FOREX PRO Weekly February 06-10, 2012

Sive Morten

Special Consultant to the FPA
Trend is bearish, market is not at oversold. Actually there is not much to add here to previous analysis. Currently market is showing some pullback, that may be is a respect of our Agreement level. January’s candle forces me to search for some analogues in closest past, so, if you will take a look at recent bottoms on monthly chart you will find the same pattern as in January. This is type of hammer with small body and close slightly below top. Current price action is rather shallow and stands inside January’s one. So it does not add more information. One thing that we have to note still is that market has returned back above 0.618 support and January has closed above it also. That could be important. Next monthly target stands as AB=CD pattern at 1.1650. Since market has reached just 0.618 target, retracement should not be too deep. I suppose to 1.3505-1.3707 as max.
There are two significant levels of resistance at monthly chart that are mostly close to current price action – 1.3296 as 0.382 resistance from solid thrust bar down and 1.3505 – major 0.382 resistance level. From perspective of hammer pattern, we can say that downward move has continued only if price will take out its low 1.2627.

Conclusion from monthly chart is as follows – market has found some support and now under way to respect it by bullish hammer pattern. Breakout of 1.2627 can be as indicator of reestablishing downward trend, while to the upside nearest resistances are 1.3296 and 1.3505

Although market has formed an inside week, still, even this fact could be significant on weekly time frame. Let’s start from the trend – it has turned on bullish side by MACD, but here I’ve used MACD Histogram, because it also shows reducing of downward momentum. You will not see this divergence with simple MACD. This is a confirmation sign of potential retracement on weekly time frame. During previous week market behaved absolutely in a row with this divergence and perfect Morning star candlestick pattern, but on past week price has taken a pause and formed, as we’ve said, inside week.
As we’ve discussed in previous research – we have nice context for DiNapoli B&B “Sell” trade, which suggests 1-3 closes above green line (that is 3x3 DMA). This inside week is the second one. Both two previous weeks stand right at 1.3244 Fib resistance. Hence, from perspective of B&B trade market has only single week before starting move down (if it will happen at all, of cause). Let’s can we estimate potential move with more precision by lower time frames analysis.

Among others scenarios on daily time frame – potential DRPO “Sell” has a significant interest of mine. Just to remind you a bit – market has reached daily K-resistance (although I’ve drawn only one level) at 1.3240 and formed excellent “Dark cloud cover” pattern. After that market has fallen in tight consolidation during the whole week. Take a look at these long shadows and inside days. This price action shows market indecision and energy building. The same was yesterday, despite positive NFP release – market has closed as it opened.
By number “1” I’ve marked first close below 3x3 DMA, while “2” is a close above. To confirm DRPO pattern we need second close below 3x3. This could become a triggering pattern for weekly B&B “Sell” with minimum target at 1.2860. Pivot point for coming week is 1.3135 – very close to current market. That is what we have to keep an eye on in the beginning of next week.

On Friday we’ve discussed two butterflies and made a note, that market could complete downward AB=CD inside of right wing and cancel small butterfly on hourly chart. So, that has happened – market has shown downward AB=CD, but larger, 4-hour Butterfly “Sell” still holds. Why is it so important for us? Because we have potential DRPO “Sell” on daily and to get a confidence with it, we need either close below 3x3 and erasing of this butterfly by closing below 1.3027 or W&R of 1.3237 high. I suppose its all clear about first possibility, while second one has different variants. First one is a completion of Butterfly around 1.33 and move right down below 1.3237 – this will be W&R of 1.3237 high and will give us confidence that market is ready to go down and probably we will even try to anticipate DRPO using Butterfly pattern. Second is linked to inner AB=CD pattern with 1.3261 target. Market could not proceed right to butterfly target but show W&R by reaching just 1.3261 and turn right back. From bearish perspectives both scenarios are equally welcome.
If market will proceed above 1.33 to 1.618 extension this will cancel DRPO, since second top will be too far from the first one. In this case will be more probable that weekly B&B will start from 1.35+ level. I hope this explanation sounds not too confusing…

Here we do not have much add-on, just bullish divergence, that gives some hope market could proceed a bit higher.

Long-term bias still holds bearish, but market now turning to some pause with nice hammer pattern. Probably this is respect of the area that we’ve discussed previously. We can speak about downward continuation only if market will take low at 1.2627.
Weekly time frame is most important in current days, since it has context for directional pattern with excellent trading potential. Our major task is to catch triggering reversal pattern on daily or may be on 4-hour time frame for two reasons. First, estimate the starting point of B&B, second determine where to enter and where to place stop. One problem still is that if market will proceed higher – this will not cancel B&B, since theoretically there could be 1 weeks more before it will be triggered. This trade could be used by long-term traders to add short positions.

On daily time frame we have potential context for DRPO “Sell” that might become particular triggering point of weekly trade that we’re waiting. We will be satisfied with any scenario – as with new high (preferable) as without it if butterfly on 4 hour time frame will be cancelled.
One thing that bears do not want to see is proceeding and holding above 1.33.

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.

Sive Morten

Special Consultant to the FPA
EUR/USD Daily Update, Tue 07, February 2012

Good morning,

Market still holds in some sloppy consolidation, but here are some thoughts that I would like to discuss with you. Let's start from daily TF, as usual.

First of all, as you remember our pullback has started as respect of daily K-resistance area. And that was logical. But currently we see long-tailed candles during rather extended period of time. Don't you think that this is too long for respect of K-area? I start to suspect this. Market has nice upward momentum, it has respected K-resistance, it has shown shalow retracement - all environment is bullish, but why it can't even retest previous highs?
Curious... Obviously that this is indecision condition and market is building an energy. Major thought is if market really could proceed - it should done it already. That makes me worry and expect downward move, that probably could become strong.
Speaking about pure technical issues - we expect here DRPO "Sell" pattern. Yesterday market has closed 2 pips higher than 3x3 DMA and I prefer not to force patterns. If this will be really DRPO, then target will be at 1.2860 - do you really need to anticipate it? You will have pretty much room to enter till 1.2860, even if you will not enter in time.
Besides, anticipating of DRPO is not safe thing, especially because potential move to 1.33 has not been totally cancelled - Butterfly on 4-hour TF is still valid.

On 4-hour TF you've discussed AB=CD pattern, but market has not quite reached 1.0 Extension target and shown upward strong bar. I'm not pretending on absolute opinion and can't give 100% probability but market really seldom leave significant target behind. In most cases it reaches them. here you also can see that trend is bullish, but price action is not - here we see (at least currently) hint on bearish Dynamic Pressure. By this price action and by overall picture I will not be surprised if market will erase this upward bar...

On hourly chart I can try to explain why I think so. This could be just one among other explanations. Take a look at downward AB=CD pattern, that has started right from NFP bar. market almost has reached 1.0 extension and shown upward move just to fill gap and reach 0.618 resistance. Very often after reaching 1.0 extension market shows 0.618 resistance. Also market stands now below weekly pivot point.

So, what?

Well, I still can't exclude that market can show upward move to 1.27 butterfly target at 1.3294, but I do not intend to trade inside this choppy and sloppy price action. More safe, at least for me is to wait clear pattern on daily time frame. But this does not mean that you can't try to trade any of the AB=CD's, butterfly and other patterns that can appear during the day.
I mostly skew to downside probability rather than to upside, but again we can favor any scenario but we have to act only due clear pattern. No patterns-no action, no matter what scenario we favor


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Sive Morten

Special Consultant to the FPA
EUR/USD Daily Update, Wed 08, February 2012

Good morning,
today on daily time frame we can see why it si dangerous slightly "force" DRPO pattern. If we've said that market has closed below 3x3 2 days ago (and it is not) - now we already have DRPO Failure and this is drastically change our view on market. May be it will be so, I do not argue, but I just want to attract your attention to consequences.

So, today we have second type of potential DRPO, that we've discussed in weekly research - with higher second top. And that will be perfect for bears if market will form DRPO of cause. Why? Because breakout traders who entered yesterday by stop orders around 1.3240 are in. And they have long positions. If market will show W&R of 1.3237 level and return right back - they will be trapped on a wrong way. And when market will start to take their stops - they will add fuel to downmove.

On 4-hour chart our butterfly is in progress. Target is 1.3294. I suppose that market should touch it before any retracement will start.

I've attached hourly chart also, here I see only small bullish dynamic pressure, it does not add much to overall picture.
So, what kind of conclusion could be made?

1. Keep an eye on 1.33 level - it has a lot of possibilities. If you trade harmonic patterns that is your chance to try enter short by butterfly completement.

2. If market will reverse at 1.3294-1.33 - wait when it will return below 1.3237 - previous high and hold there. This will give us bearish W&R. If this will happen, we probably could try even to anticipate DRPO...

3. If we will do this - wait for confirmation from the market by close below 3x3 on daily time frame. It will not neccesary should happen today, but probably till the end of the week.

Other worlds. If market will hold above 1.33 fail butterfly, then move to 1.3450-1.350 becomes more probable.
If it will hit 1.33 then returns right back (first clue) and later confirm DRPO (second clue) - 1.2875 area is the target.


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Sive Morten

Special Consultant to the FPA
EUR/USD Daily Update, Thu 09, February 2012

Good morning,
Price holding above 1.3237 high move bearish short-term scenario under question by some reasons.
First, is because we have not seen W&R yesterday, market just stands in tight range.
Second, because DRPO on daily has just 8 thrusting bars and now we already have 6 bars of consolidation. That is not good.
Although weekly B&B probably will happen, the level from which it could happen moves to 1.3360 and I do not count on DRPO any more.

Speaking about foundation of this price action, I suppose that it comes from Greece, and that investors in general expect positive decision on help providing.

On 4-hour time frame we have some another bullish signs. First is stop grabber, that suggests taking out previous highs at 1.33 level. Also take a look at solid thrusting bars and quite shallow retracements. Market has solid upward momentum on itraday charts.

On hourly TF trend is bullish. Inner AB=CD pattern of butterfly gives us 1.618 extension at 1.3342.

So, now I suspect that probably market will complete butterfly and reach solid resistance at 1.3340-1.3360 area. You can act different. Personally, I will probably take small long position till 1.3360 by stop grabber pattern and will be watch at sell possibilities there, since B&B "sell" at weekly was not cancelled and that is my focus.

You may trade purely butterfly, if you're bearish, or trend, if you're bullish.


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Sive Morten

Special Consultant to the FPA
EUR/USD Daily Update, Fri 10, February 2012

Hi everybody,

Looks like medium term picture will change not early than on 13-15 February, when some decision from Greece will come. That's why it is almost nothing to comment on daily time frame. One this is just to add - market has hit 1.27 butterfly level. And that is only think that we could stuck with in today's trading session.

On 4-hour chart we see, that yesterday's stop grabber (and dynamic pressure on hourly chart) has worked and particularly by this move market has hit 1.27 level. Trend has turned bearish. And pay attention that during this move MACD has held trend bearish - yes, there is some divergence with MACD. BTW, this was rumor announcement from Greece that politician have come to agreement about pensions contracting. Even with this relatively positive news market was not able to continue move higher. This gives me just single idea for trading today. And this idea is bearish.

On hourly chart we see that trend is also bearish, price supports it.

So, what we can do today?
1. We can't possess ourselves on daily chart - since there market is indecision till 15 of February. Hence, we also can't expect solid move (at least currently) on intraday charts;
2. Market has reached 1.27 buttefly level, shows divergence and can't proceed higher at positive rumors, 4 hour and hourly trends are bearish.

I suggest we can focus on this moments and try to enter short at hourly K-resistance 1.3275-1.3280. Nearest target, probably is 4-hour K-support at 1.32 area.

But again - this is not superb foundation. This is just the single one, that I see now. So, decide by yourself - sit on the hands or try to take some risk.


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Sive Morten

Special Consultant to the FPA
Hi Sive thx for your Analyze.

i want to add my own analyze based on STAR.
and so far i found 2 setups who i think agree with your analyze.
one is based on the EU M30 starting from the low at 1/13/2012 to the high at 1/27/2012.
that setup did already give us 2 Short setups 1 based on the first pullback at 2/30/2012 and that did give us a trigger to go short at 1/31/2012 1.31753 that setup stil holds as long as the market does not break the high at1.32330.
and our first target for that setup was at the low of that pullback.
and that target did get hit so we made already a nice profit.
but the market did retrace back and the new deeper pulback at 2/1/2012 did give us a new short trigger at 2/1/2012 14:00 price 1.31990. with a stop at 1.32330 nice tight stop and a first target at the low of the pullback at 1.30257.
those pullbacks did change our setups to the H1 timeframe.

but we also have a setup based on H4 starting from 8/29/2011 till the current low at 1/13/2012.
then we have a pullback and now we are waiting for it to retrace back to arround 1.27668 and 1.28563.
but that depense how long it takes to get there.
if it gets there we wil get a trigger to go long.
that pullback did change our setup to D1 timeframe.
and could be the reversal for a new trend.



Hi Gert,
and can you add charts and some description of your signals, since most people will not understand your analisys sufficiently. You've said that there were signals, but what signals and why are they signals?
I suppose this will be interesting for everybody, since this is educational part of forum. We're here to discuss different approaches and methods of trading. If this is not private, of cause.