FOREX PRO WEEKLY, December 13-17, 2010

Sive Morten

Special Consultant to the FPA
Monthly trend is formally bullish, but price action does not absolutely confirm that. Price action during December is not very impressive and looks like just a retracement after strong collapse in November. During the previous research we’ve said that down move has started due to situation that could be interpreted twofold. From the one point of view – this was “Stretch” sell pattern (market has reached Fib resistance simultaneously with overbought). Usual target of this pattern is a zero point on Detrended oscillator or the middle between two lines of Oscillator predictor. I will not bother you with calculations and just tell that this is approximately 1.27 area.
From another point of view (look at chart#2) – we may treat current retracement up as B&B LAL pattern from the previous swing down. I say LAL (Look-alike) because thrust down has no sufficient number of bars. The target of this trade is 5/8 Fib support from whole opposite to trust price move. This is 1.2793.
Of cause, I do not offer you to trade monthly pattern - we use this pattern just as a possible context for deeper understanding of situation on lower time frames.
Also take a look – market has formed bearish engulfing November bar that also is a reverse bar. And I think that this is an absolutely tradable bar from technical point of view. As you know, bearish engulfing signal remains valid, until market will not take over the highs of this bar. So, currently we can trade that swing down. The nearest target on monthly chart is a 0.618 Fib expansion from more recent ABC-top pattern at 1.2255.


Not much new action on weekly time frame. Weekly trend is clearly bearish. Although market has shown this nice hammer on previous week, the recent week bar engulfs it to the downside. Second, market just tested monthly pivot point at 1.3418 and closed below it. My thought is if market is still bullish, it should have to move above monthly pivot during previous week. As we’ve discussed, there were all necessary conditions for that. The next weekly support is 1.2966. Monthly pivot support stands far below current prices at 1.2559.

Daily trend has turned bullish, but price action is not. In general, all resistance levels stay the same and you’ve seen them numerous times already. They are – monthly pivot point at 1.3418, daily Confluence resistance and Agreement at 1.3456-1.3461. Others are far above the market and do not interested us yet.
Now, weekly pivot point for coming week stands at 1.3271 (blue dash line), weekly pivot resistance 1 at 1.3380. Market is neither oversold nor overbought currently. So, let’s discuss current situation. Look at ABC-bottom pattern. If “C” point will stay in place, then the next target is 0.618 Fib expansion 1.3443 comes right at daily strong resistance area.
First, during previous week market couldn’t move above monthly and weekly pivots and retraced lower. Current price action does not confirm bullishness of the trend. Second, take a look at price action during recent week – a lot of doji with small trading range. Furthermore the Friday trading session was inside day – its trading range was inside Thursday’s one. So as Tuesday was inside of Monday. What does it mean? It means that market is coiling – choosing direction other words speaking. Usually after such kind of price action follows strong move in one or other direction, i.e. trend bar. Market can’t stay in such behavior for a long time. So be prepare for strong moves. 14 of December is a FOMC meeting by the way…

Second chart shows the levels of support. Fib support comes at 1.3141, weekly pivot support1 at 1.3122 (lime dash line)

Now we shift to most interesting part of analysis. Let’s start from 4-hour chart. You can see, that market is forming obvious triangle pattern. The typical triangle breakout should happen on a 5th move/wave inside it. But here we see that 5th move comes down inside the triangle and there is no breakout yet. Sometimes it leads to soft exit from the triangle sideways – market continues to stay in tight range. How it will be in reality – who knows…
Now are a couple of words about market mechanics. This triangle is obvious. Everybody sees it. So, those who’ve possessed themselves for upper breakout already opened positions with stops somewhere below the C-point. By the way – the low border of triangle is a 50% support area. Just below the market we see strong area of support 1.3122-1.3136 - Fib support and weekly pivot support. This could be a trap. I prefer to see down breakout failure first, hitting this area of support, if market really intends to move higher. Here is why… First – it will clear out obvious stops, second – it will involve public and breakout traders play on short side of the market. Both these things will help larger participants open long positions at excellent price, so we should join them. So, here is first beacon to you – look for W&R of lower border of the triangle. If you’ll see it – you can enter Long with very tight stop (under the lows of W&R) and target at least 1.3443.
If market will show upper breakout – watch how it will response on weekly pivot at 1.3271. If it will fail there – be prepare to down move. If it will be able to move above of weekly pivot and hold there – then, possibly, you can use some retracements on lower time frames to enter Long with the same target – 1.3443, or if you’re intraday trader – take a look at next, hourly chart...

Here we can see some possibility for Butterfly “Sell” pattern with 1.272 target at 1.3361 or 1.618 one at 1.3417. This is just a possibility, I’m not saying that is has to happen, but it could, especially, if market can hold above weekly pivot point.

Conclusion: On longer term market does not show something really new. Situation still looks bearish but market stays in tight range.
In shorter term… Recent churning on daily time frame makes me think that market will explode sooner rather than later in one or other direction. We’ve discussed possible scenarios for beginning of the week. Personally, I prefer to see situation with lower breakout failure and W&R before move up. This scenario is clearest from logical market behavior point of view.

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.

King Midas


Thanks for the analysis. I utilize it constantly and appreciate all of your efforts to share your knowledge and insights with us!


Sive, you get it alot, but I gotta say it here, too: THANKS!! I'm learning alot from your analysis and video's. Merry/Happy New Year to you!!:)


OMG!! Great analysis Sive!!!!!!!!! They are working to the letter. I ain't pulling the trigger yet, but I'm gaining SO much confidence and skills thanks to you. Thank you very much!!!


Private, 1st Class
Thanks a million! How High?

Thank You once again Mr. Morten :eek:)
I guess we didn't have to wait long to see which direction it wanted to go! lol

Question: I actually missed the break above 1.32 with my real account but I had a "test trade" set to go off in a demo account @ 1.3215. Not wanting to chase the market (coz thats cost me before;) I've been waiting for a pull back to look for another possible entry point but none seems to be coming yet. Do you think targets in 1.35-1.36 range are still possible given the strong action we've seen today?

God Bless you all and have a Pip Happy Day! :eek:)

Sive Morten

Special Consultant to the FPA
EUR/USD Daily Update, Tue 14, December 2010

Good morning,
as we've expected, market has shown yesterday exploding move (although I've thought that it happens due FOMC meeting). Anyway, market move strongly above the weekly pivot and reached 1.618 target of hourly Butterfly Sell pattern at 1.3416 , weekly pivot resistance 1.3380 and monthly pivot at 1.3418

At the same time, at daily time frame just above the market strong area of resistance - 1.3450-1.3460 and Agreement with daily target at 1.3443. This target is just above the highs and this makes me thing that these highs will not hold - market makers definitely throw the burning match there. This will add fuel to the further upmove and market can even show some piercing of this area of resistance.
So, couple of issues - if you're bullish - wait for some retracement to the downside before entering long, if of cause market will show them, before hitting 1.3450 area.
If you're bearish - wait for failures around 1.3450-1.3460. This could be W&R, RRT, even hourly H&S pattern, because just above the market is strong resistance. Market can show retracement from their.



Private, 1st Class
1.3460 was hit

Yes, the target area 1.3443/60 you mention, Sive, was hit.

Any idea from now on. There are a lot of news today. Can we expect another break of this area to the upside?

Thanks and have a nice day.