FOREX PRO Weekly July 25-29, 2011

Sive Morten

Special Consultant to the FPA
Messages
12,732
EUR/USD Daily Update, Tue 26, July 2011

Good morning,

The first part of our trading plan for the beginning of the week has been completed - market has shown acceleration to the upside and hit daily AB-CD.
Although in weekly research I've pointed that reaching of 1.27 extension on 4-hour chart will be sufficient, market has reached 1.618 and that is important as you see a bit later.

Today daily time frame is not very important for us. Here we just see that just above the market weekly pivot resistance 1 and daily overbought.

Our task for today is watch on 4-hour and hourly charts for clear "sell" patterns - will they appear or not.
We have some reasons for that:
1. Market has hit daily AB-CD target and CD leg is flatter than AB;
2.Market has accomplished Butterfly "sell" at hourly chart;
3. Although this is not so significant, but on 4-hour chart we see bearish divergence with MACD.

One of the potential patterns could be H&S, since Head is very typically stands at 1.618 from the shoulder and the half of this pattern has been formed already.
Still be careful, because fundamental data and major news could drastically skew market's parity and technical analysis.
So, we have at least three way to trade current situation:
1. If you trade harmonic patterns - you may trade butterfly "Sell"
2. If you trade trend - wait, when hourly trend will shift bearish and market will show some acceleration to 1.43 area then you may try to use some retracement back to enter;
3. If you trade classical patterns - wait, may be H&S will appear.
Also probably there could be some candlestick patterns right on top. So there are a lot of ways to trade current market.

One thing, that we have to be aware of is acceleration above 1.4515-1.4520. This will erase Butterfly and potential H&S patterns. In this case, probably, we will not see any retracement down. But currently it's very difficult to predict something, it's a bit too early talk.
Today we should focus on possible reversal patterns or their failing.
 

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rashidin5178

Sergeant
Messages
244
Hi Rashidin,
I've got it. The core of your confusion in expectation that AB-CD pattern has to lead us to reversal. In fact, AB-CD could lead to just some retracement form whole A-D move, for instance 0.382 or 0.618. And in this case it will be treated as nice working AB-CD. This pattern does not always mean major reversal.
That's why I've pointed some levels where this retracement could finish.

Second, I said that retracement should not be too deep, because, as bullish context holds and market not at overbought it has not any strong reason to show deep retracement. To show respect to our AB-CD this will be enough to show retracement till Confluence support. Because if we will see deeper move down - then bullish bias will be under question.
But understand, these words about shallow retracement do not link to AB-CD itself. In reality due to this AB-CD market could show any retracement of any depth. These words were mostly for overall bullish picture.
Hi Sive,

Thank you very much for your answer. No words that can describe my high appreciation on your assistance. Thanks a lot, Sir. Things got better and better with your helping hands.
 

Sive Morten

Special Consultant to the FPA
Messages
12,732
EUR/USD Daily Update, Wed 27, July 2011

Good morning,
Market has hit weekly pivot reistance 1 and now shows clear bearish patterns and hints that retracement probably will start today and tomorrow.
On daily time frame we do not see any really new. Upmove itself shows really nice gain.

On 4-hour chart we see three different possibilities that could appear on the market - H&S pattern, 3-Drive "sell" (2 drives are formed already) and bearish wedge. These patterns are not exclude each other - breakout of bearish wedge could turn to H&S pattern. Also we see the same divergence with MACD...
Trend now is trying to shift bearish.

On hourly chart we see W&R right on top and some acceleration to the downside in the area of Butterfly "sell" completion. So, probably currently, if you're scalper, you may try to short the market with stops just above W&R's highs. When market will continue down further - move stop to breakeven, since market could turn to 3-Drive "Sell".

Nearest target of retracement is Confluence support and weekly pivot at 1.4250. Also it could be second point of neckline of potential H&S pattern.

Still, we don't need to be hasty - even if we will skip initial swing down, later we can enter on retracement. Although price will be worse - enter will be safer.
 

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muzammil_p

Private
Messages
11
Retracement

Hi Sive,

On daily chart its forming bearish engulfing pattern.
Does it suggest the retracement could be deep?

I see it as a RRT pattern as well.

Waiting for your comments.

Regards,

Muzammil
 

navk

Recruit
Messages
7
Fantastic analysis. I have been watching your analysis ( Though this is my first post ) very keenly and the price moves according to your analysis.

I am using it in my trading.

I would request if you can guide me what is the blue line in your chart? Is it moving average? EMA or SMA ?

Thanks once again.
 

Sive Morten

Special Consultant to the FPA
Messages
12,732
Fantastic analysis. I have been watching your analysis ( Though this is my first post ) very keenly and the price moves according to your analysis.

I am using it in my trading.

I would request if you can guide me what is the blue line in your chart? Is it moving average? EMA or SMA ?

Thanks once again.
Hi Navk,
this is DiNapoli Oscillator predictor upper band. It shows level of overbought on the market.
 

Sive Morten

Special Consultant to the FPA
Messages
12,732
EUR/USD Daily Update, Thu 27, July 2011

Good morning,
So, second part of our plan has started - market turns to retracement, and now it looks more and more as potential H&S pattern on 4-hour chart

On daily time frame reversal was marked by excellent bearish engulfing pattern. This is neither W&R nor RRT - it's just an engulfing.
As a rule the target of this pattern is a length of its bars - this coincides with pivot support 1 and Fib support at 1.41 area.

Major information for us is at 4-hour chart.
First, market should meet support of potential neck line soon, because 1.4250 is Confluence support, pivot point and previous highs, then it should turn to some upside retracement.
If this will be really H&S, then retracement should be to 0.618 Resistance from the head move down - around 1.44 area.
The potential target of H&S is 1.618 of AB-CD that is formed by head and right shoulder. It appoints on the same area - 1.41.
Classical target of H&S is a distance between head and neckline, that we should count to the downside - also appoints on the same area.
Now - do you see strong support area at 1.4189-1.4245? This is Confluence support and potential Agreement, that could lead to H&S Failure directional pattern. This is a public's trap. For us, to escape it, we have to enter prior breakout of neck line - optimally right around 1.4405.

Hence, our trading plan as follows:
1. Wait when upward retracement on hourly chart will start;
2. Search for AB-CD pattern or other sell patterns, that will point on 1.44 area, i.e. 0.618 resistance level;
3. If so - enter short;
4. When market will reach neck line - move stop to breakeven.

If market will reach "trap area" at 1.42-14250, and then will return right above neckline - reverse your position or at least close shorts.
If not - then, probably market will hit 1.41 area.
 

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