EURUSD Momentum Follow Through OR?

[kayvon77]

Here I come forth with my idea for a EURUSD trade. Being relatively new to the FOREX trading community, I'm trying to tap into the wisdom of y'all who are veterans and know a thing or two about good profitable trades. As the great masters would have it, journaling your thoughts and trades will yield you a better trader. So in that spirit engage with me on this journey to become a better trader and see if we can teach each other a thing ortwo.

EUR/USD

Using a top down approach, so is this a failed support line break of a head and shoulder formation?
Attachment 28186

On the Daily, the Fib retracements shows the forming of a Bearish Gartley "222" pattern. based on this pattern and the latest price action, I'm anticipating a move to the Fib Extension level of 1.618. which coincides with the longterm downtrendline starting from the highs of last August, which also coincides with the 1.30 psychological resistance level. Lots of cross confirmation which increases the probability of our analysis being correct.


Now, can Friday's momentum push us through the 50% retracement level or would this be the area where the momentum reversed. For that we look through the inside price action on the 4-hour and then hourly charts. Looks like our momentum indicator MACD has made quite a new high indicating momentum is intact, however, we're seeing the stochastic as well as CCI oscalitors signaling bearish. Furthermore, we are approaching a 115 pip wide reversal zone (1.2665-1.2750). We'll have to see where the price takes us from this point. Ok, lets check-out the 1 hourly...


Wow, looking at the hourly, it's bearish divergence galore. The latest move has become susceptible to these reversal conditions (check out the chart below). A move below the 1.26433 price level which is a break of a longterm support line would probably bring the pair lower to at least the 1.25224 area.



Summary - So in Summary....If the price clears the 1.26433 area we're looking for a short position in light of the bearish signals on the 4 hour and 1 hour charts, and the fact the price has krept into a reversal zone.
Short - 1.26312, Stop -1.27047, PT - 1.25240 Reward/Risk: (1.45:1)

However, if momentum resume and we take out the 1.2750 high, we're looking for a short term push to the 1.2900 daily fib extension level. So here's our plan:
Long - 1.2755, Stop - 1.27074, PT - 1.28820 Reward/Risk: (2.7:1)

So what you guys think thus far?

[asi212]

Great trade idea. I shorted it at 1.265 and I'm currently up 67 pips. I shorted it because of weak EZ fundamentals, the strong long term bearish trend and on grounds that the Friday spike was an overreaction and due for correction. I literally just picked up two books on harmonic trading and patterns, so hopefully I'll be able to add gartleys and butterflies into my trading soon. I'm still short but preparing to go long for your PT of 1.2882--Every fib level from the jun 29 spike high is showing resistance--so if it starts to reverse or we get good EZ data on Thursday, then I may be going long. Thanks for your analysis

[kayvon77]

Great trade idea. I shorted it at 1.265 and I'm currently up 67 pips. I shorted it because of weak EZ fundamentals, the strong long term bearish trend and on grounds that the Friday spike was an overreaction and due for correction. I literally just picked up two books on harmonic trading and patterns, so hopefully I'll be able to add gartleys and butterflies into my trading soon. I'm still short but preparing to go long for your PT of 1.2882--Every fib level from the jun 29 spike high is showing resistance--so if it starts to reverse or we get good EZ data on Thursday, then I may be going long. Thanks for your analysis

Sounds good Asi. I should probably pick-up some books about harmonic trading. I've learned alot of what I learn about patterns on this website and it has been very helpful. Specially the Gartley formations.

Here's my short trade so far on this pair. It has proceeded nicely with the plan. I shorted at 1.26359 with a PT of 1.25240 which is also the .618 Fib retracement level and seem like good support. I have also moved my Stop Loss to break-even as any quick reversal at this juncture should signal a good bullish move to the upside. We may see a bit of consolidation at this level before the next leg up/leg down. Lets see how we do

[asi212]

I Just picked up "Trade What You See" (Tmoneybags reccomended it) from my college's library. It's a short read and I didn't really learn anything new. I think the most important part is the experience, which will let you get a 'feel' for what levels the price will bounce off depending on what 'clues' are given (such as a really steep CD leg etc).

Here is a Gartley step up which is happening right now on the EURUSD 1hr.


I couldn't find the tool to draw actual lines, so I used trend lines. Point X was in the middle of the news reaction (not sure if that gives the pattern less credibility or not).

[kayvon77]

So looks like our plan worked out pretty well. Absence of any real catalyst for the continued bullish momentum on the pair following the Summit outcome, the pair continued it's descend and found somewhat of a support in the 1.25560 area which coincided with the 50% retracement level of the upmove. There we held through consolidation ready to stop out should the price break above the consolidation range. Following the weaker than expected retail trade report out of Europe the pair broke down through support and proceed towards our profit target of 1.2540, which is where we closed our position.

As of now 61.8% of the Summit move has been retraced. I don't anticipate any substantial move until after the ECB rate announcement tomorrow. Bagging 111 pips was a good way to start the holiday. Happy 4th of July! (Whoever celebrates)

[kayvon77]

How did you do on your EURUSD trade Asi?

[asi212]

After it started consolidating I closed near the bottom of its consolidation range for +59 pips then reopened at the top an hour later. I'm currently at +70 but have been as high at +85 for the current position. So altogether +129 with 59 locked in for sure. I'm watching it closely until the interest rate decisions, but I'm staying in it for now because its still making lower lows and the interest rate decision and speech could make it go lower over the next few weeks. This trade is a position trade for me as-well, so I'll be staying in it and also selling the highs and closing the lows like its a swing trade. I'm also in a EURAUD short which I'm up 160+ pips, so this week has been great so far These past two weeks have been my first serious attempt at forex (First time doing in depth fundamental and technical analysis), and so far i've made back another 10% of my initial 'noob' losses. Hopefully I can keep it up!

[kayvon77]

Sounds super Asi. Great job! Keep it up and remember not to get too greedy . I'm still trying to find a good setup to play the interest rate decisions tomorrow. Looks like you're on the right side of the trend. I'm right now eyeing the consolidation pattern for Aussie/US. What's your take on that?

[asi212]

I've been waiting to short AUDUSD for over a week! but Australia's economy had a great first half of 2012 and apparently the RBA was pretty optimistic about the future yesterday. But that's not assuming the worst for Europe. If the EZ continues to get worse (or we find out it is worse), and China continues to slow down, then the AUD will definitely tank. Also, many economists are saying that AUDUSD and NZDUSD are as much as 20-30 percent overvalued and that the USD is greatly undervalued. So if the ECB is dovish tomorrow and NFP isn't bad, then I'm definitely expecting that to push the AUD down. And from what I've gathered AUDUSD could go WAY down.

Here also is two gartley patterns forming with convergence in the blue rectangle zone (possible price reversal zone).


If it breaks out of consolidation I'll short it with a stop around 1.035. Not sure about a price target yet though.