FOREX PRO Weekly January 30-February 03, 2012

[Sive Morten]

In your weekly update, you stated that "since this is first pullback after solid move down – it can’t last forever, even more - it should turn to deep retracement – 0.618 at minimum, now this is 1.2860."

However, I see our NEAREST K-Area is on H4 @ 1.3000 - 1.3012. IF the scenario you stated were to happen, I just want to know from your experience how would market react at the K-Area since you anticipate market to fall to lower than K-Area? Would market pullback a bit and maybe consolidate for a day and then fall down? How does K-Area usually react when a bearish pattern or bullish pattern tells us that it could go FARTHER than K-Area?

Since this move down will happen mostly by weekly directional pattern (B&B "Sell") minimum target is 0.618 support level. But this will not exclude possible respect of 4-hour K-area or areas. But probably this respect will be seen only on intraday charts. On daily time frame we will hardly see it.

In DiNapoli book, it stated that the 61.8 and 38.2 that makes up the K-Area should be relatively "close." I just want to know if you allow a bigger gap in higher timeframes? Let's say you allow a 20 pip gap between 61.8 and 38.2 on 1 hr TF. Would you also use the same 20 pip for a weekly or daily TF?

Of cause not. This distance will be wider as higher time frame will be. This is mostly experience issue since DiNapoli does not give any fix number. They have to stay relatively tight visiually. For example this K-area that I've shown you on weekly time frame looks a bit wide. There is about 150 pips. But the same 150 pips looks fine on monthly/quaterly chart. 10-15 pips will be probable acceptable for hour chart, but this is not mean that 16 pips will be unacceptable. This is a bit flexible substance - and that is perfect, since it's a bit hard to programm.

Lastly, in your 4HR chart, it seems like you only took Fibonacci from Reaction 3, 2, and 1. Why did you exclude Reaction Points 5 and 4? Were they cancelled because market broke through those levels? Attached is your 4HR chart but I labelled it for easier understanding.

Thanks a lot, Sive! Take care!

Initially I take a look at all reactions and levels, but then I choose only most significant and important and show them on chart. If I will show all levels - chart will be overloaded and difficult to analyze.

 

[Damian1987]

You really are a wonderful teacher Sive

 

[BeeKay8]

Thanks a lot Sive!!!

 

[Triantus Shango]

guys, i see a potential right should in progress for a H&S structure on M15/H1.

do you concur?

 

[Triantus Shango]

oops!
i mean, re. sive's reminder about spreading MACDP. didn't read that. but then again, since it's floating all over the web...

 

[Triantus Shango]

Initially I take a look at all reactions and levels, but then I choose only most significant and important and show them on chart. If I will show all levels - chart will be overloaded and difficult to analyze.

sive, how do you determine which reaction points are the most significant wherefrom to draw the fib retrace structure?

 

[Sive Morten]

Hi Sive,

Thanks again for your wonderful research and explanation, as always.
I have some difficulties to recognise this pattern whether it is bearish pennant or bullish wedge on GBPUSD monthly chart. For me, it's look like bearish pennat if we consider vertical price action before consolidation. But the problem is, I think it is too much consolidate to be pennant. If this is pennant, by looking at its mast, the target is around 1.0!!! Could it achieve there?
It is very appreciated if you can elaborate some of your advice and where the price should be because of this pattern.

Hi Rashidin,
sorry for delay...
Well, I do not pretend on absolute opinion but for me it looks like triangle. WEdge is exhausting pattern that's why in most cases it has a slope - not always but usually it has ascending direction in bear trend and descending in bull trend. Also it usually combines with divergence. While pennant should be much smaller.
Here it looks more like just triangle.

 

[Sive Morten]

sive, how do you determine which reaction points are the most significant wherefrom to draw the fib retrace structure?

Hi Trinantus
well, this is a bit question of experience, but some rules are exist still. First, initial reaction is always important. Second, starting reactions of thrusting moves are more significant than other reactions.
In general, try to understand swing, separate it on 3 parts - initial trhust, retracement and extension. Most significant will be initial reaction and first reaction after extension wave - other words, initial reaction of another AB=CD. It's a bit difficult to explain in writing.

 

[Sive Morten]

We have perfect DRPO "Sell" on 30-min chart

 

[Gert v Bruggen]

Hi Sive i did post this yesterday but in the wrong treat the one from last week
i wanted to give some analyze on EU based on STAR if that is oke

i follow 2 EU setups at the moment next to other pairs
EU H4 starting from 8/29/2011 we see now a Pullback and are waiting for it to Retrace back to give us hopfully a Long Trigger
EU M30 starting from 1/13/2012 this is the pullback from the H4 setup and it is a faster setup on it own.
this M30 setup has also a pullback and we are waiting for it to retrace to give is a Short trigger if that happens that could become the Retrace for the H4 setup what wil give us a Long for the long run
if i get a trigger for the M30 i will update this post and we will see how it goes from there


wel it did trigger EU M30 the pullback did grow the setup to H1 and retraced back to give us a short trigger at 1.31753
with a stop at 1.32330 and a first target at 1.30753
so if this short wil continue it could Give us the retrace we need for the H4 setup