FOREX PRO Weekly September 03-07, 2012

[Sive Morten]

No, this will be bullish stop grabber.
This pattern suggests upward move.

 

[georgeta]

pure theoretical question

Hello Mr. Morten!

I have a theoretical question about targets. I waited and waited but this situation seems to freeze so I decided to ask for an opinion. In a situation like one on the GBPJPY would it be reasonable to expect reaching of the 1.618 target? The butterfly worked perfectly to minimum 0.382 retracement but now price is consolidating. In such a situation (assuming that there is no ECB meeting on the horizon), should I expect an up move for completing the 1.618 target?

Thank you!

 

[BeeKay8]

Hello Mr. Morten!

I have a theoretical question about targets. I waited and waited but this situation seems to freeze so I decided to ask for an opinion. In a situation like one on the GBPJPY would it be reasonable to expect reaching of the 1.618 target? The butterfly worked perfectly to minimum 0.382 retracement but now price is consolidating. In such a situation (assuming that there is no ECB meeting on the horizon), should I expect an up move for completing the 1.618 target?

Thank you!

I am certainly not nearly as experienced as Sive but I thought I might give this a try and please correct me if I am wrong.

I think you got your butterfly pattern incorrect. X-A-B should be LEFT wing of Butterfly and B-C-D should be RIGHT wing of Butterfly.

In my opinion, this Butterfly "Sell" pattern has formed quite nicely and here are a couple of reasons:
1) Looks symmetrical
2) B-C Leg has found support right at 78.6 support

Obviously, LONG @ 78.6 support would've been a good trade but the pattern HAS NOT reached significant targets yet.

The inner ABCD Pattern has 161.8 extension target roughly ~100 pips from current price (124.661) and MINIMUM target of Butterfly is 127.2 extension which is at 126.60 area.

With all this being said, I do not trade GBP/JPY so I do not really know how it acts but as far as I can see right now this Butterfly "Sell" looks pretty decent.

 

[Sive Morten]

Hi Georgeta,
first of all, this is not quite correct buttefly, since it is on bottom, while it should be on top (Beekay has drawn correct one). Hence, more probably that this is "222" pattern. And this turns you in quite different scenario - you should trade it on long side by inner AB=CD pattern. (also pay attention to greater AB-CD that starts from 118.5 low)

But if we suggest scenario that you've specified, here is couple of things that may be help. Since butterfly is reversal pattern you should not trade it on long side of the market. Second, trading rule of this pattern suggests stop placing above 1.618 extension with no difference what particular reversal point you intend to trade - 1.27 or 1.618. In both cases stop should be above 1.618.
In our forex military school you can find some practical examples of butterfly trading. Among the other things, it suggests taking first profit at 0.382 retracement and moving stop to breakeven on the rest of position.
When you do not have any clear signs that market should proceed to 1.618 better to apply scale in. So, enter with 20-30% of your trading lot at 1.27 and, if market will move futher the rest of position at 1.618.
Speaking precisely about your chart and if we suggest that market is not at overbought, then, you can expect move to 1.618, because market has accelerated right 1.27 of inner AB-CD. In such cases odds suggest further move to 1.618.

 

[squidge42]

If there is a stop grabber on daily, it means market will probably go down?

no no this is a bullish one...market dipped down in euro session and took out a lot of SLs before moving back up

 

[minimax]

Georgeta,

first noticed you used expansion instead extension and second - just measure on seen fractals. Pattern was done in pip, so to say.

 

[papao]

Hi Sive and thank you, as usual, for your daily update. I'd like to ask you a question about ECB. About a year ago mr. Trichet was announcing ECB was going to buy bonds of italy, spain etc. If i don't mistake, in march 2012 ecb stopped that purchase plan. The question is: after that, did ECB hold bonds that he purchased or did he sold again to market? (i don't know if this information was disclosed or not, so i am asking here. It would be interesting to know also for making an assessment of mr. Monti job and btp-bund spread (in italy everyone talk about spread everyday :-D ))

 

[pragmatic]

Georgeta,

first noticed you used expansion instead extension and second - just measure on seen fractals. Pattern was done in pip, so to say.


View attachment 6530

I think she explained it in details some weeks ago. Scroll down right on the bottom of the following page:

https://www.forexpeacearmy.com/fore...1-forex-pro-weekly-august-13-17-2012-a-4.html

 

[FPAtony777]

Georgeta,

first noticed you used expansion instead extension and second - just measure on seen fractals. Pattern was done in pip, so to say.


View attachment 6530

Hello minimax
What's the differnce between expansion and extension and how do you apply any of them on the mt4 platform??

Thanks

 

[minimax]

Hello minimax
What's the differnce between expansion and extension and how do you apply any of them on the mt4 platform??

Thanks

Expansion is a tool for itself on mt4, just add expansion numbers which are common to existing default numbers; you can also add price at each level. It is also called (price) projection.
How to use will explain on the picture I sent: first (start) point to measure projection - expansion is A swing low, second is B swing high and third is C swing low; so wave AB is projected to point C to get potential reversal zones in point D.

Extension is extended retracement and is used (look at the picture): first (start) point to measure extension is B swing high and second is C swing low; so wave BC is extended into direction of point D to get potential reversal zones.

Where expansion and extension are close, there is confluence and potential reversal zone if also other conditions are fulfilled.