Alternative Technical Templates.

[Jocelyn]

How do you ascertain that it's an actual reversal & not merely a pullback?
In other words, what do you use to differentiate between the two?

If you're trading primarily off 4 hour charts, you're going to have to be awful patient in allowing price action to tip you the nod. If not you're going to get tangled up attempting to trade reversals when in fact they're likely to be pullbacks in the dominant trend.

One option would be to drill down into a smaller timeframe or two. Maybe a 30 or 60min? That would highlight any early potential topping or bottoming formations playing out at your previously drawn s&r zone.

[John P.]

Here is a chart of the GBP for today (July 31) that I thought was interesting, although it is trend (channel) lines and not horizontal S/R that is the interesting part (hope thats okay).

US GDP was released at 830 am New York time. The actual number was below expectations and the USD weakened against the field. However, the dollar began a retrace within the hour. With the GBP, the retrace completely reversed the initial reaction to the news move (5 pips from 100% retracement). The part I found noteworthy for the purposes of this thread was the reversal zone on the GBP created by the intersecting trend lines of opposite slope.

The attached 15M chart shows two upper level lines. The downsloping (blueish) is the top line of a downsloping trend channel from the 240M chart. The upsloping (goldish) is the bottom line of an even longer term upsloping trend channel on the daily (once support, now resistance). I just thought the intersection zone and the effect it had on price was worth pointing out (and wanted to bump the thread too )

[Tess]

The big advantage of researching & familiarizing yourself with a trusted set of rules is to offer you an edge.

As long as you're confident it offers you a better than average chance of staying alive out there, then you can observe whatever it is that attracts you to the chart.

Simple is often best. Less to complicate the chart & more importantly, your head.

Price action is the seed of everything. If your set-ups or strategies are wrapped tightly around the basics of price action, then I guess you're making life a whole lot easier for yourself.

If you can work a consistent game play around those trend lines & channels John, & your risk model sits comfortably alongside it, then you're good to go.

A well versed set-up/strategy should afford you confidence that when it all lines up, you don't hesitate in pulling the trigger. You know where price is at now, & you got a marker for where you're going to make your next decision if price makes a run for it. Your back up or insurance is obviously your stop-loss, but that's all part & parcel of the plan anyway.

Your lines highlighted an upper level on the 15min chart to maybe think bout taking action. I also had that zone earmarked for pretty similar reasons.

Only my markers were horizontal (my weapon of choice!!).

That upper zone highlighted on the accompanying charts showed a previous level of bearish activity or supply. Price found fair value there for a while before dropping hard out of the temporary consolidation zone.

We got lower tops on the hourly going back a couple weeks & the fundamentals aren't exactly wearing a smiley face on the British economy of late, so I guess marking up that zone around 1.9925-50 was a fair option in my book? In my view we still got short-term downside momentum.

As price revisits the zone of interest, you can then drill down into a lower timeframe of choice & pick a trusted set-up to signal you in if circumstances dictate.

As long as you can identify an area to get you out if things wash out, then you can look down from where price came & plan for a timely exit or partial pare-off.

I've chosen the James 15m IB-OB/stochs set-up on this example, as it's a very popular little set-up - but you could just as easily use one which favors your own preference.

The point being.............once you recognize the behaviour traits that price is displaying (be they horizontal lines, angular lines or a combination of both) you need something as back up to get you in on the action as safely as possible.

[Tess]

I hope one or two viewers are rolling the (short) dice on this pair. Picking up from the previous post, the recent depressed behaviour is continuing to play out, bouncing off the s&r range boundaries & offering low risk/higher reward opp's for directional trades.

Again, identifying your s&r levels...ranges...consolidation ledges - call them what you will, makes your job easier when looking to wrap your favored set-up triggers around the game play.

Whether you wish to play the naked break-out or wait for a pullback, the momentum is still in your favor, allowing not only a clear objective trade, but also a decent positional stance for an emergency stop-loss exit in case price fails to play ball.

A quick glance at maybe your 240min timeframe will offer some potential lower support gauges should price continue to drift.

[John P.]

Only my markers were horizontal (my weapon of choice!!).

OK, I admit that made me smile out loud.

We got lower tops on the hourly going back a couple weeks & the fundamentals aren't exactly wearing a smiley face on the British economy of late, so I guess marking up that zone around 1.9925-50 was a fair option in my book? In my view we still got short-term downside momentum.

Now 300 pips lower (and counting).

I know you look at zones of consolidation or perhaps "fulcrum" areas. Do you also work the various patterns, such as wedges, pendants and the like? See attached 240 GBP for July.

Also attached up to the moment GBP 15m post US weekly UE data, post MPC statement and while Trichet is speaking.

[Jocelyn]

No, we don't pay any attention to chart patterns as a rule John. That's not to say anyone else shouldn't - just that we don't have any use for them at all in our technical observations.

Re; your GBP chart. We're not currently buyers of that pair. It's in a confirmed downtrend, as referenced by the 240 & 60 minute charts.

We're only interested in & focused on shorting that pair

[4xStar]

Originally Posted by Jocelyn

We're only interested in & focused on shorting that pair

Wow, this is a contrarian view .. everywhere else I am reading how "oversold" people think it is and especially after this big Trichet-drop, everyone says "buy". You think it is going to take out the lows of June, May, Feb and ... Jan?? Do you have a downside target? And more importantly, after this last big drop, what bounce point would make a good short entry??
My estimate is 1.9521 which is the 200 ema on the 15'

Any merit to this?

[Tess]

Wow, this is a contrarian view

Hi 4XStar,

You think so?

Well, we’re looking at the 4 hour & 1 hour timeframes here & they’ve been telling us to short thru 2.0000 since last week of July. We got unseated 1st time we traded it back on the 17th (July) when it bounced back, but once we got our value seat the second time around it’s been a case of adhering to the peak-trough behavior and “going with the flow” as normal. The fundamentals have steered this pair quite clearly since end of 2nd quarter to be honest, so it hasn't been a very difficult decision process to remain on the 'short' side.

[I].. everywhere else I am reading how "oversold" people think it is and especially after this big Trichet-drop, everyone says "buy". [/i]

That’s maybe one key reason why most folks come quickly unstuck in this business. We don’t pay any attention to what other folks are saying or levels they’re calling. All we need is there right in front of us on the technical charts & in the quality newswire missives. We definitely ignore all the talking heads & analyst predictions.

You think it is going to take out the lows of June, May, Feb and ... Jan?

I’ve no idea 4Xstar, we’ll just continue to do what we normally do & allow our support-resistance zones to guide us as/if prices continue to plunge the lows. We’ll get ready to peel off & change from shorts to longs as soon as the 4 & 1 hour peak-trough behavior tells us to & the specific fundamentals begin to favor a change in bias.

Do you have a downside target?

Nope, we don’t do targets buddy. We let the market find it’s fair value levels & try get aboard at our normal execution zones according to our take on the environment.

And more importantly, after this last big drop, what bounce point would make a good short entry?

A good short entry would be when prices pullback & fail to take out the previous lower high swing point. Providing the price action sets up according to one of our trigger entries & we can get a decent risk guage, then we’ll add to our shorts.

My estimate is 1.9521 which is the 200 ema on the 15' any merit to this?

If that’s one of the price aid triggers you use, then I guess you got to assess whether it offers you sufficient information & confidence to take it on at the time?

[4xStar]

Thanks for the detailed reply. I am interested in learning to trade this pair & I like the simplicity of this approach

Originally Posted by Tess

A good short entry would be when prices pullback & fail to take out the previous lower high swing point. Providing the price action sets up according to one of our trigger entries & we can get a decent risk guage, then we’ll add to our shorts.

Ok .. also from reading the early posts, I think I am getting what you do .. basically just draw trendlines and s/r lines on the 4 hour, then when a trend develops you go to lower timeframes, 60 and 15 min to decide entries based on s/r lines drawn there. You also pay attention to news that might influence direction, right?
In this case, you would look at the last sh which is the same on the 4h and 60 min .. 1.9536, so price needs to retrace and establish another sh that is lower than that one .. and this needs to happen on the 4 hour? Or can it be 1 hour, or is it discretionary?
Do you want to see a min fib retracement before establishing a lower sh?

And for s/r levels do you use weekly, daily, monthly s/r levels as well or only draw your own?

Thanks for the input .. very informative thread!

[Tess]

Ok .. also from reading the early posts, I think I am getting what you do .. basically just draw trendlines and s/r lines on the 4 hour, then when a trend develops you go to lower timeframes, 60 and 15 min to decide entries based on s/r lines drawn there.

We don’t utilize trendlines 4Xstar. We prefer to observe & act upon the natural oscillation of price which prints it’s (swing) high-low behaviour above/below, on & around our support & resistance (supply-demand) zones.

Yes, the 4 hour graph is my primary template timeframe. I’ll plot the majority of my s&r zones from that graph reference. Jocelyn’s favored template is the 1 hour timeframe, which a couple of our colleagues also reference, so we tend to confer regularly on the validity of specific zones & levels throughout the trading week.

When a particular area of interest begins to blip on our radar, we’ll drill down into a smaller timeframe if necessary to get a better view of the level & see if one of our favored triggers can get us aboard at a value (risk compatible) price.

You also pay attention to news that might influence direction, right?

Absolutely, yes. We’re always aware of what’s printing & when. It might not have a direct bearing on our positions, especially if we’re already onboard & the trade is bedded in – but we certainly won’t look to execute any fresh positions in front of an important economic release.


In this case, you would look at the last sh which is the same on the 4h and 60 min .. 1.9536, so price needs to retrace and establish another sh that is lower than that one .. and this needs to happen on the 4 hour? Or can it be 1 hour, or is it discretionary?

Yes, staying with the current GBPUSD example, the last swing high on both those timeframes is situated at 1.9536. That level would need to be successfully breached & consolidated before we’d consider fully relinquishing our short positions. Ideally I’d prefer to see the next level up at c1.9570 threatened before cashing in our hand.

To initiate another add-in short, then I’d obviously like to witness a reaction failure move back toward 1.9536, yes. Eventually as price begins to wash-out one of these add-ins will fail. That will be the 1st potential warning sign to pay att’n to the behaviour as it maybe begins attempting to base or switch directional bias.

Again, regards the differing timeframes for judging the importance of s&r zones? It’s down to a sharing of views & idea’s. But basically, we’re quite disciplined as to what constitutes a potential change in bias.


Do you want to see a min fib retracement before establishing a lower sh?

We don’t consult Fibonacci analysis or Eliott Wave or Pivots or any other math based configuration. Only horizontal area’s of previous activity (s&r) and supply-demand levels which have influenced the most recent price activity.

And for s/r levels do you use weekly, daily, monthly s/r levels as well or only draw your own?

I use the most recent active zones plotted from the 4 hour template timeframe. The zones & levels plotted on the 4 hour will then automatically be transported down so they show up on all of the lower timeframes as price comes into focus.

Jos & our other colleagues use 60min down to 5 & 15min references dependant upon whichever strategy or model they’re running at the time.