FOREX PRO Weekly February 20-24, 2012

Sive Morten

Special Consultant to the FPA
Trend is bearish, market is not at oversold. In fact I leave previous analysis of monthly time frame intact. One thing that I would like to add is that market has touched first Fib resistance level at 1.3296. Here we see almost the same candle for February as on previous week.
Currently market is showing some pullback that may be 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 a bit shallow for now. 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

Trend here is bullish. Market is not at overbought/oversold. During previous weeks we’ve talked about B&B “Sell” pattern, with target around 1.29 level. Today I would like to discuss with you some thoughts about perspective of this pattern. In two words – we have to be careful; because some signs have appeared that we just can’t skip out.
Looking at details, what is a B&B in general? B&B is a pattern that based on momentum of the market. That’s all. Applying to it some targets (0.618) and triggering conditions (length of the thrust, number of closes beyond 3x3 DMA etc.) are based just on probability. It means that although this pattern almost always works, but achieving predefined targets and conditions is a not rule of thumb. Probability suggests that in most cases – it will happen, but not always. Why I’m speaking about it…
Take a look at weekly time frame. When market has started move down during previous week – it has reached 50% target, but not 0.618. Now I want to ask – can B&B been completed with just 50% retracement but not with 0618? Absolutely, why not. By this statement I do not want to say, that it will not proceed to 0.618. I just want to say that we have to be flexible enough when we deal with such kind of pattern, and when destination is based at such unstable issue as market’s momentum. What else can we see here?
In favor of bullish standpoint we might say following thoughts. Market stands above monthly pivot second month in a row. Second is, market holds 3rd week above monthly 0.618 support level, and during previous 3 weeks trading range was relatively tight, compares to other weeks. Trend has turned bullish. And last one is – B&B is short-term pattern. It finishes when market reaches its target. B&B is not a reversal pattern and when it comes to an end – our major focus turns to trend direction. Based on monthly analysis we can’t exclude retracement to 1.3505-1.3650 K-resistance, especially when we have weekly trend is still bullish.
From bearish perspective we can say that pivot resistance still holds upward move, suggesting that market could continue move lower right from that area. And, as we know – retracement in long-term bear trend usually held by pivot resistance 1.
So, what we can say from this contradictive view on weekly time frame? The most important is to be flexible when dealing with such as issue as market momentum. There are some worries signs exist for perspective of achieving 1.29. We have to be careful and be ready to react fast if lower time frames will give us the clue that market sentiment has changed.

In current environment daily analysis is much simpler than on previous week. Trend is bearish. Market has reached major 0.618 resistance as we’ve planned on yesterday’s trading plan and pushed back from it. So, if you’ve entered short, as we suggested – this is excellent chance to eliminate risk and move your stops to breakeven. That’s why we always recommend entering at some significant levels – even if you will become wrong, in most cases market somehow, even with shallow retracement, but respect this level. This will allow you to move your stop to breakeven. That should be done, I suppose.
Here we will not guess and gamble about B&B. We will base on absolute things. What are they? First of all this is trend direction. It’s bearish and holds 0.618 market retracement. If you’ve read our Forex Military School and part dedicated to multiple time frame analysis, you should understand trend compounding technique. We have bullish trend on weekly and bearish trend on daily. What does it mean and how it can be traded purely on trend direction? Even if we will not take into consideration bearish directional weekly pattern (and direction overrules trend), it means that market will show deeper downward retracement on daily. Second is that we can enter long, based on weekly time frame only when daily trend will turn bullish. By these thoughts we get clear picture what to watch for and what is a crucial moment for daily time frame and weekly B&B trade:
- If daily trend will turn bullish then we will have to search possibility to enter Long.
- Until this will happen market has chances to show deeper move down.
That’s why from this standpoint, 1.3190 level is important. If market will proceed higher, then there will not be any resistance above it and it makes trend shifting to bullish very probable.
So, trading plan for daily time frame is hold bearish position (if you have it), move stop to breakeven. If market will take out 1.32 area – sit on hands and wait for further clarification and confirmation of bullish bias. In this case chances to reach 1.29 will contract significantly.

Trend is bullish here. In fact we do not see anything, but respect of area that we’ve pointed yesterday. 1.3140 is pivot point for coming week. This is our advantage that it stands close to current price action. Probably, based on market behavior around it we can understand its sentiment sooner rather than later.

Trend is bearish, I remain as MACDP as simple MACD just to show how they add-on each other. On simple MACD we see bearish divergence right at 0.618 daily resistance, while on MACDP we see stop grabber pattern, that suggests move below pivot point. Also this perfect bearish engulfing pattern is nothing else as W&R of 1.3191 level and grabbing stops above it. This is also bearish pattern. Nearest support level is 1.3113 next one is 1.3061. Here we have context for Monday:
- Daily trend is bearish, hourly trend is bearish. If you do not have short position you can get it at nearest upward retracement, when it will happen – probably after reaching of some support level;
- Crucial level is 1.3202. If market will take it – this will mean that market could shift to bullish bias, as we’ve discussed already.

Long-term bias still holds bearish, but market now turning to some pause by respect Agreement area on monthly time frame. Retracement even to 1.35-1.3650 will be normal. We can speak about downward continuation only if market will take low at 1.2627.
Weekly time frame is one that mostly shows market indecision. Although we have bearish directional momentum pattern B&B “Sell” with theoretical target at 1.29, at the same time there are some potentially bullish hints there. It forces us to be very careful to details and price action on lower time frames.
Still, daily time frame currently holds bearish bias – 0.618 retracement at bearish trend is absolutely normal price action. Based on our analysis we have to watch for couple of things – daily trend and 1.32 level. If market will erase bearish bias on hourly time frame by taking out 1.32 level and later will shift daily trend to bullish – these moments are particularly reason to change our view on medium-term perspectives to bullish. The same moments probably will destroy perspectives of weekly B&B to reach 1.29 area.

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 21, February 2012

Good morning,
since market has opened with upward gap and it was above our beacon level 1.3191 that is 5/8 resistance from move down we should not enter short. Second condition was (although it has not achieved yet) shifting of daily trend to bullish side. Still we see, that market is underway to it.

On daily time frame we see some kind of bullish dynamic pressure, when price action does not support bearish trend. I do not see any directional patterns. At the same time we can't rely totally on trend direction, since market does not support it. What we can do? To my mind we can focus just on some intraday patterns and short-term trading, until situation will become clear. Conservative tactics is wait for bullish confirmation from daily trend, but probably we can find something more interesting.

On 4-hour chart we see that market has reached some resistance - AB=CD target at 0.88 Fib resistance. If market will show some pullback here - it coud start as DRPO LAL or B&B. This is first possibility.

Second is at hourly chart. If retracement will happen - this might turn to 1.3420 butterfly "Sell' pattern . Also take a look that 1.618 extension of AB=CD stands very close to it - 1.34 area.

As you can see that our doubts about downward continuation that we've discussed in weekly research (weekly Time frame) had some foundation. Weekly B&B should be treated as passed trade.
Due to reason that price action does not support daily trend - we can't enter short. At the same time, trend is still bearish and we do not have sufficient confidence to go Long.
So, as possible decision could be made is to trade directional patterns, because Direction overrules trend. That's why I offer search directional patterns and keep an eye on further price action.


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Sive Morten

Special Consultant to the FPA
EUR/USD Daily Update, Wed 22, February 2012

Hello everybody,
Couple of previous trading sessions were a bit boring. Some of you, probably were really active on intraday charts and do not share my view, but I speak from perspective of daily/hourly time frame.
At the same time, on daily time frame I've marked for myself some moments that in nearest term could clarify further price action, or, at least give us hints what to expect and how it can turn.
Frist of all, I do not want to hurry with conclusion that bearish move is over. Mostly, because we have long-term bearish expectation. Probably it could be postponed a bit in time and by some patterns, but we can't say that it has been vanished.
First of all, market does not hurry to proceed higher and stands at 0.88 resistance. This ratio is very typical for butterflies. And that is my first scenario to watch for. Based on it we can count on downward retracement to 1.3080 (-) area and watch for reversal patterns there to upside.
Second scenario is bearish SG on daily. Take a look - market stands close to MACDP chart. This is good possibility for SG. In this case we can count on downward AB=CD pattern - to 1.2950 area.
And, finally, if market will just accelerate further to upside and erase butterfly - this will lead to deeper retracement on monthly chart. I suspect to 1.3500 area.
The one problem is that currently all variants are probable - we need some hints which way market will choose. Until this will happen you may sit on the hands or try to trade soemthing on intraday charts.

I see only AB=CD pattern on hourly chart. Market has reached 0.618 target. Now, probably some retracement to 1.3250 is possible, and then market could proceed to 1.3084 K-support and Agreement.
Probably, you will find something else to trade, based on your trading metodology and style...


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Sive Morten

Special Consultant to the FPA
EUR/USD Daily Update, Thu 23, February 2012

Good morning,
yesterday price action was rather anemic, so on daily time frame almost nothing to add, except may be, possibility for SG, that we've discussed yesterday.

On intraday charts very interesting situation. On 4-hour we see bear trend, but price action does not support it. Applying simple MACD we get bearish divergence, but in fact - this is bullish dynamic pressure. That's why it' very probable that market will take out highs at 1.3293. What will happen next - who knows... Market could show W&R and return right back, or hold there and continue move up.

Another important moment comes from AB-CD pattern, that we've tried to trade yesterday. Although market has done attempt to continue move down - it couldn't proceed to K-support at 1.3180 area. That's why I suppose that if market does not want to go down, it probably will go up :)

So, there are two patterns to watch - 4-hour bullish dynamic pressure - if it somehow in agreement with your trading plan, you may try it.
Second one is - keep an eye on SG on daily TF.


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Sive Morten

Special Consultant to the FPA
EUR/USD Daily Update, Fri 24, February 2012

Good morning,
I alsways suggest that if to wait a bit, market will give you clues. You can see, that by yesterday price action market has erased two from our three scenarios. The only that left is upward continuation. As SG as Butterfly have been cancelled by price action.
But even this scenario has risks...

Daily trend has turned bullish. So, now we have strong bullish context - weekly, daily and 4-hour trends are bullish. Market has moved through previous highs and hold there. At the same time market is not at overbought.
AB=CD pattern tells that nearest target is 1.3406, next one slightly higher than weekly K-resistance 1.3505-1.3624 at 1.3672. Daily overbought is also inside that area. So, if market will hold above previous swing high, this will be the next destination, some kind of "222" Sell on weekly TF.

On 4 hour TF trend is also bullish. WE need to use nearest Fib support as potential area to search for possibilities enter Long. I like 1.3317 or 1.3277-1.3280 K-support level. Although even 1.3226 level is acceptable, I prefer to see retesting of previous highs at 1.3325 and upward acceleration.

On hourly TF we see some kind of Dynamip pressure again and that market stands at AB=CD target around 1.3282.
So, I suspect that market could start retracement either right from that level or will proceed to daily 1.3406 and start retracement after that. In fact, we don't care when it will start - we just have to watch over nearest Fib support levels to get an a chance to enter long.

One thing that we do not want to see here is plunge down - fast down move below 1.3325. Because it will look like W&R on daily. Also because market now still stands around monthly pivot resistance 1. And we know that pivot R holds upward retracements in bear trend - this is particularly the case that we have on monthly chart.
So thats the risk of current situation. That's why I prefer to see retesting of 1.3325 from upside and upward continuation, this will just give me more confidence with bullish sentiment.


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Hi Sive,
Again, wonderful analysis as always. Thanks a lot, Sir.
I just have one question here regarding Dinapoli patterns. In your experience normally when the pattern gave the signal, what we should expect from it. Is it fast movement to the direction of the signal or we should allow market to breath a while, let say 1 to 2 bars after the signal or we should be aware of failure if we see market is hesitate to move in the direction of the signal?
Have a nice weekend, Sir.
Thanks and Best Regards.


Possible bearish Gartley?

Hi Sive,

thank you for your analysis.

Looking at the current daily chart, I would like to have you toughts about a possible bearish gartley. We have an A point at 1.2970, we then retraced 61,8 that is ideal retracement for the gartley B point (1.3187). Now if market will retrace the 0.382 support around 1.3113 we have the C point, so then you can think that we have probabilities to have point D at 1.3335 about 1.618% extension of AB?




Thank you Sive for your generousity, your analysis is always a source of courage for we freebies. God bless you


Hi Sive

Thanks for all that you do here. I'm doing my best to tune in and am able to follow your analysis quite well, reading Joe's book many times as I go :)

My question might seem too basic but I need to be sure and I can't find the answer browsing the forum. What do you use to define trend? Is it a DMA, MACD or something else, and does it vary depending on which time-frame you are looking at?

Many thanks,