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Archive for the ‘Price patterns’ Category

Monday 04/14/08

  • Currency trading end of last week into this week is like the Abbet and Costello “Who is on first and what’s on second” bit, confusing and violent.
  • G7 Language was purposefully vague not referencing China’s currency but general currency fluctuations- market tried to anticipate intervention action which caused more violent price action overnight and through today’s trading sessions.
  • Sunday Asian and European markets took the time to reduce risk led by Fridays’ GE news and US equities had potential and going into today to sell off dramatically – WAMU posts poor earnings prompting dollar selling and JPY holding steady while SKF rises. While US markets holding up steady as well – By commodity stocks and a weak dollar
  • Commodities rally while the currencies struggle??? Re-iterate the strong correlation between $ and Commodities. Highlighted by NY trading session.
  • Promptly discount US retail sales – housing later on this week could be a catalyst
  • UK housing tonight watch for a drag on the good news overnight of PPI input
  • NZD might be showing some weakness on Retail overnight and then CPI tonight may put a drag on the bear flag on the AUD/USD 4 hr chart
  • What are pro CTA’s doing YTD: 2.5% to crack top 10, 27% to be par with #1 ytd leaders managing over a mil and under 10 mil

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gbpjpy1.jpg The pair finally broke from its triangle – down, as I long expected. Freaking heck that took long enough. Usually went it goes sideways for a good while it breaks out and acts like a teenager with long pent-up energy – it goes bananas. I circled previous times like this in the last several months. It should be good for a good many hundreds of pips so enjoy the ride!

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I am updating the price pattern section, finally. I’ve started with Triangles. If you don’t know much about these, enjoy!

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head_and_shoulders_classic_clean_dandruff_shampoo-resized200.jpg Heads up (haha) –  commodities ($CRX) could be forming a head and shoulders, which is a major reversal pattern – by the way, I plan on updating the Price Pattern section very soon, so more discussion on Heads and Shoulders there stay tuned. See how I am looking at it in the chart. I try and look at a variety of markets, but when starting out I recommend remaining focused on the pairs you’re monitoring. That said, here’s some thoughts to consider:

 

commodities.jpg If commodities make a run lower, what does that mean for currencies – specifically, pairs that have been on a good run?

What pairs are especially affected by commodities?

How do commodities fit into the grand scheme of things? (think: global economy)

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eurusd1.jpg EUR/USD continues its bounce, and today the Stochastics crooked up – and out of oversold – on the 3 green arrow (Workshop) study set. If the pair was just above its moving average that would be perfect. But that’s the problem. The pair, technically, is not uptrending. It’s in a bit of a funk, in this triangle pattern. Real aggressive people would buy on this signal. Real aggressive usually = you’ll lose money, unless you’ve developed some edge. At any rate, it’s looking up for the pair.

The best buy signal using this method would be everything you see here AND the pair is making higher highs and higher lows.

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eurjpy.jpg The pair broke down from a triangle and is heading back up and is now at resistance. Is a retest in the cards? We’ll see. Examples of possible, simple entry signals in line with the trend are in the green ovals where the fast stochastic line crosses below the slow line. Notice how we are looking to “buy in” to the current rise for a better price, after we see a bounce down and an entry signal.

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dow.jpg Stocks got a HUGE “denied” today as they failed to overcome former support/now resistance (was the old head and shoulders neckline) and came down forcibly from it. See the green oval on the lefthand chart.

 

 

eurusd-triangle.jpg This is a classic “retest”, having broken out from a technical level. What does it mean for the pairs? In my book it’s a big signal to get frisky again with the yen and franc, and back to be careful/be bearish with the more aggressive currencies such as the euro. Look at how the EUR/USD has come down hard from the resistance we’ve been watching.

This is also a good example of how intermarket analysis can help in currency trading. Disclaimer: if you are starting out, don’t think you have to know all this and do it! You can do fine without. But I’ve found it helpful to me as I’ve adavnced over the years.

dowvolume.jpg Stocks have the bonus of having volume attached to their prices. Rising volume supports price movement, falling volume weakens it. We can put volume on DIA (mirrors the dow, and has volume on it) and see a picture of the bears being strong and the bulls being weak (see chart on left). As we see this unfolding, it helps us feel more bearish and bullish of certain pairs because stocks continue to lead currencies in a lot of ways.

Bottom line: as stocks continue downward, so will most pairs, and the yen and franc will strengthen!

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