4444-1.4475 – 0.618 Fib extension from great AB-CD and pivot resistance 1.
    Daily chart gives us nice information that is in a row with bullish suspicions due monthly and weekly charts.
    [​IMG]

    4-hour
    Trend has turned bullish here, we see solid move up. Still, market has not exceeded downward trend line. The breakout of this line will give us additional confirmation of bullish sentiment. Now market stands at Fib resistance and could show some retracement that should be 0.5-0.618 of recent swing up. This could turn to reverse H&S pattern right at the point of daily Fib support and completion of 2 different AB-CD patterns with 1.27 and 1.0 extension targets.
    So, plan for Monday will be to wait, when this retracement will start and use it to enter long.
    [​IMG]

    1-hour
    Trend is bullish. Move up on Friday was triggered by DRPO “Buy” pattern, as we’ve noted in daily update. So, market has reached one of the 2 possible Fib resistances. Still, I can’t exclude that market could continue a bit further first – before retracement will start. Probably till 1.4315-1.4335 area. Logical retracement that is typical for potential H&S pattern should be to 1.4135-1.4150 area. As you can see, head stands at 1.27 of potential left shoulder. There are a lot of possibilities if for scalpers. For instance, there could be DRPO “Sell” right at top since current thrust up is acceptable… As for others – wait, when retracement will finish and look for daily updates on forum for discussion of additional clues that could appear during the week.
    [​IMG]


    Additional caution
    Finally, I want to show you another “bomb” picture of daily chart. It shows completed reverse H&S pattern, so further upward move could happen without any retracement, we can’t exclude that. Still I suggest that this retracement should happen. If not – we will adjust our trading plan later. Pay attention that target coincides with weekly one:
    [​IMG]

    Conclusion:
    Position traders:
    Probably it makes sense to try to enter long from 1.4135-1.4150 with stop below 1.40, since market could accelerate upward to monthly and weekly targets and it offers currently exceptional low risk on position. Even if you will be wrong, from long-term perspective, this is very tight and logical stop. This is relatively rare for long-term positions.

    Intraday and daily traders:
    1. Probably we can see some further upward continuation first to 1.4315-1.4335 area.
    2. If you’re scalper, watch for sell signals. One of them could be DRPO “Sell”, since thrust up is suitable for that. Potential target is 1.4135-1.4150 area;
    3. Others wait until retracement will finish and market will form some visible pattern. I darn to suggest that this could be reverse H&S.
    4. In fact, it could turn to solid upward continuation in medium term perspective, since longer time frames shows bullish sentiment.


    The technical portion of Sive's analysis owes a great deal to Joe DiNapoli's methods, and uses a number of Joe's proprietary indicators. Please note that Sive's analysis is his own view of the market and is not endorsed by Joe DiNapoli or any related companies.
     
  2. tadinda

    tadinda Private, 1st Class

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    Calculation of 1.5081 in Monthly

    Hi Sive,

    Ernest here.
    I am quoting a bit of yur monthly analysis.

    Nearest target stands at 1.5081 – just above the previous highs – this is 0.618 extension from most recent AB-CD pattern.

    Cannot understand how you obtained this figure. I am using the Fib Expansion tool using your ABC but I am getting a hugely different result. Meaning it is not a case of dissimilarities in data.

    Can you please explain what I am doing wrong.

    Thanks.
     
  3. Xenofanes

    Xenofanes Private

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    Dear Dr. Morten

    Thank you Dr. Morten for helping me to survive with my tiny forex account. :)

    You changed my life. I am waiting for your words more than a buffalo is waiting for the sunrise.

    Your wisdom is wide and deep as Grand Canyon and your sight is better than falcon's.

    Thank you and have a nice weekend
    :)
     
  4. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Hi Ernest,
    tell me, what numbers do you use for A, B and C points.
    My points are - 1.2870;1.4925;1.3811
    Looks like you was confused a bit, since A point marked as C on the chart, because I've drawn two different ABC's and software does not allow to show both letters in one point.
     
  5. mjunkyard

    mjunkyard Private, 1st Class

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    Trading Plan

    Hi Dear Sive;
    thanks again for your amazing work.
    i have an educational question.
    what would you do with the positions that we've opened on friday?
    on friday we we're pretty bearish and the eur/usd hit both fibnodes so both orders were filled. so, would you wait for a retracement to breakeven or would you take a loss?
    sincerely
    mjunkyard
     
  6. Erdinc

    Erdinc Private

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    I also would like to know the answer to this question ...
     
  7. CheeLee

    CheeLee Private

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    Hi Sive,

    Thank you very much for your great analysis.

    Cheers,
    Chee Lee :)
     
  8. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Hi Guys,
    I've taken a loss already, since we've said that stop should be placed just above 0.618. It was hit.
    So, if you still have position, you may try to wait retracement at least to breakeven or may be you will gain some pips. Let's say that this is "professional" approach to this.
    From another point of view - market is not too far from entry point, so, loss even if you will fix it will be relatively small. This is "safe and easy" approach.
     
  9. BackSpace

    BackSpace Private, 1st Class

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    Dear Sive,

    I have also opened two SHORT positions at the FIB levels indicated in your Friday trading plan.
    I have the same question as Mjunkyard. What do we do with these SHORT positions ?
    Also: where do we set our S/L in case the move up continues ?

    Kind regards, BackSpace.
     
  10. tadinda

    tadinda Private, 1st Class

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    Monthly Expansion Level

    Thanks Sive.

    Problem was with my data. A variance of more then 20 pips on two points out of three. It could be that this never happened to me before because last month ended on a Sunday and Alpari UK do not provide Sunday Data.
    In any event thanks found the problem.

    I have not written to you for a long time but I am following you religiously. Especially your Education Forum. I think it is purely fantastic, well laid out and explained for people (idiots) such as me to follow. So much so that I motivated my 14 year old son to take them up and read them so that he will start trading a small account. He knew nothing about Forex, currencies etc. And I never provided him with any introduction. I just asked him to read, learn and come back when he would require additional explanations. But every week he reports good progress.

    You are the man.
    Thanks
    Ernest
     

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