Sive Morten
Special Consultant to the FPA
- Messages
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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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.