Forex FOREX PRO WEEKLY, November 05 - 09, 2018

[Sive Morten]

Morning guys,

EUR shows not big changes compares to our weekend view, but still, some new moments exist. As we've said in weekly report technically EUR keeps nice bullish setup on daily and lower time frames, but fundamental and sentiment situation makes overall context weak and tricky. This is the reason why we've called you to not go long by far, or at least keep close eye on major intraday supports that could work as good indicators of wind change...
On daily bullish context suggests upside action to 1.15 area and this corresponds to harmonic swing retracement. Alternitavely and this is my expectation, we could get 3-Drive "Buy" pattern with 1.12 destination point. Somehow I feel that all this negative background will find way to price during the week. But, let's take a look at the facts that we have. On daily DXY is a grabber, which suggests downside action on EUR. This is major stone in bearish technical context by far.

On 4H chart we see that EUR has formed right arm lows and jumped up, which is good. But here are another two moments that I do not like. First is bearish grabber that suggests drop below the same right arm bottom - in fact, this could lead to failure of H&S pattern. Second - market shows too weak upside action. Following the market mechanics of this pattern, action up from the right arm bottom should be most powerful and definitely this is extension impulse action. But here, price was not able to reach neckline and stopped.
If everything will be OK, indeed price could form, say, upside butterfly, right? But, the same butterfly could be formed down, according with our 3-Drive daily scenario...

On 1H chart market has confirmed the lows by nice butterfly "Buy". If you still want to go long here and missed butterfly - your working swing is upside one from the right arm lows. Here you need to watch for retracement to one of the Fib support for long position taking against the 1.1350 lows.

I don't want to say that this bullish scenario is bad and it will not work. It's OK, at least tehcnically. But speaking on overall context with all this opposite patterns on dollar index, market sentiment and dollar-supportive statistics - it looks weak, at least for me. But taste differs.
Whatever you will decide to do with it - hope you will done well.

 

[Deltoid88]

Wave 5 proved to be expanded flat

Wave 4 proved to be expanded flat of course, mistake in typing...

 

[Stag]

Wave 4 proved to be expanded flat of course, mistake in typing...

Hi Deltoid, thank you for sharing your ideas, just one comment on them: most often then not I miss your conditions and specific point of invalidation at which you think your "vision" is no longer viable.

I do find it sometimes, but I miss them in general. It is still worth sharing, but in lack of them, your vision remains your dream of what you want the market to do for you. By inculding your conditions you transform them to be a real plan you will follow to make the dream happen - and last but not least your readers will give much more credence to your idea. Yeah, it takes time, but that's the point.

 

[gwynfor]

Hi Guys,

I think both Stag and Deltoid bring a great deal to the table and am full of admiration of them as writing a clear EW analysis is fiendishly difficult, doing it succintly is well nigh impossible. .

For what it's worth, (and at risk of introducing too many EW contributors) I feel the following may be worth adding.

Stag's question "Do I see a pattern I recognise " also crops up in one of the EWI publications and is absolutely key. The frustrating thing is that the pattern can lead to different conclusions as well as being misread.

EUR USD has two recent lows within a whisker of 1.1300 . Both are 3 wave moves and Stag sees two possibilites - namely a flat and an WXY pattern. I am nowhere near confident enough to venture a view on WXY's but in terms of flats there are two possibilities.

The first is a regular flat where the first two legs are complete. That would imply a third leg up towards (and probably close to) 1.1812.
But I see (and favour) a second possibility namely an extended flat where the second leg is incomplete.
The move down from 1.1812 is in 3 waves and if it ends at 1.13 it does so in mid air between Fe 62 and Fe 100 (both marked).
The second move down to 1.1300 could be wave b of a (smaller) expanded flat rather than a fifth wave down. The references to 1.236 and 1.618 are typical retracement levels for an expanded flat used in the same EWI textbook.

At first glance all these options may be confusing. But sometimes they spell opportunity. In either case the move up to 1.14548 is motive. So the next move should be a correction down. On the 30m chart I see a 5 wave down and a 3 wave abc up. This gives an opportunity to trade as seen on the 30m chart

Even if Stag (and Deltoid) are correct that a large upward correction is due from 1.13 my sell order gives me a good chance of getting to the FE 100 down where I will close half my order. I of course hope that I am correct and that a wave 5 in the second leg of the flat takes me down to 1.1238 for a really juicy risk/reward.

My entry was on the break of the 4th wave of the c wave up on the 30m chart.

Of course the market will now make an absolute fool of me, but that's life ........

 

[Deltoid88]

GBP ready for drop. Double ending diagonal on 1H chart and 15min chart in waves 5. Expecting drop to rectangle zone. Tight stop can be used here, SL=1.3120.

 

[Deltoid88]

I think both Stag and Deltoid bring a great deal to the table and am full of admiration of them as writing a clear EW analysis is fiendishly difficult, doing it succintly is well nigh impossible. .

Glad you find it useful. Good idea as well. Although I am long on EUR, I must admit that 1.1240 op target calls, and you brought one scenario with your idea how that 1.1240 target can be reached. Good wave count. However, I do not think we have expended flat in wave 4 like you drew. I think that red wave C is already in place, and that was ending diagonal which is completed. Will see, market will tell

Even if 1.130 support breaks I am not going to close my longs on EUR, in that case I will hedge just under 1.130 and wait for upside again in 1.1135-1.1240 zone. Drop bellow 1.11 will make me think to reconsider bigger wave count.

 

[Deltoid88]

Hi Deltoid, thank you for sharing your ideas, just one comment on them: most often then not I miss your conditions and specific point of invalidation at which you think your "vision" is no longer viable.

I do find it sometimes, but I miss them in general. It is still worth sharing, but in lack of them, your vision remains your dream of what you want the market to do for you. By inculding your conditions you transform them to be a real plan you will follow to make the dream happen - and last but not least your readers will give much more credence to your idea. Yeah, it takes time, but that's the point.

Hey Stag, in my opinion most important thing in trading is managing position properly, by that I mean to manage risk properly and to manage stop loss properly. What do I mean by that? Trading is time game, you need time to be right, and if you are not right today, that does not mean you will not be right later, with same position. Simplest way to trade is just to put TP and SL, if you are right most of the time you will be profitable, but I do not trade like that. I put TP, but not SL, I put full hedge stop orders against my position. That way I allow myself to be right with my first position in some later point in time, tomorrow, in 1 week, 1 month, maybe even a year, and also to earn something with opposite position. I avoid to close losing trades, I close losing trades only when I do not see the way for position to be profitable in some near future. I use SL only when I have big position, when I simply cant control it properly with hedge. That is why i mostly do not put strict zones for SL, everybody should manage their position on the way they think it is best. I put target zones for TP, depending on risk appetite everyone can manage their SL levels knowing what TP is, even without knowing anything about Wave Principle. Of course I take much more risk with this, but that is my style. You can make point that I can close my trade and then open new one later, but that is not always the case, psychologically it is easier this way, at least for me. Also this way you can earn something even when you are wrong with your position, which is great.

I am going to discuss my position plan on EUR as an example:

I have long positions on 1.1360, TP zone 1.19-1.21. Planning to increase long positions if price goes in 1.13-1.1350 zone. I will of course consider option to close positions manually while in profit depending on price action.

Where is my SL? I do not have it, and my plan is this:

Sell stop orders 1.2 x long positions at 1.1295 with TP zone 1.1135-1.12. If price comes down here I will increase my long positions as well, and close all sell hedge orders. I will place new sell stop orders in zone 1.10-1.11, and hope for upside action and even greater profit then I would made if I was right at the beginning. If EUR goes up right away, great I made profit, if EUR breaks down 1.13, I was wrong at the beginning, but that does not mean I will be wrong later and in this case my profits would be even greater then I was right on the beginning. If EUR breaks down 1.11 and 1.10 I will again place sell stop orders and wait for right opportunity to close them and increase long positions, because in monthly chart I expect 1.03 support to hold.

Conclusion: Trading is time game, do not be afraid to be wrong in the beginning, sometimes that is good thing. That way you can earn money even when you do not have idea what to trade, and all price movements, in all directions can give you some profit. Time works for you, price movements work for you. All this has sense because of true nature of price action and waves - what goes up, must come down. Also one thought - why should I close my EUR long positions if it comes to levels lower then my entry, I would buy it more, I just need to manage my risk properly. That is the point.

Thank you for your constructive comment, Stag. In my future analysis, I will mention something about SL, but you should know that does not mean I am out of position if price goes to SL levels

P.S I have a dream, and deep plan behind it always.

 

[gwynfor]

Thanks for your comments Deltoid.

Clearly the market has proven my wave count incorrect. Back to the drawing board ! . The regular flat perhaps now looks more likely but I far prefer to trade with Sive's view not against it.

Memo to self. When you see 5 waves think not of the profit you will make if it is the start of a motive wave, think of the loss you will make if it is wave C of a flat or zig-zag !

Not sure though that I I understand your labelling for the move down from 1.1812 to 1.1300. You label it as red a,b and c. Whether a zig-zag or a flat wave I THOUGHT the red wave c has to be a 5. But you label it as black a, black b and THEN a 5 to complete black c? Can you explain what I am missing here?

How does this hedging work? Was your long initiated at 1.1360? If so why put a sell stop at 1.1295 rather than 1.1360? If you have say 0.10 lots long do I understand that your sell stop will be for 0.12 lots?

 

[Deltoid88]

Update on EUR and GBP.

EUR - expecting expended flat in blue wave 2, red wave C probably has started, very nice scalp short entry against the high in red wave B. Expecting 5 waves to downside in red wave C to end just above 1.13 level. SL=1.1480

GBP - ready to drop too. Believe blue wave A has been completed, expecting ABC action to downside in rectangle zone. SL=1.32-1.3250

 

[Deltoid88]

Not sure though that I I understand your labelling for the move down from 1.1812 to 1.1300. You label it as red a,b and c. Whether a zig-zag or a flat wave I THOUGHT the red wave c has to be a 5. But you label it as black a, black b and THEN a 5 to complete black c? Can you explain what I am missing here?

How does this hedging work? Was your long initiated at 1.1360? If so why put a sell stop at 1.1295 rather than 1.1360? If you have say 0.10 lots long do I understand that your sell stop will be for 0.12 lots?

Hey man! Yes, long on 1.1360, I am not hedge on 1.1360 because on those levels I still think most probable move is to the upside, only if price breaks 1.130 I expect downside acceleration and want to be in sell position there. If price comes back to 1.13-1.1360 levels I would buy more EUR. Yes, 20% stronger hedge then main position.

Sorry for confusing you with wave count, I just wanted to pay close attention to it while wave were developing, talking about black ABC, it was weak when wave C started. Here is more clear wave count.