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FOREX PRO Weekly October 17-21, 2011

Discussion in 'Sive Morten- Currencies and Gold Video Analysis' started by Sive Morten, Oct 15, 2011.

  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Monthly
    As you remember we’ve spoken about possible retracement during whole previous month. It should be more logical if it had happened two weeks ago, but market rarely does absolutely logical steps, so, we’ve seen this pullback only during past week. Anyway, this pullback has started. But is it absolutely correct to treat is as pullback on monthly chart? May be we have to treat as pullback previous down move? Really, if we will take a look at the chart we will see two things – first is confirmed bullish trend, second is deep 50% retracement, but still this is just a retracement from previous upswing. We treat current move up as pullback just because it’s smaller than previous move down, but actually this is not a big deal, how to call it. The most important, what we have to keep an eye on monthly chart. And I suppose that it will be price action versus MACD.
    Today’s discussion of monthly chart will be dedicated mostly to trend. The red line on the chart is DiNapoli MACD Predictor. It acts as simple MACD, but uses price chart instead of second line. When price stands above red line – simple MACD shows uptrend, when it stands below – downtrend. But despite this common using of MACDP, this indicator has a lot of additional tools and one of them – prediction of precise price, where trend will change and simple MACD will show line crossing. It is happening so, that this tool will need as in near-term. Look at level in blue circle – this is trend breakeven point for October – 1.4037, and it stands below our target on daily time frame and just 200 pips away from current market. How do you think, is it too far in terms of monthly chart? Surely not. I think you are starting to catch my idea, right? If market will close above that level in October – we will get huge bullish stop grabber and perfect context for enter long with target at least around 1.50. Context will be perfect, since we will need just October range and retracement to possess ourselves in big move on monthly chart. This will give us outstanding risk/reward ratio.

    But let’s suppose that you do not trade on monthly charts. Fine. But still you will know the overall direction – to 1.50. This will allow you to enter long on lower time frames without scare to catch deep pullback or drawdown. Other words you will know the direction and target of the market for 1-3 months ahead. Isn’t it cool?
    You might say, that this is just a theory, and assumption, may be this will not happen – and you are 100% right. But that is a work of analyst – to look at picture in perspective. What’s the use from just poor description of past price action? Besides, monthly chart is rather long-term, and it’s just impossible to find something new on weekly basis here. Anyway, if this scenario will not happen, we will start to search another one, but currently I can’t find the reasons why this perspective could be unreal. It’s worthy to track monthly chart from that point of view.
    Simultaneously we have to keep mind open for opposite price action, if bears are really strong – we should not be too surprised if market will break all supports and accelerates down further. Nearest target on monthly chart stands at 1.2905 from large AB-CD pattern – near major 0.618 Fib support 1.3039, so we might say that this is also a monthly Agreement. Current price action looks like Gartley “222” from AB swing on chart, so we can’t exclude that also.
    [​IMG]

    Weekly
    Important point that we’ve not mentioned in monthly analysis is that we need price above 1.4038 at close of October, but not just permanent penetration of it. We will not get any advantage if market will reach even 1.45 but close month below 1.4038. On the weekly time frame we see that this will be the real fortress to break.
    Weekly trend is bearish, market neither at oversold nor at overbought, so it has no barriers except resistance levels. But these levels are impressive for coming week. Look at 1.4014-1.4080 area – this is classical and strong resistance level, Fib resistance at 1.4014, 1.4076 is monthly pivot resistance and 1.4102 – slightly above it minor Fib resistance. So, market will really struggle to pass through it.
    Here is worthy to mention one of the possible scenarios that could happen. Market could reach that level since it has no barriers between current price and 1.40-1.41 area, but since this level is quite strong, probably market will not break it at first touch. So, we can see reaching of this level and some retracement from it on coming week and breakout could come on last week of October (if it will come at all, of cause).
    [​IMG]

    Daily
    Currently this time frame gives a lot of trading possibilities, and there are a lot of different patterns could appear on coming week, but let’s start from markings since this chart a bit overload with details.
    There are the same levels of resistance as on weekly chart – 1.4014, 14102 and 14244. Long red dash line is monthly pivot resistance 1 at 1.4076, small red dash line is weekly pivot resistance 1, that adds more resistance to above mentioned area – at 1.4046. Just below this area is level of overbought for Monday in blue circle – 1.40. Do you feel how pressure grows in this area, right? 1.4037 is a monthly trend breakeven point.
    Now to the downside - small blue dash line at 1.3709 is weekly pivot that almost coincides with nearest Fib support 1.3689. Just below daily K-support stands at 1.3567-1.3601. I suppose that we will hardly need other support levels in near-term, at least on Monday.

    Since market has some room to overbought and strong resistance level, we might expect two different scenarios – reaching of this level first and retracement second, or reaching pivot at 1.3710 and move to 1.40-1.41 resistance and then deeper retracement. Whatever scenario will happen, our trading plan is searching for sell signals around 1.40-1.41 and searching for buy signals around 1.37 or around K-area if market will reach it. By the way, if you add on chart 3x3 DMA, you will see, that current thrust has minimum required bars to classify it as thrust and could be a context for B&B or DRPO trade.
    Based on daily time frame, it’s very difficult to say, how it will turn. All that we can do here is to discuss how to act, depending on future price action. If market will break to the downside 1.3550-1.36 daily K-support, then bullish bias will be under question. Also, if it will be B&B “Buy”, then it will probably start from K-support, rather than just from 1.37 area.
    [​IMG]

    4-hour&hourly
    On these charts could be some clue to understanding of price action in nearest term. We see that 1.40-1.41 area just teems with different targets, levels and extensions. Which one we have to choose? How we may trigger our trade or make a decision. The common approach to solve that problem is to find some clear pattern. Based on current price action I still think, that market will continue move slightly higher at open. We see that it has reached 1.0 Extension at 1.3876, but shown just shallow pullback, why? I suspect that this is due butterfly “Sell” pattern, which 1.618 target stands somewhere near 1.272 extension of AB-CD at 1.3963. But I’m not done. Let’s shift to hourly chart to discuss another pattern that could help us…
    [​IMG]

    Hourly trend is bullish, here you can see both butterflies, that we’ve discussed during the week. Also you can see that first butterfly, was a bit extended beyond 1.618 extension before it has started to work properly. The same could happen with the second one – 1.618 target stands at 1.3917, while 1.27 AB-CD extension at 1.3963. So, market can reach that level before any signs of retracement will appear. But I would like to show you not that butterflies, but 1.618 3-Drive “Sell” pattern that is forming on 4-hour chart, especially if we will take into consideration 4-hour MACD action – double divergence. I guess you can find it by yourself now. That’s an excellent educational example by the way, of harmonic patterns compounding. In our FPA School you will find whole part dedicated to this topic (but probably it will be released a bit later).
    Still will it work or not – I will not dare to suggest, but no doubt we have to keep an eye on it.
    Hourly
    [​IMG]

    Conclusion:
    On long-term chart market could show a “Reversal and trap of the year” if October will close above 1.4038 level.
    Still, on lower time frame, very probable some continuation to upside before retracement will start. There is some probability exists that market will show retracement to weekly pivot point prior of reaching significant resistance at 1.40-1.41 due to 3-Drive “Sell” pattern that is forming on 4-hour chart.



    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. rashidin5178

    rashidin5178 Sergeant

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    As always, thanks a lot, Sir.;)

    Thanks and Best Regards
     
  3. ahmad ashraf

    ahmad ashraf Recruit

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    dear sir,
    thanks a lot for this hard work on charts and we hope that we should see 40 area to sell some short term positions thanks again we see where market starts
     
  4. Sive Morten

    Sive Morten Special Consultant to the FPA

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    EUR/USD Daily Update, Tue 18, October 2011

    Good morning,
    the first part of our trading plan on Monday has been accomplished - market has reversed precisely at 3-Drive pattern completion point. What's next?

    On daily time frame we see clear Bearish engulfing pattern, that could be very usefull for stop placing. Since we know, that if market will move above the highs of engulfing - then it should be treated as failed pattern.
    The potential target on daily chart is length of the engulfing bars - that is coincide with 1.3575-1.3614 Confluence support. Very probable that this is the retracement target.

    On 4 hour chart we see the picture, according to our expectations: market has accomplished second 1.618 butterfly pips-to-pips, that is also a 3 -Drive trigger point and turned to the downside. We see that both targets of Butterfly stands very close to daily K-area.
    The minimum target of 3-Drive pattern is low between 2 and 3 drives. This low stands below nearest Fib support, so the probability that market will continue move a bit lower is solid.
    Also here we can see H&S pattern is forming. This fact gives us a clue that probably market will show 0.618 retracement to the upside on hourly chart - right to 1.3830 area/

    On Hourly chart trend is bullish, potential AB-CD target from current move also stands at area of daily Confluence support.

    So, we have 3 different reversal patterns on hourly chart (although H&S has not been formed yet), 4 hour trend is bearish. We have engulfing on daily chart.
    All of these patterns have a targets right at daily K-support. So, probably it makes sense to short this market from 1.38-1.3830 area. Engulfing pattern lets us to place logical stop above its high -just 60-70 pips higher. Target - 1.3575-1.3620 area. Risk/reward is perfect.
    But not forget to wait till clear sell patterns on 5-min chart around 1.38-1.3830 area before enter short.
    Second way - enter short, when market already will bounce from 1.3830 resistance, houly trend will shift bearish - use some nearest retracement on 60 min chart.
     

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  5. Sazu

    Sazu Corporal

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    You the man!

    Thank you Sive. Your briefings are like having a road map, follow them and you won't get lost!
     
  6. cashcorn

    cashcorn Recruit

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    Are you currently in a short position here?
     
  7. Sive Morten

    Sive Morten Special Consultant to the FPA

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    EUR/USD Daily Update, Wed 19, October 2011

    Good morning,
    On daily time frame there is nothing really new to comment - bearish engulfing pattern and its failure point at 1.3905 will dominate in nearest trading session.

    On 4 hour chart market is forming H&S pattern, and now has reached 0.618 resistance level 1.3806 that we've discussed as potential entry point. So if you want to take this signal, you may do this, since hourly chart shows that this is also an Agreement.
    But probably it's better to place initial stop just above 1.3870 - AB-CD target on hourly chart.
    If market will show respect to current level - move your stop to b/e.

    Another important thing that is worthy to note here is watch over possible shifting of this H&S to Butterfly "Sell'. If market will show some initial move down, but later will move above the top of right shoulder - there is a high probability that H&S could shift into Butterfly "Sell" pattern.
    If this is really H&S, market should not stop downmove at least till the neckline.

    By the way - this could be perfect example of DiNapoli H&S failure pattern - just look what stands below the neckline. That's our profit objective, if market will really form H&S.
     

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  8. Sive Morten

    Sive Morten Special Consultant to the FPA

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    EUR/USD Daily Update, Thu 20, October 2011

    On daily time frame market is continue flirting with engulfing pattern. It couldn’t trigger it during 2 previous trading sessions, let’s see, may be it will happen today.
    Nearest support area is the same – 1.3575-1.3614 area.

    On 4 hour chart looks like market is still forming H&S, although it looks a bit skewed. There are two possible scenarios are possible here. If you already have short position as we’ve discussed yesterday – think about close it at 1.3575-1.3614 area since this is also an Agreement with AB-CD pattern.
    In general situation looks like perfect context for DiNapoli H&S failure directional pattern, because K-area and Agreement stands right below the neck line. And it looks like probability of failing of H&S is greater than reaching theoretical target at another Agreement btw – 1.3433-1.3441.

    If you’re bullish – you have to watch over two levels. First, if market will not reach neckline and reverse to upside, preferably with breakout of 1.38 area – this could shift to butterfly “sell” pattern. We’ve talked about it yesterday. The one problem with harmonic patterns, still, is that its very dangerous to anticipate it.
    Another way – wait till 1.3575-1.3614 area and watch for buy signals there. It’s very probable that if even market will break it down, it will happen not at first touch, probably market will show at least some respect to it at first touch. But there is a great probability that it even could continue upward move on daily right from it…
     

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  9. Sive Morten

    Sive Morten Special Consultant to the FPA

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    EUR/USD Daily Update, Fri 21, October 2011

    Good morning,
    Yesterday’s intraday price action was a really nightmare and churning. Still, particularly this price action could be the first sign and hint on upward continuation.

    On daily time frame trend is bullish. After solid swing up market has shown just nearest 0.382 retracement and couldn’t trigger engulfing pattern during the whole week. In fact, market is coiling in tight range and building energy. We definitely should be aware of thrusting continuation, and very probable that it will be to the upside.

    On 4 hour chart there are three currently blur but very significant nuances. First, market has not reached even 1.27 extension target from reversal butterfly of previous week. Second, yesterday market just hang in the air – has not reached neither neckline nor AB-CD target nor daily K-area.
    Also we see thrusting bars in opposite directions – this is a sign of momentum shifting.
    And, finally third – market is starting to form bearish “butterfly” with 1.618 target at 1.4066. If you forget, what that level is – re-read our weekly analysis. This is really significant area. 4-hour trend has turned north also.

    So, if, you’re bullish and ready to take some risk, you can try to anticipate Butterfly pattern and use some Fib support levels from recent swing on hourly chart to enter Long. Hourly trend is also bullish.
    IF you’re bearish – it’s better to wait completion of butterfly pattern. But recent price action makes me thing that we will see solid breakout on daily time frame, and this breakout will be to upside….
     

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  10. Damian1987

    Damian1987 Corporal

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    I'm amazed by the lack of comments on this week review. I didn't trade the whole week since I'm changing brokers and platform (going to futures market yay :D ) but thanks anyway Sive. have a good weekend!!!
     

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