NZD/CAD - Trend Reversal

NZD/CAD - Trend Reversal

Dollar Index - Daily Chart

(Click on the chart to enlarge it)

NZD/CAD - Daily Chart

(Click on the chart to enlarge it)

Hi Traders

Happy new year to all of you, I hope 2014 will better and profitable year for us.

Here is something I found interesting, although the watch list we received from FPTT team couple of days ago suggests that we should look to long on NZD/CAD but I believe that all the technical suggests that trend is reversing.

The dollar index is looking bearish & USD/CAD has got high test bar while trend loosing its esteem. This indicates CAD strength against USD weakness. NZD/USD doesn't look strong as its moving sideways. So I believe that CAD will be stronger against NZD.

It looks a nice opportunity which qualifies following points.

1. Strong level of Horizontal Resistance. (its not available as this chart is on all time high)

2. RSI Divergence                                  (Strong one)

3. FIB Extension level                             (1.27)

4. Bearish Price Action                           (High Test Bar)

Gap Up / Gap Down Bars & Support Resistance Levels

Hi Traders

I would like to share something which I worked out, tested & found out amazingly helpful in my trading, as it improved my trading a lot.

Most of us struggle to find good support & resistance levels, normally we find them by having a look at historical touches but they can be find out easily by recognizing the Gap up or Gap down bars as shown in the charts below (Gap Up bars are indicated by green arrows & Gap Down bars are indicated with red arrows).

How to recognize them:

They are normally oversize bars compare to the bars around them, the reason they are called Gap bars is that if you remove them from the chart you would see a price gap (the bar behind & after the gap bar would not connect together so you will see a gap in price).

Why Gap bars are important:

Composite Operators or Big Boys (Central Banks traders, Commercial Institutions, Hedge Funds & Trading Syndicates) regarded as Smart Money because they out perform the rest 90% of traders in the market. Whenever they complete a campaign of Accumulation (buying cheap) they starts mark up phase or mark down phase after Distribution (selling high). They are well aware of the areas where supply is present which is the biggest hurdle in their mark up or mark down phase. These area are the SR (Support & Resistance) levels.

Smart Money always uses the path of least resistance so we always see that the price hover around the SR levels but whenever they want to cross these supply areas they have to cross it really quick in order to deal with less supply, this is where we see price jumps & causes slippage or re-quotes. This activity plot the Gap Up or Gap Down bars which we can use to plot SR levels (supply areas), the volume is always high on these bars. Volume acts like an accelerator in your car, if you want to go through a steep up hill, you press hard the accelerator in order to generate enough power to pass through that hurdle.

Failed attempts to cross the SR levels (to go up or down):

If Smart Money fails in crossing the SR levels because they find too much supply to deal with, price returns. Just like if you want to go through a steep up hill, you press hard the accelerator in order to generate enough power to pass through that hurdle but find out that it is impossible for your car to cross that hurdle, in result car comes back.

We as retails traders can anticipate these failed attempts & exploit these opportunities in order to generate profits. These failed attempts can be recognize by volume with price action bars, the volume would be high & price action bar would normal or narrow in size with the closing price in the middle or off the low/high. That is the place where we see divergence on oscillators (RSI, Stochastic, MACD or Momentum indicators).

--------------------------------------------

Using Gap Up / Gap Down bars is quite useful in Intra-day trading as well. By recognizing these gap bars you can anticipate the moves with amazing accuracy along with other indicators & technical analysis. I know some times it really hard to learn or remember these thing in the technical way so I always think in general way that if the car (price) crossed that hurdle (SR level) on full accelerator (high volume) then it will go ahead & will not come back soon so I take the trade in the price direction with the help of other indicators & technical analysis. In other scenario if the car (price) couldn't cross that hurdle (SR level) on full accelerator (high volume) then it will reverse & come back so I take the trade in the reverse direction of the price with the help of other indicators & technical analysis.

Please let me know by comments if this helps.

Note: The above information is for educational purpose only so you should practice the idea on demo account.

CAD/CHF - Trend Continuation (Short)

CAD/CHF - Trend Continuation (Short)

Chart with historical touches

Chart with historical touches

 Current Daily Chart

Hi Traders

CAD/CHF is retesting 0.8850-0.8870 range which acted as a good support & resistance level. The pair is in down-trend since August 2012 in Weekly chart & since May 2013 in Daily chart. RSI is in convergence in Monthly, Weekly & Daily time frames.

IMPORTANT: Trade will only be valid if current bar closes at 0.8848 or lower which will make it a high test bar.

Pair scoring following points for Trend Continuation:

1. Lower Highs & Lower Lows
2. Below 50 & 200 EMAs
3. Horizontal Resistance                         (0.8850-0.8870 range)
4. RSI Convergence
5. Bearish Price Action                           (Possible High Test Bar)
6. No Major level of support in the way
7. FIB resistance level                             (Retracement Level 0.382)

PS. CAD & CHF both are becoming weaker in their crosses, so this trade might not trigger & hover around & below the range.

My observation about yen pairs

Hi Traders

I would like to share my observation about Yen pairs with you. I experienced that the Yen pairs are quite volatile, some times volatility of Yen pairs is strong enough to throw out any high probability swing trade.

There are couple of following points I consider when I take the trade on Yen pairs.

1. Bar Size:

Some of us are always in doubt in determining the size of the set up bar in Yen pairs whether it is normal or over-sized bar? because most of times the bar size in Yen pairs is over 100 pips. If we analyse this in isolation certainly those bars are over-sized but for Yen pairs this size is normal as their volatility justifies it. Still some of us think that any bar over 100 pip size is over-sized bar & not suitable to place the trade.

I have taken guidance on this topic from my K2A coach who gave me a really good tip. He advised me that I should take help from ATR(20) reading whenever I am not sure about the bar size; as it averages the last 20 bars & gives the average bar size. If the set up bar size is near or not far from the ATR(20) reading then the bar size is OK to place the trade as long as trade opportunity ticks all other check boxes in the list.

If you check the ATR(20) reading in all Yen pairs, you will find out that all readings are over 100 pips which means that in Yen pairs its normal to have a set up bar over 100 pips size. So whenever someone is not sure about the bar size s/he should take the help from ATR(20).

I personally don't feel comfortable to place the trade on Yen pairs if the bar size less than 100 pips, as volatility can stop out the trade. In this case I only use half a percent risk per trade if I find a potential high probable trade.

Don't forget that Good Money Management & Capital Preservation are the keys to stay in the game, as trading is not about how much money we can make, its about how much money we can afford to loose.

2. Major News Releases

Although our X-Risk Manager Mr. Tom Franklin advised us to consider only Non-Farm Payroll but I found out that some of Monthly or Quarterly news (e.g. FOMC) also has enough potential to throw out any high probability trade just like it did few days ago.

Its my personal opinion that before placing the order we should check that whether next day

* Is there any Monthly or Quarterly news coming out?
* Is there Mr. Ben Bernake (Chairman of US Federal Reserve) / Mr. Mario Draghi (President of European Central Bank) or Mr. Mark Carney (Governor of Bank of England) speaking?

If there is a news like that then we should check the news impact on concerned currency pair in the past (at least last three times) & should analyse this impact it created in . If the bar on news day engulfed the previous day's bar then we should know that our trade can be dangerous & risky, I will personally avoid that. So far I have found FOMC news release which creates enough volatility to stop out the swing trades. I got bitten by FOMC news release once in past.

So be careful to place the trade on Yen pairs if there are big news announcements next day as they are already volatile & these news announcement makes some vicious moves. This check carries more weight if the swing trade is being placed according to the Prop trading rules due to tight stop loss unlike Income Generator which has wide stop loss so its less vulnerable.

This second check is not just for Yen pairs only, I consider it with all other pairs as well .

                                                                 - - - - - - - - - - - - - - - -

I would like all the readers of this post to share their experience & observation about Yen pairs. I would love to see what others think about it. So please don't hesitate to share your experience as this way we can learn from each other.

EUR/JPY - Trend Continuation (Short)

EUR/JPY - Trend Continuation (Short)

Hi Trader

I am pleased that one of our USD/CHF made nearly once percent profit, unfortunately it stopped because of volatile swing due to major news on US$. Anyway it was a winner.

I shared EUR/JPY - Trend Continuation (Short) few days ago, today its giving us opportunity to go short. As you can see that its making a beautiful downward channel, its hitting the top (resistance level).

Its seems a high probable trade which is scoring following 7 points.

1. Lower Lows & Lower Highs

2. Horizontal Resistance                          (Soft level SR level 130.70)

3. RSI Convergence

4. Bearish Price Action                            (High Test Bar, Nearly Doji as well)

5. No Major level of Support in the way

6. Fib Resistance                                      (0.618)

8. Trend Line Resistance

Unfortunately today's bar size is about 130 pips so the prop traders on half a percent risk won't be able to take this trade. 

EUR/AUD - Trend Continuation (Short) on Radar

EUR/AUD - Trend Continuation (Short) on Radar

Hi Traders

Today when I was looking at the charts I found a potential opportunity which may rise in a week or so as I showed expected move with blue arrow. We are seeing that Euro is getting weaker & Aussie dollar is getting strong against US dollar so consequently they may start a downtrend in their pair.

What I am looking is a downward break of 1.4450 level to go in the old range & then retest of this level. If its turns out as I am expecting then it will be a second cycle & would give us good opportunity to go short.

EUR/JPY - Trend Continuation Short

EUR/JPY - Trend Continuation -Short

Hi Trader

I am pleased that one of our trade from my last post (USD/CHF) is going in right direction & we will lock few pips profit tonight which will give us  some relief & put us in win win situation.

Here is another one on EUR/JPY - Trend Continuation (Short). As you can see that its making a beautiful downward channel, its hitting the top (resistance level). I am sure that its going to be a high test bar tonight.  US "Core Retail Sales" report came better than expected which gave strength to dollar & knocked down Euro.

Euro started a down-trend in 4 hour chart while USD/JPY is moving sideways in 4 hour & hourly but it started coming down in lower time frame. This scenario gives us enough confidence in addition to a nice channel on EUR/JPY.

Its seems a high probable trade which is scoring 8 out of 9 following points.

1. Lower Lows & Lower Highs

2. Finding resistance off 50 EMA

3. Horizontal Resistance                          (Soft level SR level 130.30)

4. RSI Convergence

5. Bearish Price Action                            (High Test Bar)

6. No Major level of Support in the way

7. Fib Resistance                                      (0.618)

8. Trend Line Resistance

Unfortunately today's bar size is about 138 pips so the prop traders on half a percent risk won't be able to take this trade. 

My Short List

My Short List

EUR/USD - Trend Continuation Long

USD/JPY & EUR/JPY- Trend Continuation Short

USD/CHF - Range Based Reversal Long

EUR/CAD - Trend Continuation Long

Hi Traders

First of all accept my apologies for being away from this blog due to holidays & some other business. Here is my short list which I am looking at in these days.

EUR/USD - Trend Continuation (Long)

Finally its seems that euro came out from 1.32 - 1.33 range & now I am expecting to have a pull back on 1.33 level to go long.

USD/JPY & EUR/JPY - Trend Continuation (Short)

Both pairs started channeling nicely in a predictable short term downtrend. Phase 1 is completing today so we have to wait for a pullback up to the top of the channel, to go short.

Last cycle setup on USD/JPY was excellent but price action didn't form a reversal bar to allow us to go short. I hope this time any of this pair can give us something worthwhile

USD/CHF - Range Based Reversal (Long)

This pair is hitting its floor. RSI developing a divergence while price action is extending to touch/fall in the FIB Extension level of 1.272.

EUR/CAD - Trend Continuation (Long)

This pair broke 1.38 level today & taken out the 24th June high. Just like euro I am expecting a pull back on this level to go long.

EUR/JPY Trend Continuation

EUR/JPY Trend continuation is scoring following 7 points

1. Higher Highs & Higher Lows
2. Above 50 & 200 EMA
3. Horizontal Support                         (131.15)
4. RSI Convergence
5. Bullish Price Action                        (Doji Bar & Inside Bar)
6. No Level of Resistance in the way.
7. FIB Retracement support               (0.382 - 0.50)

AUDUSD - Range Based Reversal

Daily

Weekly

Monthly

Hi Traders

AUDUSD setting up to go long in Range Based Reversal set up & scoring following points.

1. Strong Level of Support (1.0154)

2. RSI Divergence              (there is strong divergence on Stochastic & Momentum as well)

3. FIB Extension Level       (Between 1.27 - 1.618)

4. Bullish price action          (Inside bar & low test bar too)

5. Flat Moving Averages.

AUDNZD Trend Reversal - Long

Monthly

Weekly

Daily

Hi Traders

Warm welcome to all new fellow traders on the largest portal of K2A students after Adam Harris promotion to the blogs, so kind of him to take such an initiative to help us. So far 42 students are on board with us which is really cool.

AUD/NZD is setting up nicely for Trend Reversal to go long, its completing following check list for Trend Reversal.

1. Strong Level of Horizontal Support (1.2050)
2. RSI Divergence
3. Fib Extension Level (1.618 - 2.000)
4. Bullish Price Action (Low Test Bar)

Strong level of 1.2050 is on all charts (Monthly, Weekly & Daily) so its a very strong level of support which makes trend reversal quite likely.

PS: Unfortunately the trade size is 104 pips, so the prop traders on half a percent risk won't be able to take this trade.
 

EUR/USD (Weekly) - Head & Shoulder Pattern

Euro weekly chart is making Head & Shoulder pattern which is a strong reversal pattern. We are having some negative news from Germany in these days which could be an addition to downward move.

EURCAD - Continuation Long

 Hi Traders

EURCAD is setting up to go long nicely, retraced upto 0.5 Fib level. It seems a high probable trade which scoring following 7 points.

1. Higher High & Higher Low
2. Above 50 & 200 EMAs
3. Horizontal Support              (1.34 Level)
4. RSI Convergence
5. Bullish Price Action             (High Test)
6. No Resistance in the Way
7. FiB Retracement Level        (Support at 0.5 Retracement Level)

There is no hard level in the way apart from a soft level of 1.3523 (previous high), which looking at it conservatively still makes makes it a 1.7:1. Assuming a profit potential till 1.3610  makes it nearly a 3:1. 

CAD/CHF & AUD/NZD

CAD/CHF (Trend Continuation - Short)

 



1. Lower Highs Lower Lows
2. Below 50 & 200 EMA
3. Horizontal Resistance (0.9100)
4. RSI Convergence
5. Price Action (Doji Bar)
6. Fib Retracement Resistance (0.50%)

The only concern is the hard level of 0.9032 is in the way

AUD/NZD (Trend Reversal - Long)

 



The pair is on its strong monthly, weekly & daily support level of 1.2172. RSI is giving strong divergence signal while made an inside bar. The only missing thing is Fib Extention level which I am really wondering about as couple of week ago EUR/AUD same scenario happend when it wasn't giving any Fib Extention level but it was profitable trade. Even in USD/CAD & EUR/CAD in Trend Reversal trades (last few weeks) there was no Fib Extention level but the trade turned out profitable.

So the recent oppertunities of Range Based Reversal & Trend Reversal missed out due to no Fib Extention level but they all turned out profitable.

AUD/USD Continuation - Long

AUD/USD Continuation - Long

Hi Traders

The game is still ON, the current bar is going to be an inside bar bouncinf off a soft level of 1.0385. The only concern is its retracement which is deeper than the retracement of previous cycles which could be a start of downtrend but so far its checking all the boxes for an uptrend continuation trade.

AUD/USD (Continuation Long)

AUD/USD

Long Continuation

 

Please click the chart to enlarge it

 Hi Traders

AUD/USD is setting up to go long nicely, retraced upto 0.618 Fib level. It seems a high probable trade which scoring following 7 points.

1. Higher High & Higher Low
2. Above 50 & 200 EMAs
3. Horizontal Support              (1.03932 Level)
4. RSI Convergence
5. Bullish Price Action             (Inside bar)
6. No Resistance in the Way
7. FiB Retracement Level        (Support at 0.618 Retracement Level)

There is no hard level in the way apart from a soft level of 1.0493, which makes it 5:1 profit potential if it goes upto to that hard level.

NZD/CHF

Ascending Trianlge (Continuation Pattern - Long)

Please click the chart to enlarge it





Hi Traders

Today I noticed a trend continuation pattern Ascending Triangle on NZD/CHF daily time frame (Top Chart). I have drawn the expected price action move with blue arrows which normally takes place in Ascending Triangles. Once it breaks the level of 0.7870 & retests it, it will give us a nice oppertunity to go long; the next SR level would be 0.8025 which hasn't been broken since June 2008. The profit potential of trade will depend on the size of setup bar, which could easily be 2 : 1.

Bottom chart is weekly chart which is making an uptrend channel, the phase 2 has been over extended sideways thats why it was showing a long consolidation period in daily time frame

If the price action breaks & retests the SR level 0.8025 then it will be a strong bullish move. Alternatively if the this level rejects the price twice within a span of two weeks, it will form a nice divergence on RSI(6) which will be an opportunity of Trend Reversal.

This pair is on my radar now as the opportunity can rise in couple of weeks. Any suggestion is welcome, please do comment to give your opinion.

GBPAUD Continuation Short

Same story with GBPAUD as a continuation short.  Unfortunately at approx 140 pts risk those of us on half a percent cannot take this trade.

 

1. Lower lows and lower highs

2. Below 50 & 200 EMA

3. Strong Horizontal Resistance at 1.4635

4. RSI Convergence

5. Bearish Price Action (High Test Bar)

6. No level of support in the way

7. Fib Retracement Level 50%

 

I've taken USDJPY (long) and GBPAUD (short) on my retail account.

USDJPY & AUDJPY

Trend Continuation (Long)

Please click on the chart to enlarge it

 

 

Hi Traders

 

As Tom suggested the Yen trade which turned up exactly in  the way he described but sadly all of us who are on half a percent risk per trade can't take the trade on any of the above two pair because setup bar size in USD/JPY is about 150 pips & in AUD/JPY is about 200 pips which means no trade for the prop traders who are still on half a percent risk trade but the traders who are at one percent risk per trade can take both trades.

 

USD/JPY

 

Scoring following 7 points, Highly probable

 

1. Higher High & Higher

2. Above 50 & 200 EMA

3. Strong Horizontal Support at 94.00

4. RSI Convergence

5. Bullish Price Action (Low Test Bar)

6. No level of Resistance in the way

7. Fib Retracement Level (between 0.382 & 0.5)

 

AUD/JPY

 

Scoring following 6 points, Highly probable

 



1. Higher High & Higher

2. Above 50 & 200 EMA

3. Strong Horizontal Support at 94.00

4. RSI Convergence

5. Bullish Price Action (Low Test Bar)

6. Fib Retracement Level 0.382



EUR/USD - Big Long move on Horizon

Please click on the chart to enlarge it

Hi Every one

It seems that Euro's is like a sport car with breaks on but engine revs are increasing, as the SMART MONEY let off the breaks it will shoot up like lightening, until then it will consolidates (if not long).

RSI 6 is showing strong divergence not just on Euro (top chart) but on Dollar Index as well (bottom chart), MACD & Stochastic are diverging too. Although fundamental bias is bearish as NFP came with positive figures of 236,000 (jobs added) well above the forecast 160,000 which paused any potential trend reversal technicals are pointing. The only thing stopping me to go in this trade is that there is no FIB Extension, apart from that other three are present.

1. Strong Horizontal level (1.2970 & 1.3000 are making a buying zone)

2. Inside Bar (it look it will be an inside bar by 2200 GMT.

3. RSI Divergence

SAJ