FOREX PRO Weekly September 17-21, 2012

Sive Morten

Special Consultant to the FPA
Well, we’ve talked much about current situation on forum within previous week. So, what conclusions we can make from technical picture. Monthly trend still holds bearish, but price stands very close to its breakeven point. If this upward pace will continue in October, then we could expect either stop grabber on monthly chart or trend shifting. Now price has moved inside of monthly K-resistance, although has not quite break it yet. Despite solid price action to the upside, our major conclusion here is that market at significant resistance. It is still logically to expect respect of this area.
Also I’ve checked the possibility of monthly B&B Sell here, but come to conclusion that hardly we could call current action as B&B. Previous retracement has reached 0.382 resistance and that put under question treatment of current action as B&B. I’m not sure that can call it even Look-alike. But the nature of action is in a row with nature of B&B – solid thrust down and first significant retracement up. Anyway downward momentum is still here and it is significant. Take a look, how it has happened two times previously – solid upward bar and long bar down. Something of this kind I expect here as well.


Weekly trend is strongly bullish, I even do not have MACD on this chart. Here we have another bearish context – Bearish Stretch pattern. This is a combination of overbought condition and significant resistance. Here we have Monthly K-resistance, or at least monthly significant 3/8 resistance, if you want. This pattern does not erase overall strongly bullish sentiment and price action. Stretch mostly is retracement pattern. By this combination market tends to leave it, since overbought in combination with resistance press on it.
Although I’ve deleted Monthly Pivot levels from this chart – market has moved significantly higher MPR1. That is a sign of strength and medium-term reversal – as well as other patterns and moments that we’ve discussed already. Based on current patterns that we have on weekly – this could be move to 1.38 that is Butterfly 1.27 destination and major 5/8 resistance. Current pace of recovery tells that this is absolutely possible.
All that I would like to tell is about retracement. Since we create trading plan week-by-week, currently I want to attract your attention that odds of retracement are high.
Another moment that is worthy to be monitored is current thrust on weekly. Although it is not significant currently, it could become a context for Directional patterns in nearest future – weekly DRPO or B&B patterns.

Here we do not have any patterns yet. Instead of that I would like to attract your attention to another tool that could be quite rare seen on markets. I’m talking about volatility breakout (VBO) that is described in DiNapoli book. That’s why I always take a look at DOSC indicator, although I have Predictor. Only DOSC shows VBO. But is it really VBO? You may argue that DOSC showed the same value in September 2011 and you will be right. From that standpoint it is difficult to call it VBO. But, if you will take a look how price stands in relation to DOSC and Predictor. In 2011 price just touched Overbought. That is absolutely normal. But what do we have here – whole week market stands above 100% oversold. If we will take in consideration that currency market is financial one and not commodities for which is not unnatural to stand in overbought for some time. Financial markets, in contrast, can’t stand in overbought long time. How to trade VBO?
VBO suggests 0.618 retracement that should be used to enter in direction of breakout. Then we should apply classical extension and take profit either on new overbought level or at extension target. By this strategy retracement should reach daily Confluence support at 1.2730 area that also will be daily oversold. Most recent swing up (that is a swing for VBO, by the way) is also suitable for any directional pattern as well. So you can see that here we have a lot of different combinations what could really happen in nearest future.
Here is one nuance still exists. AS we know usually WPS1 holds retracement is this is true upward trend on the market. On next week WPS1 stands in agreement with nearest Fib support. How we could see deeper retracement then, and will it mean trend breakout? I see answer in weekly overbought. This is like too much boat lurch – when it tends to middle condition it strongly lurch to other board first and then gradually fluctuated tends to equilibrium. Now we have a boat that strongly lurched in overbought. Hence, during retracement it will tend to oversold on daily chart. Other worlds reaction is equal to counter-reaction. That’s why retracement could be deep. Another reason, as I’ve said in previous research – bearish momentum is still strong and this is first upward move after solid bear trend.

On intraday charts I do not see much interesting, since market is just approaching to significant levels and targets. Thus, price has hit 1.618 butterfly target on daily. As you can see, here DRPO “Sell” is possible. But I hope to see some more significant pattern on other time-frames during coming week.


So, here are facts for you:
1. All trends are bullish, market shows strong recovery pace;
2. Market has passed through MPR1.
1. Market at daily and weekly overbought;
2. Price stands at significant monthly Fib resistance.
3. This is first bullish swing up and bearish momentum is still here.
Make your own choice how you will act. My thoughts – we probably will see further upward continuation, but current situation hints on potential retracement, that could be deep, because this is first reversal swing after solid bear trend and market at daily and weekly overbought. By these thoughts clear trading plan suggests waiting retracement and buy deep to take part in further upward move.

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.
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EUR/USD Daily Update, Tue 18, September 2012

Good morning,

Yesterday on daily was a spinning top, Doji. That is a sign of indecision right at daily/weekly overbought, and monthly/weekly Fib resistance area. Also this is 1.618 target of butterfly buy on daily.
In general we have weekly bearish context by "Stretch" directional pattern. But to trade this pattern we need trend shifting to bearish on daily time frame, because this pattern itself rather tricky since it meets significant struggle from opposite trend direction. That's why Stretch is weakest among all other directional pattern.

On daily I see nothing. All my hopes are linked to nice upward thrust - my be we can get DRPO or B&B. But taking into consideration overall situation - DRPO looks logically.

Interesting situation on hourly chart (4-hour trend has turned bearish BTW). On first glance pure bearish picture - small yesterday's W&R, stop grabber and bearish divergence. But not all divergences are equal. When price action does not support trend shifting and stand flat while trend shows strongly bearish direction, this could mean that market has hidden bullish power. It's obviously that upward daily momentum is still significant. And that could be bullish dynamic pressure. So, do not enter short hasty. Wait clear signs. This Dynamic PRessure could lead to failure upward rectangle breakout, and only after that market could turn south or start to form some reversal pattern. We are waiting rather long already, so let's be patient a bit more. It's definitely something is going on here, something is changing. We just need to catch clear patterns.


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EUR and Gold Daily Update, Wed 19, September 2012

since today is nothing to comment on EUR, I've decided to dedicate some time to gold discussion, since this market becomes more popular in recent weeks.

On EUR I have to say, that this is still expectation time. Price action on hourly chart is not an impulse move, looks choppy and gradual - this is some sort of trap, I suppose. This retracement could put a foundation for some reversal pattern, may be this will be butterfly, I do not know. I just feel that sooner rather than later we will get significant move with clear pattern. Personally I will wait...

Now about gold....
Most representative for us is a weekly chart. As we've said previously gold now in seasonal bullish trend, that lasts from September-October till early spring, as a rule. As market has not washed and rinsed previous lows around 1500, this makes possible appearing of butterfy "Sell" pattern with targets at 2025 and 2160.
But here is some thin nuance. Yes, market looks strong, price has broken through triangle, trend are bullish. That's OK. But take a close look - price just has moved to wider consolidation. We have rectangle here, and it's upper border is 1800. That is also Weekly overbought BTW.
I could say that if market will show true breakout of this area we should see new highs. target of this breakout (equal to height of rectangle) stands at 2040 - very close to first 1.27 butterfly target.
But this level is important for another reason as well. I will be more happy if market will show greater upward swing that previous downswing. This will give me confidence about breakout reliability. That will be excellent confirmation of gold bullish intentions. So keep an eye on 1800.
If market will not break it or will show failure breakout - it does not mean that upward move is over, but it could be significantly postponed, since after failure breakout could follow some retracement.


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EUR/USD Daily Update, Thu 20, September 2012

Good morning,
market is showing at least something - today we see price below 3x3 DMA and very close to trend breakeven point by MACD. So, daily time frame has context minimum for three patterns - DRPO "Sell", B&B "Buy" and Stop grabber. And take a note - stop grabber could become a company as for DRPO as for B&B.
Personally, taking into consideration the significance of resistance level and weekly OB, I prefer to see some reversal pattern, for example DRPO. Appearing B&B will not exclude forming of some reversal pattern but could postpone it a bit and probably will cancel DRPO context.

What else could you monitor? If this will be the case of DRPO - keep an eye on intraday charts, since DRPO very often looks like Butterfly on hourly chart. If this will be the case - it will give us possibility to anticipate DRPO and enter short by Butterfly pattern at better price. But before that Stop grabber could work. So we have a lot of short-term possibilities to trade on any side of the market.

Now let's take a look at 4-hour chart. Trend is bearish here, but we do not have any leads to estimate potential retracement depth - no extensions, AB-CD, patterns or something.
I have found only one solution for that and recalled DeMark framework. He says that when price breaks some trend line it should pass down the distance equals upward deviation of price above trend line. Other words, reaction equals to counter-reaction.
This points on 1.2850 area - that is 50% support of recent swing and WPS1.
IT is not neccesary that price will reach it, especially if it will be DRPO. But if it will be B&B - this is the first level to watch for as potential long entry area.


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EUR/USD Daily Update, Fri 21, September 2012

Good afternoon,
sorry guys, for some delay, but looks like I've not been late too much...

On daily we didn't get Stop grabber, but as DRPO as B&B is still possible, since market has not reached significant support yet. For me first significant level is 1.28-1.2850 - Fib support + WPS1 and may be 50% support of the most recent thrust. That is an area to watch for in case of B&B.
That's why DRPO is still possible. Also, you can try to trade weekly Stretch pattern, if trend will shift bearish today on daily by close price. If this will happen - catch first retracement up and place stop above weekly overbought (for current week it's at 1.3270). But this trade is not suitable for everybody due risk. It is more medium-term, because based on weekly chart.

By taking a look at 4-hour chart - finally we have some hint on AB=CD pattern. If market will follow it on Monday then we will get an Agreement around 50% support. If not, and price will form some sort of butterfly or any other upward move - DRPO will be in play.

Looks like we still have to wait a bit more, unfortunately.


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Sive, you say "1. Market at daily and weekly oversold", should be corrected to overbought I guess.
Thank you so much Sir,you don't know the value of what analysis mean to a alot of traders,me especially,it's priceless,analysising every week,every day,giving insight into this very though career.Thank you Sir,may God richly bless you.
Sive, you say "1. Market at daily and weekly oversold", should be corrected to overbought I guess.

Yes, happens here in Mexico many times, they tell you to turn right to the hand where there thumb is, while they mean to turn left.

Thanks for noticing that.
Good Day Sive,
Thanks as usual for your priceless analysis. Pls help with the following questions.
1.What are the price exhausting signs/potential termination signs you often watch for in the market or during trading hours.

2.I think about 2 months ago, I received a message in my mail box from FPA asking if anyone will prefer a trading signal or trading system, pls I just want to know if you have started the stuff.

3.Finally you shared the pivot point indicator you use in MT4 last week. Pls do you usually change the inputs for the period & offset? I use Excel for mine, but I observed that there are little discrepancies which I think it is not negligible + or - 40 pips and sometimes over. But if I offset to 2 the values will change but the results is not the same with my excel results. In your analysis for this week on daily chart the pivot values are the same with my excel weekly pivot point results, so I think the PP is meant for weekly. Pls can you explain how you are using the pivot indicator? Pls I will like to adopt this indicator it will make my analysis fast and easy. Kindly illuminate this darkness for me. I use Alpari MT4.
Thanks as usual Commander in pips.