Weekly Analysis
Point A- Swing point. Higher-High put in just under 104.00 mid-MAY 2013. From the middle of the supply zone of the leg labeled XY, pair sells off 800 points. Mass imbalance between buyers and sellers. One side of the market in control. Supply zone cemented in.
Point B- Retest of established supply. The first pullback into an established supply zone offers a high reward, low risk, high probability trade opportunity. Entries are placed @ the level – no need to wait for any type of signal. The leg labeled ZA is roughly a 550pt sell off.
Move BC is even less – sellers are only able to print a 360pt decline.
Point BCD- Wedge structure. I was expecting this to break to the downside, seeing the series of lower highs printed (points ABD). However, the structure held and demand overwhelmed supply.
Point D- Structural/technical breakout. Shorts are not initiated as price rallies into @ our established supply zone for the 2nd time – this is a basic principle of S/D zone trading.
Point E- Confidence for buyers. A Higher-High is put in.
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[li]11/10/2012 – 5/18/2013 bull leg is 2400pts
[/li][li]10/26/2013 – 12/28/2013 bull leg is 800pts
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The 2nd major leg up which established the new Higher-High was 1/3 the size of the original move. This is crucial. Where did all the buyers go?
Point F- Bearish structure established: 4 attempts to bring prices above 105 – all failed. Buyers are losing ground to the upside. Yet, a floor has been established b/w 101.8 – 101: prior Supply should act as new demand. Orders are being eaten away at this floor.
D1 Analysis
Point A- Testing of supply zone as new demand. 400pt bull wave from Point A – Point B. Sellers take control @ Point B.
Point C- After retesting the newly established demand, buyers print a measly 180pt increase in price. The Pair enters a range-bound environment thereafter for about 18 days.
Point D- Retest again of technical horizontal support/bottom of range/demand zone. S/D principles would advise against long positions here. Buyers are able to muster up a bit more of an aggressive rally but stall @ 102.75 (former technical horizontal support now technical resistance).
Point E- 200pt 5 day rally is evaporated in 4 days, with moderate-conviction. Moderate resistance from buyers is present.
Point F- Key price action. 3/20/2014 trading session was an inside day, capped by a tight 40pt range. Heading into the weekend, we don’t suspect major players to put on large positions. So, Friday 3/21/2014 may follow suit. There is clear hesitation on both sides of the market, as the 3/20/2014 candle was a small doji, formed at the peak of a single days’ worth of buying which hasn’t been seen in a few months.
How we’re trading this:
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[li]Short just under 102.5.
[/li][li]Initial target is logical @ 101.5 zone.
[/li][li]Deeper targets are 100.5.
[/li][li]Backup plan- If 103 gets taken out w/ conviction, the recent swing point @ 103.75 would be on deck for a retest. If price action shows sign of breaking out, we may see another leg up. Ideally, I’d like to see a breakout / retest of the high before going long.
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Looking forward to feedback!
Have a nice day.
…Charts are a bit fuzzy - apologies. Here are links to each though for you to open in a new window if needed:
Weekly Chart
Daily Chart
Target chart
