FOREX PRO Weekly November 05-09, 2012

Sive Morten

Special Consultant to the FPA
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Monthly
New month has started and at once has brought significant changes on monthly chart. Now it is clear that market has stuck in monthly Confluence resistance area 1.2934-1.3149. In current moment, looking at pullback outside of it, we can suggest that the first challenge was unsuccessful, but will follow the next one? We can’t exclude this absolutely. For instance, some sort of double bottom could be formed, or something like that, we don’t know. I prefer to talk about it stick to the subject, that we do not have yet.
What is more important for us is that definitely some downward move should come. Since this is monthly time frame, this move could be really significant. Even if we mostly trade on daily and intraday charts, we could get definite direction for long-term perspective. That’s why higher time frames are important.
Now, pay attention to MACD Predictor. November bar stands very close to it, and by November open price trend has turned bullish. The trend breakeven point for current month is 1.2762. If monthly bar will close below this level we will get bearish stop grabber on monthly chart with minimum target – clearing of 1.2042 low. Since 1.2042 stands below 0.618 target of drawn AB=CD pattern, it’s a high probability that market will proceed to 1.17 area initially – target of AB=CD. 1.17 in turn, stands slightly lower previous long-term 2010 lows. Just imagine what will happen, if market will trigger stops below it. We easily could get achievement of our long term 1.15-1.16 target.
But let’s pass from one to another gradually. Our first task on monthly is to wait for November close. Let’s get stop grabber first and only after that will discuss other things.

eur_m_05_11_12.gif


Weekly
Here is almost the same chart as on previous week. Analysis that we’ve made on previous week is still relevant, so I’ve held most tools as it were on week before. There are still two things that give us assistance in understanding of situation here. First is gibberish bullish flag, second is harmonic swings.
Our suggestion about affectation of price action on breakout of flag now is getting confirmation from price. The price action that has followed to its breakout looks bearish. That is much like classical bullish trap, this is not the way how flag’s breakout should looks like. Probably we could adjust the line so that we have no breakout, but I suppose not in this time. This resistance is absolutely clear on daily time frame. The price return right back in the flag’s body tells that we should be ready for donward move, and this move on weekly time frame could be strong. Flag per se is amount of overlapping bars, some sort of indecision. Usually such stagnation is followed by acceleration. Previously we’ve suggested, based on failure breakout, that this acceleration should be bearish. Now we have more confidence with this assumption.
Finally, take a look at blue lines. They were cloned. Downward swings are cloned from initial swing down, while upward swings from first upward retracement. Take a look what a harmony! Yes, on second couple of swings, upward retracement was slightly smaller, but downward swing was either. If we count both of them from “correct” point (as it shown on the chart), then they will finish in the same point as actual swings. Now we have equal upward retracement completed. If we suggest that this harmony will continue further, market should show swing to ~1.15. When I’ve seen this number, I’m suddenly recalled our quarterly analysis that we’ve done in November 2011 where we said about long-term forecast 1.16.
https://www.forexpeacearmy.com/fore...pro-weekly-october-31-november-04-2011-a.html
So, may be now it looks not as impossible as it was couple weeks ago... Anyway, guys, I probably more gravitate to conclusion that bears overweight bulls right now.
Also pay attention that we have new Monthly pivot points, although they are almost the same as on previous month. Numbers in a right upper corner.
eur_w_05_11_12.gif

Daily
Trend holds bearish here. We have perfect downward development, even from theoretical point of view. Large AB=CD pattern has started as “222” sell model. After hitting of 0.618 minor extension (we’ve discussed it in daily updates), market has shown shallow retracement and has continued move down. Next destination point is 1.2750-1.2770 area that includes AB=CD target, daily Confluence support, daily overbought and WPS1 – thin green line on the chart. Thick lines are Monthly pivot levels.
Take a look that monthly pivot has not been touched yet and it coincides with WPR1 at current week. New barrier that has appeared is November pivot support 1 at 1.2794.
eur_d_05_11_12.gif

4-hour
Trend holds bearish here as well. To join the party we can use two potential levels. First one, that is more prefferable is 1.29 area – Fib resistance + WPP + previous lows. Next area is 4-hour Confluence resistance at 1.2945 area.
eur_4h_05_11_12.gif


On the second chart we see a bit larger picture. Although market has broken the slope trend line that we’ve talked about, now it meets horizontal support zone. Also here you can see smaller AB-CD pattern that nevertheless has almost the same target as greater AB=CD. Still it could proceed to 1.27, since CD leg currenty is much faster than AB.
eur_4h1_05_11_12.gif


1-hour
Here we see possibility for either DRPO “Buy” or B&B “Sell” pattern. Market has hit 1.618 extension of AB-CD pattern. So, pullback is possible. If it will be B&B pattern – that will be nice opportunity to enter short and join the downward movie. In the same manner DRPO Failure could be used.
eur_1h_05_11_12.gif



Conclusion:
On long-term charts market shows thrilling price action, since it could lead to tremendous consequences.
Until we will get confidence with it, on daily time frame in the beginning of the week we should be focused on AB-CD completion point and reaching Confluence support.
If market will give us chance to join this move – we can use it. This could happen by pullback on hourly chart that could be triggered by B&B “Sell” pattern or any other of this kind.
If we will get downward gap opening, probably it’s better to stay aside, since price will appear to close to significant support area.

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.
 
EUR/USD Daily Update, Tue, Nov 06, 2012

Good morning,
So, market is entering in support cluster zone, that includes WPS1, MPS1, different AB-CD targets, Daily K-support area.
So, I suppose that time has come to watch for intraday bullish patterns, because odds suggest that market should show some bounce, at least at first touch of this area.

We should keep an eye on bullish patterns by two reasons. First is - for those of you, who trade mostly on daily time frame it will be signal to take profit.
Second, for those, who trade on intraday charts that will be the chance to make pips on potential pullback. Even if it will be just for 3/8 - that's ~150 pips to the WPP. Not small move...
So, personally I will be keep an eye on two moments.

On 4-hour chart trend is bearish. We have AB=CD pattern, that has a completement point at ~1.2763 - i.e. slightly lower than current low and around WPS1. Also we have nice thrust down here, so, it might be DRPO "Buy" with lower second bottom. But how much lower?
Here we can get assitance from hourly chart. We can get Butterfly buy with 1.27 at 1.2758 and 1.618 at 1.2745. Both of them could become the second bottom of potential DRPO. BTW, latter level is also suitable as a target of bearish flag, that now is forming on 4-hour chart.
Both of these patterns could fail of cause, but risk/reward very attractive and what is also stands in our advantage - we can anticipate DRPO by sticking to Butterfly (if it will be formed of cause), that give much better chances and stop placement.
At least now, I do not see any other interesting stuff.
 

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EUR/USD Daily Update, Wed 07, Nov 2012

Good morning,
market has got some relief with Obama's been reelected. Technically expected pullback has started as well.
At the same time it's few to comment right now. Jump up is rather strong, so, probably it will continue for some time.
First area to watch, as we've talked yesterday - 1.29 zone around WPP on 4 hour chart.
That will be also an Agreement with 1.618 AB=CD hourly extension. Intraday trends are bulllish.
So, make your choice. Probably, scalpers could try to join upward move, but market already stands very close to resistance. Still, I do not want to say that market will have to reverse around 1.29 downside. Upward move could continue. Even 5/8 retracement is normal after reaching AB=CD target.
But if you still want to sell - keep an eye on 1.29 - that's just nearest solid resistance, and if even you will be wrong, it will help you to protect your position by breakeven stop.
But all this stuff is just a tactical thoughts.

Discussing the strategy - we need breakout either above previous highs or below 1.2750. Only after that we will be able to estimate long-term direction. Until that will happen, we stand inside of weekly coil and we can do nothing except just be focused on intraday price action.
 

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EUR/USD Daily Update, Thu 08, Nov 2012

Good morning,

Few hours ago market has touched daily K-support area, so currenty I do not know what to say, because too small time passed since then and market just can't show any response on that. It has not even start to challenge it. That's why no patterns, no leads that we could stick with.

On daily time frame, market in general could reach 1.2720 and 1.2668 areas - first is 1.27 extension of upward BC leg of hour pattern, while second is 1.27 extension of AB=CD pattern itself. One thing that I can say is I do not want to sell right at daily K-support.
So, if I do not want to sell, then probably I should want to buy? May be. But buy entry should based on something, that we do not have yet. WE need to wait some time just to monitor how market will challenge this area.

On 4-hour chart is almost the same picture - I just add two more extensions of smaller AB=CD pattern. One thing that could be seen here is that market is forming lower lows and lower highs, swings down is greater than swings up. Market should break this tendency before we will start to speak about upward bounce. But this has not happened
yet.

On hourly chart we see divergence and potential broadening bottom pattern, but that does not give me much confidence.

So, my thought is - wait.
 

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EUR/USD Daily Update, Fri 09, November 2012

Good mornng,
just couple of things I can add to previous thoughts. On daily time frame, we can see that market has reached K-support and touched 1.27 extension of BC leg, that stands slightly below it. Also it has pierced the low of the coil at 1.2755 but now stands higher. I probably would not call it as challenge or breakout attempt, but at least it has touched it.

I still do not want to sell. Hence I have to buy, if even I would like to catch just a pullback from support area. But to enter Long we need some reason - context. We do not have it from trend, since it is bearish on daily, we do not have any bullish or DiNapoli directional pattern as well. All that we have is just strong support area. As DiNapoli says - Counfluence areas itself could be treated as weak directional pattern, but they have to be confirmed by lower time frames. That is what we have to do - find confirmation on lower charts.

I do not want to upset you, guys, but all that I can see on 4-hour chart is potential 3-DRive "Buy". Divergence is a good sign, since 3-Drives very often are accompanied by it.
If my assumption is correct, then market should show some upward move to 1.28-1.2811 area and turn to the downside again. Our major are to watch for long entry is 1.2680-1.27, since precisely here is a cross point of 1.618 and 1.272 extensions of 1st and 2nd drives correspondingly.

My be you see something else...
Hence, I will wait until situation with this 3-Drive will resolve - either it will work or it will fail. Or, may be some other pattern will appear. But until I will not see any clear context for long entry, I will sit on my hands. Although, I do not know will pattern be completed within current day...
 

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And target, yes, 50% support/resistance of thrust of DRPO (although this is not specified in book). In book minimum target is OP (AB=CD) from the tops of DRPO. I give you example on Gold chart, although this DRPO is not perfect

Hey Sive,

Since we currently have some possibilites of DRPO, I just want to make sure I understood this correctly.

I used the same example you provided me for DRPO - the XAU/USD chart.

I understand how to get the 50% fib. target for DRPO but for when you said "AB=CD from the tops of DRPO", I just want to make sure I understood that correctly.

Please look at the chart below. Did I draw the fibonacci expansion correctly? Did I find the AB=CD from the tops of DRPO correctly?

Thanks!

Brandon

targetdrpo.gif
 
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Hey Sive,

Since we currently have some possibilites of DRPO, I just want to make sure I understood this correctly.

I used the same example you provided me for DRPO - the XAU/USD chart.

I understand how to get the 50% fib. target for DRPO but for when you said "AB=CD from the tops of DRPO", I just want to make sure I understood that correctly.

Please look at the chart below. Did I draw the fibonacci expansion correctly? Did I find the AB=CD from the tops of DRPO correctly?

Thanks!

Brandon

Hi Brandon,
yes, you've done well. BTW, here we can see why we can't do this in any case. When C point stands above A - this is not typical extension setup and strictly speaking - it is not absolutely correct to apply this for traget estimation. But algorithm is correct.
 
Cannot wait for this trading week to get started !!!

Thanks again for the SUPERB analysis, Sive.
 
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