WaveRider - Back to Basics - S/R, Price Action, MM, Smart Exits, One Indicator, and patience...

[WaveRider]

Did great this week. Sunday, I'll post another weekly analysis. This is a pic of my live account with the open positions. I closed the last one this morning because I think the market will retrace and take it out. The others I'll leave as long as the larger TF's say it is bearish. All these positions I took some profit and moved stops to BE. 12% up on the live account including these open positions. Most positions risked less than 1% and I already took 1%+ on the initial TP. It's almost like getting paid next week for a good decision made last week. Or a trend following royalty check.

Make money everybody.

 

[WaveRider]

Why I think the banks run the stops.

There is no problem with having a million investors all in going the same direction during the profit gaining phase, the body of the candle. Everyone is happy with that until it is time to take profit. If the investment banks are in the distribution phase trying to cover their positions, they need someone else to take the other side of the trade. If they know there are too many investors going their way, they are worried there won't be enough street money allowing them to get out. That's why they run the stops before the move. It shakes all the over leveraged and jittery people out, and people who put stops in above a high. Then they move, not completely aloneo, but more alone than before and when they get to the bottom, there is enough street money selling at the low that they can cover their position, but only because they shook off everyone else first. There isn't enough dumb street money to cover both the banks and the smart street money when it is time to get off. So they shake off the "smart" street money first.
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When a bank runs stops, it cost them to do this. It isn't free. It's worth it to spend this up front than deal with who can cover them when are ending the day though, so they do it at open. The expense is why they tend to only do it once a day for London and once for NY if at all and only for 10 pips, not 50 as that would be really expensive. Asia already ran the stops on Tuesday. All the street money was already long so it makes no sense for London to go farther up since they would have to deal with the profit taking of these people. So London just opened and tanked the whole market, this popped the SL orders of all the street longs and let London take profit with out all the unwanted house guests.

 

[WaveRider]

Weekly analysis

Last week's total pip count was 445. This included some positions that were opened the week before and that were closed last week and a position off the Cable. I had no losing trades last week and that is pretty rare. I'm trying to catch the week's range and last week I got it. There was a pretty nice 4h pin bar on the Fiber and I got in right after it. There are now two positions open that I'll leave until it seems this down thrust is done and they are both in profit by 200+ pips. I was hoping for 100 pips total last week, so I feel pretty happy about last week's haul. A big help was that twice Asia ran the market up 50+ pips to a S/R. This is pretty rare and made a great opportunity to sell in this down trend context. I got in at the high of both Tuesday's and Wednesday's Asian rally and woke up to 50-65 pips. I risked 20 pips on both trades so if one hadn't worked out it still would have been profitable. Since Asia got everyone excited about a further move upward, London did not need to run the stops in the morning as the street money was already long and their stops easy game for London.
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Last week's candle was a week down bar and last week's day candles had long wicks to the top because of some unusual run ups by Asia.
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The next strong support is at about 1.2620-30. I expect some rally early this week and then the drop for the market to hit that point. The rally is because the USDX is 81.10 or so and it is unlikely that this level will be blown through without a move back to 80.00 at least. Last time the USDX was at 80, the fiber was at 1.2900 or so. I hope we rally this week. I want the USDX to get some pull back before continuing up but I think many traders are looking for a reversal this week for a rally up, which would mean a continuation down, or basically whatever everyone else is expecting is going to be the wrong choice.
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This may be a slightly down week or a ranging week but over all down. Target is 1.2620.
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If we are rallying early in the week, I'll see this as confirmation the fiber will drop. If we drop early in the week, I'll see it as confirmation we will rally overall. If we rally over all, that target will be 1.2820-50, or near the last swing high on the daily chart which is also a S/R from Jan 2011.
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Weekly Bias - None or a little down. But since we have had week daily PA to the down side, we may be due for a rally too. I want in at the week's high, probably 1.2820 and take it to the week's low, probably 1.2620, leaving some in for the longer term trend.
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Monday: No trades. We want to see what London will do. If there is a run to 1.27 tomorrow morning, maybe we'd buy until the weekly pivot point. On any day this week, if we hit 1.2820 or 1.2900, I'll sell as I still think we are in a sell program on the larger TF's. Just as before, we'll use a small position and leave some of it open longer term to keep scaling into this down trend.
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Tuesday: If Monday is down, we will likely buy London's stop run with a target of 1.28-1.29. If Monday is up, we will likely sell London's stop run until at least 1.2620.
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Wednesday: Same plan as Tuesday if the early week stop run hasn't happened until Tuesday.
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Thursday and Friday: If the market has come down and hit our 1.2620 target or gone past it, we'll keep looking for rallies to sell. If we are near a new low and especially if we are at the ADR or past it, we will look to trade counter trend near London close for 20-30 pip scalps.
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I intentionally didn't watch Sive's analysis until after mine was done.

 

[WaveRider]

London ran to 1.27. I'm long at 1.2717 SL 30 pips and full TP at 1.2746 the weekly PP. Risk is 1%.

 

[WaveRider]

I was in profit 18 pips but decided to let it run. I got stopped out a few minutes ago for a loss of a little less than 1%. It is now at 1.2680 - an institutional level and I still think this PA will go up. I'm blown away that Asia found the nerve to make a new low. Seems the 4 channel was able to hold price during NY. It's pretty cool what Asia is doing now becaues it makes all the street money go short so that London can move the market up tomorrow. Hopefully I see signs of weakness and get a chance to go long.

 

[WaveRider]

Can I call this PA before it plays out? This morning saw a big 45 pips spike that was not news driven. This is the foot print of market makers as there is no way for street money to make the chart look like this. This stopped out the shorts and filled their positions. If the market makers are long, which way will we be headed over the next day or so? Can't let your hand be shown so they let the market wander down while they stay long, letting people get short again. This allows them to reenter at a better price. We will see another thrust up, up to one of our targets, and then a continuation of our down trend. I lost 30 pips on this one beause I did not stay with my trading plan for a loss of 1%. I got long but at the wrong spot and the deep retracement stopped me out. It would have been best to get long at 1.2685 or 80, if at all. Since this is counter trend it is a riskier trade. I'll stick with my trading plan and wait for the weeks top to be reached to sell again. Now that the price is out of that deeper retracement level, the trade is too risky to enter, even though I feel pretty confident about market intention, and we'll wait for another pull back or just sell at the top.
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The plan is to sell rallies and buy pullbacks. This rally showed the market makers intentions, and we wait for a pullback, into the 618 retracement area or better to buy in line with the market maker's direction. Now that I'm looking at it it is so obvious.

 

[WaveRider]

The above post was right on and we had a great thrust up. Wish I was on it! I was looking to get into the week's range on Tuesday morning and I saw it but let it get away.
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Last weeks pip tally was -54 because I didn't stick with my plan. Moral of the story: stick with your plan.
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Specifically: I'm looking for one entry every day after London opens. Price will run the stops out of the Asian range (the franky fakout) then move the other way. I need to wait for London to show what it's intended direction is, usually a 20-35 pips run, allow for a 62-80% retrace. I get in at the retrace, take 1/2 profit at 30 pips and let the rest stay in for another target or for the week or longer term trend. I expect London will make the week's high or low on Tuesday or Wednesday, usually Tuesday and want in at that point for the weeks range. Most weeks this will permit 2-5 trades for the whole week, risking about 15-20 pips to get 30-200 pips, depending on if we are staying in longer term.
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If a larger trend is presenting itself, I will just get into it at some significant retracement level, but not necessarily under the rules above. The goal always is to take some off early, move stops to break even.

 

[WaveRider]

Weekly analysis 11/19/12

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Last week's candle was almost a doji. We did hit the top of the last consolidation area on the weekly chart but with the down pressure we see, I would expect it to penetrate a little further, before retracing up away from it. For this reason, I expect us to hit our target of 1.2620-30 this week before continuing down or pulling back up. The weak price action down makes me thing we will wander down, not crash down and that once we hit 1.2620-30 we'll bounce back up. This means we might have pinbar weekly candle dipping into this price pivot zone. This green doji may have just been a part of the 3-5 rule: any time there is a higher TF candle of 3-5 in a row the same color, you are very likley to have the next candle be the other color. Well, we have a green now, so we can continue with the reds. Also, and most imoprtant, Friday London dropped 40 pips in 10 minutes. The entire EUR/USD harmonic in 10 minutes. This is to me a VERY BIG indication that London got short Friday and will run the market down next week.
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If the weekly candle turns out to be a pin bar, I anticipate the week to be: Monday up to 1.2760-80 and close back down, small range day. Tuesday down to 1.2620- big thrust and forming the week low, Wednesday-Friday a rally up. Below is the trade plan based on both pin abr and big drop scenario.
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Weekly Bias: Down or pinbar up.
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Monday: I'll set a pending sell order at about the last highs 1.2750-60 area. I have another already at 1.2810 that I'll leave. Monday we expect a run up to 1.2760-80 and an indecision day. Other than the pending orders, I will not be trading.
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Tuesday: Asia ranges or wanders to S/R, London runs the stops above the asian range, the price runs down to our S/R 1.2620. I want in short Tuesday. I will take partial profit at 30 pips, move stops, and leave the rest in for a possible much bigger trend. If it looks like the market will be turning Wednesday, I'll close the entire position. If Tuesday is an indecisive day up (to 1.2820, my ideal scenario), I'd expect a big drop Wednesday and never to return to that price until the new year.
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Wednesday: Asia ranges afraid of making a new low. London runs stops below the asian range. I want in long Wednesday. Since this is counter trend, I'm looking for London to show intention of moving up, then retrace before I get in.
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Thursday Friday - keep moving up to week's open or above at the 1.2820 area.
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If the week continues to go down after Tuesday, we'll just look for London intention and get in in that direction. Last year, this week was a 600 pip drop and I want to be ready for that decisive move if it happens. Our next major S/R is 1.2500 or 1.2400. I wouldn't mention 1.2500 except that it is several psychological levels combined and should provide solid support for some scalp trades up.
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To be fair, I watched Sive's analysis yesterday. He thinks were headed down to the same 1.2620 area (he says 1.2635) but thinks we may be due for a retacement. For this reason, I was previously expecting a strong drop off but am planning for a pin bar, in addition to the drop off. A drop would help my two orders that are already at about 200+ pips in profit. I will close these if we hit our 1.2620 target. If I get a 300 pip trade in profit, I will post a screen shot and send that image as a trophy to my family who are rooting for me in this adventure.

 

[WaveRider]

GBP at hard resistance and the commercial traders are selling it. Than can only mean...

Chart 1 is the commitment of traders report. It shows commercial traders, the real market movers and the most informed group, are more net short now than they have been in over a year. Open interest, the total number of open futures contracts, is very high showing this is a very active futures asset and it is not the dumb money that is trading this with one another, but the commercials that are selling this.The commercial shorts account for about 70% of all contracts open right now. This is a very good sign. Also, GBP bond yields are very low, getting lower and have diverged from the USD and EUR (German) bonds, putting down pressure on this pair. With the "fiscal cliff" garbage mostly resolved this should mean a boost in the UDSX helping us even more. Sell baby. Down trends are generally stronger than uptrends.

I was glad to see this great rally up near the 1.6300 level, a major resistance and the top of a very large range with a trendline sitting at 1.6330. This gives a very firm confluence resistance. It allows us to get in very high with the down trend that I think is about to happen, and it gets all the uninformed traders long allowing the banks to take em all out of the market, which they need to do to fill their orders. I've already sold this pair 4 or so times in the last week for 3 modest wins but I didn't scale in yet. I'm hoping, as usual, to scale in, take profit after about 20 pips, move stops to BE and leave the rest in for another killer move down while adding to the omve on retracements on the 1h and 4h charts. We are not due for a seasonal low until April but who knows how long this will last? I'm happy to trend down for a couple weeks, though I think it should go a little longer. The next major support is about 1.6100 and then about 1.5820. I'll take all my profits off probably about at the lower target if it all looks clear. I will trail stops using fractals so I may get whipped out of some positions but it's okay, I'll just sell again.

The markets are opening again tomorrow on a Wednesday after a great really up and Wednesday is very often the day the market reverses in the weekly candle, though Christams week, the turn didn't happen until Thursday. I'll just get in since we are already at the 80% or higher retracement of the last major swing and put stops above 1.6300 by about 50 pips. I risk 2% or less and as soon as market flow breaks to the down side again, I'll move my stops. My last run with a 12% gain was risking only about 0.5% and sometimes 0.25%.

Ideally I want to see a run at 1.6300 and maybe a nice stop run but I don't think it will make it up that high. Wed maybe we'll see 1.6280, then London sells off for the rest of the week.

 

[WaveRider]

Very cool. We tanked today and since it is Wednesday, we are very likely to see a down tomorrow too. Closed below the WPP. Hoping Asia will retrace up to let us get short again tomorrow. My platform is US based and didn't open until this morning. My UK demo platform showed Asia ran the market up to 1.6350 "because of fiscal cliff news". They did the same thing on the election of Obama. If I had been live, I would have gotten stopped out but I actually sold in the demo at 1.3300 on the fiber for +25 pips.

Will sell the Fiber if it hits the WPP during asia and am looking for a stop run at that level. Will sell during Asia if price hits 1.6280 on the cable, an institutional level. Either way, am looking for a stop run north in the morning and then another down day. I'm ready to scale in already...