This is the second time recently I have been caught in a nasty downdraft and with my frustration with GU last night capped off a fairly difficult trading day. In addition to the unexpected and unwelcome stop there is an opportunity cost in not taking advantage of the potential large profits available from the sharp reversal. The 15 min uptrend is still intact but now more vulnerable. The daily confirms the overall strenght of the up move
Looks like a major crossroads here for this pair. Other key pairs also seem to be at their support levels as well. Am not engaged in anything at the moment so looking to pick up some scraps if the opportunity presents itself
Will it, won’t it 
Cable sniffing the top end of this 2 week range into the London close. This is the 2nd real pop at 2.0460 & the Bulls will be seeking a concerted effort here to shoulder prices on the peak-trough ascent off the lower levels of the range.
The weak $ data has certainly assisted this week, & we’ve only got UK GDP left in the data cupboard for tomorrow.
The big guns are sidelined now until after the weekends G7 gig, so the volumes will be lighter than usual.
Worth keeping your wits about you into the w/end to maybe catch a sniff of an each-way punt from these levels if you’re not already positioned!
No nasty surprises this morning then! Prices adhering nicely to the levels mentioned in yesterday’s post (15m chart), affording a continuation ‘long’ at the start of London trade.
Volumes are trailing off markedly now ahead of the G7 w/end. Short-term speculators will undoubtedly be booking profits into the (London) close, & we’ll see where we stand again into early Tokyo trade Sunday night!
Enjoy the w/end
Well we are back at a very familiar number here after yesterdays excitement. Also see Tess’ post a couple back where the same level is clearly marked. Will the bulls now turn this around I wonder
We�ve previously touched on the benefits of plotting & observing s&r levels from the higher timeframes & transporting them down onto your lower timeframe charts for intra-day & week reference.
This saves you from having to constantly flick between different chart references constantly throughout the trading session, as price is moving towards, & reacting to, the particular levels.
It�s also an added benefit if you�re a shorter timeframe trader & prefer to execute your positions via the sub hourly charts. Typically 5/15/30min timeframe traders will find this habit very beneficial, as you�ll be able to focus on your chart reference of choice whilst the price action is moving around the particular s&r line.
The larger the timeframe, normally the stronger the potential reaction to a s&r level. These key price action zones are being observed by different players every day on these pairs & involve differing aims/objectives, resulting in a selection of orders affecting the particular level of interest.
Limit orders, protective stop orders, fresh entries, profit booking opportunities, as well as Option barriers from the large players all the way down to the smaller retail punters add weight & focus to the various levels up & down the price ladder.
We�ve posted charts of differing timeframe values throughout this (& other) thread & when we plot a horizontal line from say a 240m chart example, we�ll leave it on the chart for future reference. Chances are, if the level attracts interest on the way up, it�ll remain an area of potential activity on the way back down also.
A typical example of this has occurred this week on GBPJPY.
I�ve posted an extended 5min chart of Pound-Yen capturing the past couple days activity on this pair.
The key horizontal s&r levels have been present on this pair for quite some time (plotted from the 240m chart), & can be verified by flipping back to page 11, post #101, showing a chart from beg of this Oct.
We�ll always keep the key/main levels on our charts, & will also add-delete minor s&r zones as appropriate.
But, you can see how the relevant levels have once again contained the price action on the Geppy�s (slang for GBPJPY) potential journey this week towards the early October highs.
Of course, these levels don�t always behave in a similar manner, but in the vast majority of instances price will bounce hesitate around them long enough to enable you to confirm & execute according to your specific analysis.
It will offer you the chance to observe whether one of your entry triggers is setting up around the level & also afford you the opportunity of selecting appropriate risk-stop placement & potential partial or full encashment of your trade.
Lets stay with this pair & take a look at today’s current Tokyo activity, leading into this mornings Frankfurt/London shift ahead of the NFP release later in New York.
We got the relevant s&r lines/zones highlighted on our charts, & we can see that prices (on the attached 15min charts) have topped & printed lower highs off 241.35.
Not surprising really, given this pair has has a pretty rapid ascent back up off the mid-month level of 231.0 It�s due a pullback wouldn�t you agree? Whether the pullback turns into another leg down on this instrument remains to be seen, & will be adjudged via Fundamental bias & reflected in the technicals of the chart layout.
So, if you were of the persuasion that Geppy was in for a bit more downside, you could use these near term s&r zones as guides or markers to establish your entry & exit depending on which camp (Bull or Bear) you decided to hang your hat on.
Prices have dropped thru 239.60 & printed a lower high after London closed y�day. It bounced again off this lower support line down here at 237.60 in early Tokyo trade & formed a series of neutral/bearish candles at another lower high around c238.90 (underneath a round number!!!) & offered an entry at 238.78ish if you are a fan/follower of James IB/OB-Stochs strategy.
And as a short-term target you�d have been aiming for the solid support line back at c237.60 for further clues to Geppy�s directional flows.
This level here (237.60) is a relatively crucial zone for this pair, so I�d expect some fierce fulcrum activity. But the point I�m making with these couple posts is: get your geography (s&r zones) sorted out first, then begin to take note of the price action around these area�s of activity.
The clues will reveal themselves via the price action as the various players begin shuffling their hands & positioning themselves for the next stage of activity!!
Couple levels to keep tabs on re: Euro.
This one, along with Cable have been nailed on ‘buy on dips’ to key (4hr+) levels for a good lick of time now.
Remember, if you’re seeking to marry your technical ingredients with the fundamental sweetners, nothing has changed to alter the generic directional flows of outbound $$'s towards Euro’s & Sterling.
Until the Dollar begins to attract support as either a temp safe haven in times of turmoil, or it’s structural climate begins showing signs of dramatic improvement, then the smart money will continue to aggressively sell it off key moves back to (fair) value pullback zones.
Use those levels (& of course your own views) as markers from your lower timeframe charts (30/15/5m) to trigger each-way entries according to your trade plans 
Ok, so here we got the prime example of what I mean by allowing a level to be sufficiently tested before triggering your entry.
It�s imperative you ratchet the risk & value as much on your side as possible, otherwise you leave yourself exposed to fading & faking.
Just stand back & calmly assess the surrounding visuals before you pull the trigger.
Price has already travelled to the plus side of 200 pips into London trade, yeah?
It�s nervously testing a solid s&r zone, & unless there�s a very specific reason, prices rarely punch thru an important level or zone without checking the intent of participants.
This level has previously attracted support (demand) from Pound Bulls & there will again be a decent variety of stop orders resting here.
You gotta allow these stops & ancilliary orders to shake themselves out & show their true hand.
How do you know there aren�t sufficient buy orders residing here to punch price back up the range ladder?
The first signs that the Pound Bulls are being absorbed & overwhelmed will be the failure to negate this lower top behaviour on the sub hourly timeframe, which currently rests @ 237.90.
So, if price begins to fade away around here (237.60) having attempted to push back up, then you got yourself a potentially low(er) risk opportunity to short it, yeah?
It might be asking a little to expect any further aggressive move down today, given the journey it�s already undertaken, but do you begin to see how you can use your patience & discipline to allow price to show you it�s INTENT?
Don�t be in a hurry to buy/sell a level until it�s displayed propensity to either continue or reverse at key levels.
Adopting this principle will save you an awful lot of false stop-outs attempting to front-run a level.
5min chart attached.
Thanks Tess once again fantastic content.
Also for those following James IB/OB trigger, I am sure/hope
you are taking notice of this thread as well, because the trigger
system works, but there is also a need for caution around major
S/R levels.
I in fact love these times when the price hits a major S/R level,
just look how the price interacts with the level, a bit like a goal
line stand at football or rugby, or maybe similar to being in the
red zone. Who will win the battle, bears or bulls?
Okay I do love being in a winning trade more, but these are the
times, with patience, which set up those winning trade.
where exactly do you draw the s/r lines, do you choose from the days highs and lows or just eyeball it across and go with the general trend? are there certain numbers besides the round and fibs that one should be in tune with? some help would be very much appreciated. great thread, i have learned more in one day than i have in quite a few, thankyou to all my teachers! your input really does change lives.
Hi Joanne,
I plot the vast majority of my horizontal s&r lines from the 4hr timeframe.
Basically, what I�m looking for are common & repetitive area�s on the chart where the price bars have reacted to, or been rejected from.
The more times a particular zone or area acts as a magnet from the left hand side of the chart to the current day or weeks action, the better.
I�ll go back as far as 1st quarter if the level or zone dictates. Although the s&r area is plotted via a single horizontal line on the chart, based on the upside/downside activity on & around said line, it�s actually the zone I�m interested in.
Price rarely bounces off an exact pip value. These levels will generally harbour pockets of each-way option, stop & limit activity if they reside at previous weekly, monthly, quarterly highs & lows etc.
The actual s&r line itself will usually expand over a 20/30 pip zone at least. The line merely acts as a guide or marker to draw attention to the action as the bars/candles approaches it from either direction.
Once my markers are plotted via the 4hr chart, I ensure they are cascaded down thru the various lower timeframes so that I can easily scroll thru the corresponding chart references to check on the different candle/bar prints on & around the zone as it hots up.
Reason being, I might wish to exploit a level by employing a different or specific strategy. That strategy might well be based around a 15m or even a 5min timeframe & I�m seeking to trigger my short-frame based entry in accordance with price action reacting off one of my long range s&r levels.
So, there are various aims & expectations which are based on & around these s&r levels as they come into view. But essentially, they�re plotted according to their weight & importance on the larger timeframe map.
I�ve included a current EURJPY 4 hr chart to help explain this posts commentary.
Just to give you a precise example of what I mean, take a look at the price rejection on this chart @ c160.50 on Oct 22.
The 4 hr chart example shows a move down, with a spike into the zone, closing away from it�s lows into the top half of the candle. That bar alone (without referring to any other information) tells me this level requires further inspection.
You can�t quite see it on the example below, but if you scroll out a little farther, you�ll see it acted as a support test in April when this pair was moving north towards the yearly highs.
It reacted again in July & Aug on the way back down before punching thru at the 3/4thrd attempt, before finding resistance/support again on a secondary punch thru to attack the highs in mid Sept.
Which brings us to the last & current occasion where this level acted as a fulcrum & rejection before resuming it�s upward trend flows.
By drilling down to maybe a 30min or 15/5min timeframe as price rejected 160.50 from your 4hrly s&r line, you maybe could have used the level to trigger an entry, knowing it was a pretty solid zone from several reaction points this year?
I�ve also included a 15min chart reference highlighting the usage of combination timeframe observation & how it might have assisted you in determining a possible entry?
See where I�m coming from?
Like anything else, they don�t work 100% of the time, but they do allow me the opportunity of focusing my different strategy tools to enable me to take advantage of a specific level or zone if the risk & potential reward stack up.
Regards key numbers?
Big figures (round numbers) are obviously important if they happen to match up with these s&r zones, as they’re generally played back & forth by the larger players. They quite often house stop, limit & option activty on & around their vicinity, making them obvious focus zones.
I only personally plot Fibs via the Weekly or Daily swing levels, & they’re only really used to see whether a s&r level happens to coincide with a big number like a 50 or 78.6% line.
Other than for casual observational purposes, I don’t bother with them joanne.
That’s a brilliant explanation, Tess.
Since you guys opened my eyes to the significance of S&R levels, I’ve been using them to try and improve my profit taking, as well as informing my entry decisions.
Like a lot of newbies (I imagine), I’ve found it hard to hang in there with a winning trade - I find the temptation to take profit based on a pip value (albeit relative to my stop) is hard to resist. However, recently I’ve been using S&R zones as a target for a portion of my trade. If there’s no apparent reason for a trade not to continue to the next S/R zone, then that’s my target for that portion.
Probably sounds like an obvious thing to do to the more experienced among you, but it’s certainly helping me pace myself and break the trigger-happy cycle of exiting too early.
would someone please break that down for me please. is this the current trend you see on the screen or is it a flow from many time frames back. like weeks months etc. that you are comparing price action to? are there any specific tools i should be using, please advise as i have been trying everything, this is not my comfort zone but i am not a scattered person so this is annoying. also i only seem to trade one time per day, is this too little for a beginer, but i really dont see the point of sitting all day at the computer if nothing is there for me to take a trade on. but on the other hand i probably do need the exposure, if not anything just to view and study the templates, that i might add are so helpful, a big thanks for the people who contribute those, i for one study and learn from you. so you see you really do help everyone indeed. all i can say is thanks again. joanne.
[I][B]would someone please break that down for me please. is this the current trend you see on the screen or is it a flow from many time frames back. like weeks months etc. that you are comparing price action to [/B][/I]
I base my decisions on how to play the current price action (whether we�re in trend or range mode) on a combination of previous activity & my levels (horizontal lines) which are marked on [B]ALL[/B] the relevant timeframes from 1min up to 4hrs.
I also refer to the swing high/low points on the 60m+ chart references to guage potential levels of increased volatility as players position themselves accordingly.
I use the previous months/weeks/days price action to assist in deciding what I�m going to do today/tomorrow etc.
Previous price action can only be used as a guide Joanne. It�s not set in stone, as price will react to whatever is currently driving prices, & that usually emanates from the fundamentals.
[I][B]are there any specific tools i should be using, please advise as i have been trying everything, this is not my comfort zone but i am not a scattered person so this is annoying [/B][/I]
Which tools have you been utilizing up to now. If any??
Use whichever you feel comfortable with. Price action is just one element of strategy planning. What you�re attempting to do when applying the generics of price action, is to place yourself on the correct side of the money flows.
Whether you trade a 1min chart or a 4hr chart, the priority must alwys be to �run with the dominant flows� so that you�re increasing your potential to extract profit whilst reducing your risk accordingly.
Use the trend/peak-trough flows (if one exists) on your favored timeframe in harmony with your favored tools. In other words: play longs on pullbacks from a bullish trend�…& play shorts on rallies in a bearish trend.
If you attempt to short a reasonably strong uptick, on whatever timeframe you care to choose, you�re only increasing your risk of getting snapped!!
[I][B]also i only seem to trade one time per day, is this too little for a beginer, but i really dont see the point of sitting all day at the computer if nothing is there for me to take a trade on[/B][/I]
Trade in the manner which you feel comfortable with.
If you�re wanting to test out a new strategy or maybe check out executing via a different timeframe etc, then switch across to demo & test out your thoughts on there.
[I][B]but on the other hand i probably do need the exposure, if not anything just to view and study the templates, that i might add are so helpful[/B][/I]
See above��…
hello, can someone fill me in on divergence.I have an idea of what your saying but cannot fully grasp it.Thanks again…
Example of bullish divergence yesterday on EY. Price makes a lower low while stochastic makes a higher low. Essentially then momentum is moving to the upside SUGGESTING the possibility of a change in direction
Try googling jlmac, you’ll pull up a whole host of information regards divergence.
Just tap in “rsi divergence…stochastic divergence” etc.
Here’s an article which might throw some light on events. I’ve also posted a couple attachments which offer a broad, simple take on the generics.
Divergence Trading Patterns…NQoos
Nice example this morning of how Fib retracements can help you make some sense of price action especially 50, 61.8 and 78.6 levels. If you were trading this downmove they can help you decide where you might take some profits and where you might look to use your favoured trigger to get back long. It is generally believed that the deeper the retracement the more reliable it is. Whether there is anything universal about Fib ratios as claimed I really dont know or care but the fact of the matter is many traders use them so there is an element of a self fulfilling prophecy here and I certainly find them useful. I will place particular reliance on a turn signal occurring at the 78.6 level not only because of its reliability but also its high reward risk parameters
