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FOREX PRO Weekly January 23-27, 2012

Discussion in 'Sive Morten- Currencies and Gold Video Analysis' started by Sive Morten, Jan 21, 2012.

  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Monthly
    Trend is strongly bearish, market is not at oversold. We see now some pullback to the upside. Personally, I a bit confused how to treat it – still as a respect of Agreement area or as pullback from 0.786 support. Was it too deep penetration of Agreement area – decide by yourself. Still, if you will treat area between 0.768 and 0.618 as some support zone, then we might say that market has found some support here, and may be we will see some notable retracement. That reminds me widespread situation, when you expect something and get a thought that this even will not come at all right at the moment when it starts.

    Well, probably that’s all that we need from monthly chart – market in some support area and we can expect bullish signs on lower time frames. We do not need much trend direction, since most of us do not trade on monthly chart.
    [​IMG]

    Weekly
    This chart is a bit overloaded with details, but we need all of them. First, probably we can explain, why market has bounced right from that level, if we choose as reaction low a bit higher level 1.2157 instead of major one 1.1874 – take a look at blue circle in left bottom corner of the chart. In this case you might see that market as better response on touching 0.618 support as it has reached 0.786 support.
    Trend is bearish, but if you apply simple MACD you will not get any divergence. Here I’ve decided to use MACD Histogram. I like this indicator to monitor changes in market’s momentum. Here we can see by divergence that momentum has become slightly weaker. You can find another bullish sign, if you compare slope of AB and CD legs of our AB-CD pattern that has been completed recently. CD leg is slower. This usually makes support at D point stronger and could lead to deeper retracement.
    Finally, market has formed Morning star candlestick pattern. Although it is not 100% perfect, but I suppose we can treat is like that. This gives us large advantage, since hope on bullish pullback will stand alive as long as market will hold above 1.2627 low of this pattern. If market will close below it – then odds will shift to downward continuation and this pattern will be vanished.
    Now, how deep retracement could be? First important level is 1.3244 Fib resistance. Also take a note that trend will hold bearish right till that area. Next significant resistance is 1.3505-1.3624 K-resistance. Unfortunately we do not have any Fib extensions to estimate it more precise, so may be we will find something on lower time frames.
    [​IMG]

    Daily
    Let’s start here from the chart that has a lot of relation to weekly one. Daily trend is bullish and market has not reached overbought level yet. We see that market has started reversal more or less from 3-Drive pattern completion point. As we already specified many times, the minimum potential target of 3-Drive “Buy” is a high between 2nd and 3rd drives that should be taken out. This is 1.3224 level. Interesting, that particularly this level stands in agreement with nearest weekly Fib resistance 1.3244 and slightly higher than monthly pivot point 1.3129. Pay attention though, that monthly pivot also has not been traded yet and it stands right at overbought level of daily time frame. That’s, I suppose, minimum medium-term target that could be achieved during couple of weeks.
    [​IMG]

    But since these weekly level stands beyond of daily overbought, it is not so interesting for us right in the beginning of trading week. Let’s take a look at another daily chart that is interesting from that stand point.
    Looks like market has accomplished our conditions that give us confidence to think that probably deeper move up could happen – trend has shifted to bullish, market has broken broadening bottom pattern, long-term parallel channel and accelerated to weekly pivot resistance 2. This usually could be a sign of pause in bearish trend as deeper upward retracement or even reversal.
    So, we’ve estimated that our context is bullish. Still, market has reached solid resistance area, that includes pivot resistance 2, daily K-resistance 1.2980-1.996, and as we’ve specified on Friday, some retracement could come that we can use to enter on long side of the market.
    [​IMG]

    4-hour
    Bearish 4-hour trend suggests that market probably will show deeper retracement. But first take a look – market has perfectly accomplished B&B “Buy” directional pattern that we’ve discussed on Friday. It has found support at 1.2892-1.2898 K-area and has hit by upward retracement from this level 0.618 resistance, so B&B trade has completed.
    Now, next area that is worthy of our attention is 1.2833-1.2851. This is K-support and Agreement with potential AB=CD pattern, weekly pivot 1.2847 and also broken upper border of daily parallel channel. Market very often tends to retest significant levels after breakout. So that is our number 1 to monitor level on Monday.
    [​IMG]

    1-hour
    I suppose that hourly time frame does not contradict to 4-hour. Although trend is bullish, but previously we have two side-by-side stop grabbers that weren’t erased yet. If market will move above 1.2953 then hourly situation will need additional clarification, but currently it seems so, that market is ready for some deeper move. Stop grabbers suggest that market should take out 1.2889 low. This issue stands in a row with 4-hour picture that assumes move to 1.2850 area.
    [​IMG]

    Conclusion:
    Long-term bias still holds bearish. Although currently we have some hints on potential upward retracement, but now we have not any signs how deep it could be. Currently potential move to 1.16 level was not cancelled. Still, may be it makes sense to take some chips of the table and re-enter when signs of retracement finish will come – may be it will be even weekly directional trade - B&B or DRPO. So, any retracement to significant Fib level (B&B) could be used for enter short without scare been trapped in wrong direction, mostly because this will be first retracement that usually sold-off by new participants.
    Daily context is bullish, but market now stands at solid resistance and we need to wait pullback completion to enter long. Medium-term target that logic suggests is 1.3220 level.
    As 4-hour trend holds bearish, it points on possible deeper move down and our preferable level to watch as suitable to enter long on Monday is 1.2830-1.2850

    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. Sive Morten

    Sive Morten Special Consultant to the FPA

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    EUR/USD Daily Update, Tue 24, January 2012

    Good morning,
    yesterday market has not even touched pivot and accelerated to the upside. Our medium term expectation is 1.3220 area - the reasons for that we've specified in weekly analysis.
    Currently market has hit pivot resistance and I suppose it could act twofold.
    First possibility is starting to form reverse H&S on daily time frame. IT's a bit ugly, since shoulder looks narrow and small, compares to the head, but still, I suppose it could be called as H&S. It is important, that trend will hold bullish, when market will start to form right shoulder by retracement to 0.618 support level
    Second is upward continuation to 1.3220 area, but today market probably can achieve as far as monthly pivot and daily overbought.
    Based on daily time frame we can't estimate which scenario could prevail. That's why we have to monitor intraday charts to catch first clues

    4-hour time frame holds bullish but there is an attempt to shift it bearish. Take a look that recent swing up stands at 1.618 extension of previous retracement. This move up coincides with MACD divergence and that is very typical for 3-Drives.
    Hence,we have to keep an eye on depth of potential retracement. If market will reach only 1.2930 area - this will be probably 3-Drive "Sell" - 1.618 extension of it stands right at monthly pivot, while if market will fall deeper to pivot - this probably could be H&S. And in this case appearance of H&S pattern on daily will become very probable.

    On hourly time frame we see that trend holds bearish. This tells that market will show deeper retracement. Here was nice DRPO "Sell" pattern btw, but it has worked out already. Here our major focus is trend. If market will shift trend to bullish from 1.2930 and will show some thrust up from it - then it probably could be 3-Drive, as we've said. If you're scalper, you may try to trade upward continuation.
    If market will find support at pivot point - then it might be H&S on 4-hour time frame. Here is choice is up to you - trade upward move or not.
     

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    #2 Sive Morten, Jan 21, 2012
    Last edited: Jan 24, 2012
  3. Sive Morten

    Sive Morten Special Consultant to the FPA

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    EUR/USD Daily Update, Wed 25, January 2012

    Good morning,
    yesterday price action has held in some range, so on daily time frame it looks like high wave pattern, indicating market indecision. There is nothing to add on daily time picture, since all suggestions we've discussed in yesterday's update.

    On 4-hour time frame we see that trend is bearish and nice divergence with MACD. At the same time, market stands flat. That could be a bullish dynamic pressure and could lead to futher continuation to upside.
    Also, pay attention, that yesterday market has shown just 0.382 retracement as we've suggested could be a context for 3-Drive "sell" pattern.

    On hourly time frame we also see most recent AB=CD pattern, that has the same target as 3-Drive and it stands around 1.3130. Crucial point fo today's session is low at 1.2950 area. If market will move below it - it will erase potential butterfly "Sell" that could be formed on hourly chart as a part of 3-Drive pattern, second, it will alter (if not cancel totally) current AB=CD pattern. In this case 3-Drive will be under questions, and market could shift to forming of H&S on 4-hour time frame. This opportunity we've discussed also yesterday.
    Still, personally I suppose that upward move and completion of 3-Drive has more chances than reversal. But this is just my own opinion - one thing is opinion while quite other is reality...
     

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    #3 Sive Morten, Jan 21, 2012
    Last edited: Jan 25, 2012
  4. Sive Morten

    Sive Morten Special Consultant to the FPA

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    EUR/USD Daily Update, Thu 26, January 2012

    Good morning,
    Although FOMC meeting has added some tricks to our trading plan, still market has proceeded higher as we've suggested.
    Speaking about daily time frame, we have to note that in fact, this is the first pullback after solid long-term downward trend. What features of the first pullback exist?
    1. It hardly will be too extended. We already see that pullback is greater compares to previous swing down. That is typical for longer retracement or even reversals.
    2. Market shows at least 0.618 retracement after initial pullbacks.
    Hence, we have to be aware of this 0.618 retracement. The problem though, that based on daily time frame we can't say when it could start. May be it can start right from current level - this is monthly pivot, Fib resistance at 1.3141 and completement point of 4-hour 3-Drive.
    Or may be it can start from 1.3240, since this is daily K-resistance and target of 3-Drive buy... But this deep pullback will happen, no doubt.
    So, to not been hurt by it, we have to be careful and monitor intraday charts.

    On 4-hour time frame trend has turned bullish. Market has accomplished AB=CD pattern, but not quite reached 1.618 extension of third drive, monthly pivot and Fib resistance. Probably it should do this before (and if) retracement will start.

    On hourly time frame we can see why market has adjusted our C point, of AB-CD pattern, that we've discussed yesterday as neccesary condition of Butterfly. That was due downward AB=CD and "222" buy pattern. Market just completed this downward AB-CD and then reversed to the upside.
    Now we have two support levels. 1.3070 and K-support 1.3030-1.3040, that is also previous resistance zone and 50% support of thrusting up bar.
    So, how we can act in current environment?
    1. We are at resistance and 3-Drive completement point - this is not the time to enter long. Wait a pullback.
    2. Probably market will hit first 1.3140 and start retracement second (if it will start it);
    3. If market will accelerate solidly above 1.3140 without any respect, then it will proceed to 1.3240 and 3-Drive should be treated as failed;
    4. If it will start retracement down - keep an eye on 1.3030 K-support. If market will break it, then it will show 0.618 retracement on daily time frame and will take 1.2930 3-Drive min target objective.

    That's being said - two levels to watch - 1.3140 and 1.3030 K-support.
     

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    #4 Sive Morten, Jan 21, 2012
    Last edited: Jan 26, 2012
  5. Sive Morten

    Sive Morten Special Consultant to the FPA

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    EUR/USD Daily Update, Fri 27, 2012

    Good morning,
    yesterday's price action almost invisible on daily time frame. One thing that we can see is that market has tested as monthly pivot as 1.3147 Fib resistance.
    As we've said yesterday, this is first pullback after solid bear trend. So it can't last forever, because "V" bottoms quite unstable. Sooner or later market should turn to downward retracement, and this retracement will be at least 0.618. In short-term perspective our major task is to get first clues of this correction but it hardly could be done on daily time frame. We need intraday charts.

    Today I use also 8-hour chart, since here you can clearer see some important details:
    1. Yesterday price action has given us nice bearish engulfing pattern, that could be very helpful for those who would like to enter short. Since they can use its top as a crucial point of downward scenario;
    2. Pay attention that this pattern has appeared right at the finish point of 3-Drive "Sell" pattern. Target of 3-Drive "Sell" is low of 1.2930- between 2d and 3d drives.

    Who knows, may be particularly this 3-drive will become triggering pattern of daily correction to 1.2840?

    On 4hour time frame is quite the same picture. One thing that I would like to mention here is trend - it's bearish.

    on hourly chart trend is also bearish. We have solid area of support around 1.30-1.3030 level - K-support, Agreement with potential AB=CD pattern and previous classical support/resistance level that we've discussed yesterday. This will be nearest target of potential downward move.
    So,we have trading plan for bears. Since as hourly as 4-hour trends are bearish and market stands at resistance after completing some bearish patterns - this suggests that down move will be a bit deeper, at least to 1.30-1.3030 area. Crucial point of bears is top at 1.3186.
    But is what about bulls?

    At the same reasons this is not the time to enter long. I suspect that bulls should wait at least till 1.30-1.3030 and then keep a close eye on trend. If hourly and 4 hour trends will shift bullish and market will start to show some kind of thrusting move, then they probably can try to enter at nearest 0.382 Fib support. In this case very probable that market will proceed to 1.3220-1.3240 level.
    The one problem with bullish scenario is that it hardly will realize today - it's not much time rest...
     

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    #5 Sive Morten, Jan 21, 2012
    Last edited: Jan 27, 2012
  6. Damian1987

    Damian1987 Corporal

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    thanks for the analysis. I like the idea of having all updates together!!!
     
  7. samfx

    samfx Private, 1st Class

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    Hi Sive,

    Let say the market on Sunday afternoon gapped up or down, will it change anything on the analysis for Monday trading session?

    My thoughts were if market gapped down around the area of the support level (Pivot points and confluence support and the agreement 1.2850 level) nothing will change on the view of the market... but what if the market opened up on Sunday with a big gap up 40 - 60 pip or above the 61.8 resistance or even the previous swing high, that could happened and what will change in the analysis in your opinion?

    Will that mean the retracement is over or it's more likely to continue higher without deep retrace?

    Thank you for the great analysis.
     
  8. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Hi Sam,
    Usually I try avoid gambling, as "what if" game. But in your scenarios retracement still possibly will happen, since FOREX hardly gravitates to fill gaps early. It probably will be just some another AB-CD or something. More problems will come not with upward gap but down one, if market will open below our level around pivot.
    But again, it will mostly depend on how market will deal with this gap next.
    Anyway, I suppose not many of us open positions as on stock market "pre-trading" session. Most traders look how market will open and wait for some time to understand - will it move with their expectations or not...
     
  9. cosmos

    cosmos Sergeant

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    Sive, Thank you for reserving the daily update spots. This is a good solution for those who do not wish to wade through all the banter, while still making it possible for everyone to say what they wish to say. Thank you and FPA for taking the time to find a way to support everyone's preferences.
     
  10. Venelin

    Venelin Master Sergeant

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    This thread is getting better with speed of light :) I hope we`ll have no issues viewing the web site next week! Спосибо большое!
     

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