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FOREX PRO Weekly October 15-19, 2012

Discussion in 'Sive Morten- Currencies and Gold Video Analysis' started by Sive Morten, Oct 13, 2012.

  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Monthly
    Although market has shown some deeper invasion inside of monthly Confluence resistance overall picture has not changed much since previous week. Probably in today’s research we again will be focused on lower time frame analysis.
    On monthly chart trend holds bullish. After first pullback from K-resistance area, price again has entered inside this range. After two weeks passed October is still an inside month for September bar. All that we can see here is that market stands at long-term strong resistance.

    [​IMG]

    Weekly
    If you let me, I hold some text from previous research for some time, since this looks important for me. If you remember this discussion – you can skip reading this and move right to current weeks ovbservation:
    “Speaking about weekly chart, it makes sense to re-read previous comments. All our suggestions are based on thought that currently we have first bullish swing up. This is very important for medium term perspective. Take a look – if we will treat as last swing down just small swing down from 1.2750, then our assumption is correct. But what if we have to treat as recent swing down whole butterfly move? This suspicion has come to me, because it was too small retracement on a way down before 1.2750 top. In this case we do not have bullish reversal swing. Hence we will not get deep retracement to 1.25. If market indeed is reversing up – it should show upward reversal swing, but it should be higher than 1.35 – the starting point of butterfly swing down. From the other side, if market will not reverse, we should get downward continuation, since from that swing calculation we just have next lower high in long term bear trend.
    Speaking simply, if we were wrong by treating current swing up as reversal, we could get upward continuation and our thought about downward AB=CD on daily will be wrong. If this is not a reversal swing, then donward move will start, but it will not stop around 1.25 and continue futher.”

    Today there are some moments on weekly that worthy of our attention. First one is most educational and relates to Stretch pattern. Now you can see clear example why Stretch is tricky pattern. Since we know that oversold and overbought levels are dynamic and stretch pattern target is a middle point between them (zero point on DOSC) – you can see how overbought line drifts higher and target point moves to current price level while price itself holds flat in tight range. Thus, without any price action target itself reaches current price. When such correction of overbought/oversold happens fast – you can get even a loss, since it needs to close position while price action might not show desireble move in favor of position. Always keep in mind this, when think about taking position by Stretch pattern.
    Now let’s turn to pratical issues. Trend holds bullish here and price stands above MPP. Fortunately we have a pattern here – bullish flag. It can become very useful for our understanding of price action in medium-term perspective, especially with some difficulties of swing treatment. If market will break down bullish pattern this will tell us that something is wrong with bullish ambitions. Besides, market will probably move below MPP in this case. That is very important, because such price action could mean first - continuation of 1.5 year bear trend, second – that current swing up mistakenly treated as bullish reversal swing (read higher about it).
    If situation will develop in nominal bullish mode and bullish flag, as it has to, will lead price to upward continuation, then classical target measurement points on the same 1.3840 level – length of the flag’s mast counted up from flag’s breakout point. That is also target of butterfly “buy” and major 5/8 Fib resistance on monthly chart.
    May be flag, as a pattern of foundation, is not impressive, but, from the other side we do have nothing else here.
    I foresee your question about down retracement on daily to 1.26 - 1.2750 level, how we can combine them? Here is no contradiction, if market will show another week inside the flag – then even move to 1.2650 area will not break the support line of the flag. But if you remember, we’ve discussed that there might be no downward continuation, if market will break 1.3040 level on daily.

    [​IMG]

    Daily
    Current analysis is, in fact, just a continuation of our updates on previous week. The key figure here is 0.618 target of downward AB=CD pattern and upper retracement after it. Such retracements after hitting of just 0.618 minor fib extension target are not forbidden, but they should not trigger too deep retracement, if market holds bearish bias. On daily time frame we already have this retracement. If market will hold here then we can count on move to 1.2730-1.2740 area. Here three different pattern have their targets – large AB=CD, Butterfly “Buy” and small AB=CD inside the butterfly pattern.
    [​IMG]
    4-hour
    This chart shows nice bearish engulfing pattern right at resistance that might be a finish point of retracement up before move to 1.27-1.2750 area. Pattern might be usefull as well, since it could assist us in stop placing.
    [​IMG]

    1-hour
    Hourly chart shows that our Double Bottom pattern has hit the target, trend turns bearish and market has shown small Wash&Rinse pattern right around 5/8 resistance. So, making conclusion here, the single possibility that we have is to enter short. Because daily trend is bearish, hourly trend is bearish, price stands at point that is logical finish of retracement after 0.618 Fib extension on daily. Bearish engulfing and W&R allows us to place tight stop right above 1.2990 high and try to take part in solid move down. For Long entry there is no sufficient context. True move above 1.30 will significantly change overall look at short-term perspective and it will be strange for bearish bias.
    [​IMG]



    Conclusion:
    So, in medium term perspective weekly flag pattern will dot all the “i”s, but this probably will happen a bit later, not on coming week. Flag allows downward move to 1.27 level as well, and does not hinder potential move down on daily.
    In short-term perspective to my mind we have no much choice. There is no context for long entry, so probably we can try to enter short, especially because we can place tight stop and risk/reward is significant. But anyway it lies with you to decide this question.

    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 16, October 2012

    Good morning,
    Today's update is better to start from our analysis of weekly chart. We've said that context there is bullish and market is forming a pattern - flag or pennant that theoretically does not object to move lower right to 1.27-1.2750 area. But this conclusion does not mean that this move down has to happen. If it will happen - it will not break pattern on weekly, but if not, well, then it will not. Because now daily price action is just consolidation inside of this pattern, and actually for medium term perspective the breakout direction that really means.
    On Monday we had reasons to think that downward move is still possible. And it has started pretty nice, but now price action does not support normal development of bearish move.

    Since market has hit just minor target of AB=CD on daily, normally it could pop up a bit, but later without any lacework has to countinue move down. IF that has not happened - then something is wrong. That is what we particularly see now. And intraday charts confirm this further.

    On 4-hour chart trend holds bullish, the move down that at first glance has looked as starting move to 1.27 has stopped right at minimum target of engulfing pattern - length of the bars and turned up. Now we have 2 bullish stop grabbers. 0.618 minor target of upward AB=CD stands slightly above the high of engulfing. This relatively confirms stop grabbers and this high will not hold if market will continue move up.

    BTW, overall price action on daily could become a bullish dynamic pressure, since MACD shows bear trend, while price action does not support it (if move down will not happen any more)

    hourly chart shows triangle consolidation right below resistance with potential turning to butterfly pattern. Trend holds bullish.

    So, now we have clear signs that bearish development under question. From the other side theoretically we have no carte blanche for long entry.

    I suppose that it's better to stay flat for some time. Scalpers could play with intraday patterns, but speaking about daily picture - it's better t wait a bit.

    If you still hold shorts - choice is up to you. Formally our stop has not been triggered yet, but price action is suspicious for bears. If you have profit, thing about taking of it, at least partially. Better to add more to position later if downward move suddenly will come.
    If you have foating loss now and trade on our plan - then hold it until either stop will be triggered or market magically will not turn to downside move. What else could be done now?
     

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    #2 Sive Morten, Oct 13, 2012
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  3. Sive Morten

    Sive Morten Special Consultant to the FPA

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    EUR/USD Daily Update, Wed 17, October 2012

    Good morning,
    So, our suspicious that something is wrong with downward development was correct. But can we tell that it definitely will not happen in nearest time? I don't think so.

    Market currently has significant bullish signs - it stands above MPP, WPP and WPR1. Trend on daily is ready to be confirmed on bullish side, we can get butterfly "sell" development right to 1.34 and on weekly is bullish context. All these facts are correct. But I still think that safer way to enter long - after breakout of the high on daily chart. And here is why...

    First, take a look what stands slightly above this high - MPR1 and daily overbought. It means that market hardly will break it within current week. We need some shift in overbought condition higher to give market room for breakout. If market will reach it on current week - we probably will get W&R and scalp "sell" oportunity.

    Second, take a look at 4-hour chart. Market has accomplished upward AB=CD right at deep 0.88 resistance. Could it be "222" Sell on daily? Why not. And could it give us another a bit "wider" downward AB-CD. Of cause it could. So, what to do?

    Here are my thoughts:
    If you have bullish view and want enter Long - wait breakout of previous highs on daily and catch first nearest 3/8 retracement. This will be much safer than jump in now. At least that is my plan for long entry.

    IF you have bearish view, and still think that market could move deeper to the downside - current level is not bad for short entry. At least solid probability exists that market will respect it. That will allow you to move stop to breakeven and if you will be wrong exist with no loss or even with some profit.

    Hope that thoughts will be useful for creating your own trading plan.
     

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    #3 Sive Morten, Oct 13, 2012
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  4. Sive Morten

    Sive Morten Special Consultant to the FPA

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    EUR/USD Daily Update, Thu 18, October 2012

    Good morning,
    from tactical perspective I can't say anything new, since market consolidates in the range and price action yesterday was relatively flat. All our thoughts that we've discussed yesterday still hold - situation is tricky since it could lead as to "222" Sell and compound AB=CD downward pattern or, if market will show upward breakout, to Butterfly Sell on daily time frame. And currently this riddle has not been resolved yet.
    That's why all that we can do is just to discuss intraday charts.

    on 4-hour chart trend has turned bearish. Market is coiling in the range between target of AB=CD and 0.88 resistance (that is btw 1.27 extension of butterfly "Sell"). If you have bearish view on the market - this is not bad level, since it stands below the highs and protected by resistance. Here are chances that price will respect this level at least with 3/8 retracement that will allow you to protect your position.
    Trying to sell around the highs is much riskier trade.

    Due to overbought and MPR1 on daily, I still think that long entry is better to postpone, until market will break previous highs and hold there.

    On hourly chart you can see potential supports, if price will bounce from current resistance - first area is 1.3060, next is Confluence support around major 3/8 - 1.3020. IF pullback still will happen, I suppose that 1.3020 should be reached.
     

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    #4 Sive Morten, Oct 13, 2012
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  5. Sive Morten

    Sive Morten Special Consultant to the FPA

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    EUR/USD Daily Update, Fri 19, October 2012

    Good morning,
    update will be short, since price action was calm. On daily, in fact, we do not see anything new. That is not bearish engulfing pattern - just a respect of intraday resistance, by now at least. Overall picture has not changed - as Butterfly "Sell" as "222" Sell are still possible.

    Today we mostly be focused on hourly chart. Now we see tight consolidation, kind of flag, right below neck line (if you let me to call it this way) of H&S pattern. Theoretically this is bearish continuation pattern and classical target (aka mast) points on Confluence support - 1.3020. That was our initial suggestion as well.
    Also we see bearish dynamic pressure is building, since trend has turned bullish, but price shows no reaction.
    Anyway, watch for this pattern. Upward breakout and returning above 1.3090-1.31 area probably will mean that downward retracement has finished.
    Now it's time to tight stops, move them to breakeven, if you've entered short somewhere around the Head.
    Not bad idea will be to take profit from half of position and on the rest move stop to b/e.
    So, decide...
     

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    #5 Sive Morten, Oct 13, 2012
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  6. LeFrog

    LeFrog Private

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    Hi Sive

    Very good objective analysis.

    Many thanks and have a great weekend.
     
  7. rashidin5178

    rashidin5178 Sergeant

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    Hi Sive,

    Just to share with all forumers. There is hidden MACD bullish divergence on monthly tf (I'm comparing MACD histogram from end 2008/early 2009 with mid of 2012). If I am right, one more context to be concerned I suppose.

    Thanks a lot for your briliant analysis and have a good weekend, Sir.

    Thanks and Best Regards.
     
    #7 rashidin5178, Oct 13, 2012
    Last edited: Oct 13, 2012
  8. pramod1958

    pramod1958 Private

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    Hi Mr Sive thanks for your brilliant analysis. But I have a question? On my chart both monthly and weekly time frames show bullish trend by 3 x 3 SMA whereas in your chart both are bearish? Am I doing something wrong? Please reply. Thanks and best regards.
     
  9. ertore

    ertore Private

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    Hi Sive and all the folks that follow you.

    I made the analysis and uploaded to YouTube in Spanish for my group with the entry in 1.2970. What do u think about that entry point?

    Regards,
     
  10. FreddyFX

    FreddyFX Sergeant

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    I am happy with the analysis, I am a LONG time SHORT EU supporter.
    What goes up needs to come down !!!
     

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