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FOREX PRO Weekly January 02-06, 2012

Discussion in 'Sive Morten- Currencies and Gold Video Analysis' started by Sive Morten, Dec 31, 2011.

  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Monthly
    Although we have the same picture as on previous week, but this is only at the first look. In fact, we have two important moments here that were not here previously. First one is December bar that has closed now. Price action during December was solidly bearish – market opened almost at the high and closed at the low. Second moment is by current week market has reached 0.618 target at 1.2904 and now we might say that market finally has touched Agreement area. Trend is still solidly bearish.

    Another important moment is that weekly/daily AB=CD target that we are trading currently stands slightly lower that Agreement level. It could happen so, that retracement will start when market will pierce a bit monthly Agreement just to reach weekly AB=CD, because 100 pips move on monthly time frame is a very small difference.
    Since we do not trade on monthly chart, the major conclusion here is that market stands at solid support. In such cases odds suggest that we can see respect of this area on lower time frames by significant retracement to the upside. That is major issue that we need from monthly time frame. Now our task is to not skip starting signs of this retracement on lower charts.
    [​IMG]

    Weekly
    Trend holds bearish well. Market is not at oversold. As on monthly time frame, here we also can find something important for us. Fist of all – take a look at MACD Histogram. I like to use it for estimation of market’s strength or momentum. If you will apply simple MACD then you will not see any divergence here. That’s why Histogram is useful and especially important when we stand at monthly Agreement area. It shows that market gradually is losing downward momentum – it has established the new low, while Histogram has not.
    Second is, major targets stand below current market – 1.2830 is a target of weekly AB=CD and 1.2750 is 1.618 extension of previously formed AB-CD pattern. Both of them stand below current low and, what is more significant, below previous important low at 1.2870 – look at blue circle to the left.
    I hardly believe that market will not clear out those lows. If there are some stops still there, it can trigger move even to 1.2750. In general, in such kind of environment when market stands slightly higher than significant targets, probability suggests that it will hit them before any significant retracement will start. That why we have to look at current retracement on lower time frames with caution. This might happen that it will appear as a trap for traders who enter long too early.
    So, on weekly time frame we also see some slow down, but still expect another dive to important targets.
    [​IMG]

    Daily
    Let’s continue to collect signs that point on possible retracement – now on daily time frame. On the first chart there are two of them. First one is on AB=CD pattern. In fact as more harmonic AB and CD leg as higher probability that retracement will come when it will be completed. Our pattern is more or less harmonic. Second is, if CD leg becomes flatter and slower than AB, the probability of retracement in point D is significant. Particularly this development we see here. CD leg by dash line has the same angle as AB, so can see how real price action is a bit past after it.
    Another important issue on this chart is simple MACD. Daily chart gives us bullish divergence right at monthly Agreement, even if market will proceed to 1.2750-1.2830 area. That’s important.
    [​IMG]

    On second chart we see that some kind of retracement has started after hitting of 1.27 extension from recent swing down. But, as we’ve mentioned already – this could be bulls’ trap and I suspect that this is mostly respect to just 1.27 support level, rather than starting respect of monthly Agreement as medium-term retracement. Also I’ve drawn here a potential 3-Drive Buy pattern that could appear as triggering pattern of retracement that we are expecting. So, here is two conclusions may be done. If you believe that retracement has started already – you may try to enter long with stops below the swing low. If you still think that market will hit targets at 1.28-1.2830 area first and only after that will start retracement – you have to watch for intraday charts to get a confirmation of reestablishing move to this area. If second scenario will come – current retracement should be shallow and finish soon.

    Also pay attention to how current move is developing – no significant retracement at all, only 0.382-0.5 pullbacks. This shows real bears’ strength. Second is that another 1.618 target at 1.2848 stands below current market also.
    [​IMG]

    4-hour
    I will not redraw the same butterfly that we’ve discussed on previous week and just say that it is in progress now. To be honest I prefer to see (from bearish point of view) retracement finish at 1.30-1.3025 area – this is quite enough to express respect of reaching 1.27 level of butterfly. This is also K-resistance level and almost an Agreement with AB-CD pattern that we’ve talked about on Friday. Still, if market even will proceed to 1.3088 – Another Agreement and pivot resistance, this will not mean that downward move comes to an end. Only move above 1.3224 will be too much for bears.
    Currently market is moving nicely inside bearish wedge and has stopped at K-resistance and 50% resistance of nasty black bar. Personally I prefer to see downward breakout of this wedge and possible it’s shifting to butterfly “Buy” with 1.618 extension around 1.2770 – this will be absolutely perfect for catching triggering point in medium term retracement.
    [​IMG]

    1-hour
    Hourly chart shows that this is definitely retracement – no accelerations, no thrusting and explosive candles. MACD Histogram clearly shows weak upward momentum, even simple MACD shows bearish divergence right at hourly K-resistance area. I can’t exclude that market will proceed slightly higher, may be to 1.3025 area and will create 3-Drive “Sell” pattern, but currently it looks like downward continuation should come. The first confirmation of that will appear when market will take C point low at 1.2915.
    [​IMG]

    Conclusion:
    Long-term bias holds bearish. It makes sense to hold long-term bearish positions. Still do not be too hurry to add more. Odds suggest that some retracement could happen. Probably it will be better to add more when it will happen. Although think about taking some chips off the table around 1.2750-1.2830 area.
    On daily time frame we expect completing of reversal pattern, and have some hope or suspicion – as you more like it, that market should proceed a bit lower. Current retracement is mostly respect of 1.27 support of recent butterfly and bulls’ trap, rather than real reversal, at least we treat it this way…

    On intraday charts market clearly is forming retracement move rather than impulse one. Perfectly if this retracement will come to an end around 1.3025 area (or even sooner) and later current bearish wedge will shift to 4-hour butterfly “buy”. This wish is explained by fact that if it will be really so – by this butterfly market will hit all necessary long-term targets and simultaneously will form pattern that we can use to enter Long.

    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. Triantus Shango

    Triantus Shango Sergeant Major

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    sive, you mention a divergence on the weekly MACD histogram. i have the histogram drawn on the monthly chart as well and have attached it here. we can see this divergence even more clearly there.

    also, interestingly when looking at the technicals on USDNOK, it looks like the USD is poised to go up further over the next few months. USDNOK is retrace mode to the upside after completion of AB-CD. now, i don't mean to say USDNOK will go on retracing significantly immediately--the 23.6% fib level does sometime provide resistance and we might see the USD come back down to the mid BB, which would correspond to a EURUSD retrace continuation toward 31xx-32xx levels. BUT if mid BB holds and provide solid support, and retrace after AB-CD completion continues, then USDNOK will bounce upwards again signaling a resumption of EURUSD bear trend continuation.

    also, on monthly USDNOK chart we can see that the price is still close to the bottom of the monthly range, the top being at 9.6520, further reinforcing the belief in the probability of future USD strength in the next 6 months or so.

    how about my take? does it make sense to use the USDNOK chart like this for comparative analysis?

    cheers
    t.
     

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  3. phil ulanowski

    phil ulanowski Recruit

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    Many thanks Sive for the abcd idea last friday on the 4 hour chart. I entered at 12928 with 30 point stop loss and rode the d wave up to almost 13000...took profit...then entered short from the d point back down to 12943 at the close of the day...just to say that those of your readers who want more to read on harmonic waves can download (for free) Carney's first book on this subject...he say he became so fed up with people ripping off his ideas that he decided to let people have his book for free...worth adding to your library...once again, thanks - phil ulanowski
     
  4. Louis123321

    Louis123321 Corporal

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    Sive is it still more probable that market will move downwards to the 1.28400 level? I have some sells that need market to go to at least 1.2900... I didn't close because from your monthly analysis market has still not reached its target, but it should hit 28400 and possibly 27000 right? It has reversed at the agreement level to the downside again.. but question is will it go further past previous low or continue move upward...... We need a Wizard.

    WE NEED GANDALF....!
     
  5. Louis123321

    Louis123321 Corporal

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    ^^^ All my TPs are currently at 1.28400..... And all my stops are set at 1.30800 (ignore the stops, just a precaution), but my TPs are the important bit.. Hope it will hit them! Then I will have a great new year ;)
     
  6. cosmos

    cosmos Sergeant

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    Hi Sive, in weekly analysis section you note that:
    "look at blue circle to the left. I hardly believe that market will not clear out those lows."
    On the spot market, these previous lows have been taken out. Have they not yet been taken out on the futures market? Do you think it makes a difference that they have already been taken out on the spot market?
     
  7. Bradley Shepherd

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    Dear Sive, Thankyou for your weekly and daily analysis - it is proving to be the best educational tool in my forex development. I trade small lots on EURUSD and have gradually been achieving success with the help of your analysis.
     
  8. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Hi Triantus, well, I do not deal closesy with NOK, but on your chart it looks like bullish reversal with nice "222" buy.
    Still I suspect that NOK will have more relation with CAD, rather than with USD, since NOK probably has not bad correlation with Crude Oil. But this is just an assumption.
    Other words I do not check this relation between Dollar and NOK.

    Your divergence might be interesting, especially for those, who trade on long term charts. We also have discussed quarterly Dollar Index, that also looked bullish.

    Well, you're right but for weekly chart more common to see a bit deeper move.
     
  9. Sive Morten

    Sive Morten Special Consultant to the FPA

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    EUR/USD Daily Update, Tue 03, January, 2012

    Good morning,
    market is underway of retracement now and almost has reached our first destination - 1.30-1.3012 level.

    On daily time frame is nothing really new. Trend holds bullish. I just have marked significant targets around 1.2825 to show that they stand below current market.

    On 4-hour time frame trend also is bullish. We see AB-CD pattern that is now in progress. 0.618 extension creates an Agreement with K-resistance area around 1.30-1.3012, while 1.0 extension an Agreement with 1.3080-1.31 level.
    As we've discussed in weekly research - current level is important for us, since if market will stop retracement here it will give us more confidence on further down continuation and will be look more logical. Second important moment is that in this case market could create another butterfly "buy" on 4-hour chart and by hitting of 1.618 extension it will at once hit important targets on daily time frame. This will give us excellent triggering pattern for Long possitions.
    Still, if market will proceed higher to 1.31 - this will not be the tragedy as well, although will not look so nicely as the first scenario. If market will proceed higher - this is a worring sign for bears, because it will be not quite natural in current environment.

    On hourly chart there is another one AB-CD pattern exists. It's 1.0 extension stands around 1.3012, while 1.618 extension around second level - 1.3080-1.31. I do not have it on this chart just to keep it as clear as possible.

    BTW, currently on 15 min chart butterfly "Sell" is developing, so may be it will mark the end of retracement around 1.3012, let's see. If not, then market probably will proceed higher.
     

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  10. zakiaziz

    zakiaziz Private

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    thanks sive.. i really like your AB-CD pattern.. currently its has been completed.. in your opinion will market continue to downside with target 1.2830-1.2750 area??
     

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