D1 Chart
Strong bullish breakout candle through 111 zone (Marked w/ grey box @ left of chart).
Traded above 116 - horizontal line (talked about importance of this level for months).
Broke down, and now trading @ 111 - bearish breakout formation.
A bearish breakout formation will be carved out, when buyers “draw a line in the sand” @ a price zone- in this case, the 111 zone. Each time price touches that point, sellers are unable to breach, and the instrument catches a bid. However, a new high is not printed, thus, the bearish bias. As lower highs continue off bounces @ the 111 zone, buyers become less and less confident in their analysis. Their capitulation (selling into the market) + new sellers entering is what fuels the downside breakout.
H4 Chart
Sellers may seek to hold 112.25.
Buyers will need to try and attack that zone for another leg up.
If 111 cracks, may have a nice longer-term position here targeting 105 to the downside.
Sellers just nibbling here. This advance has been very corrective and volatile. Look to get short @ higher prices. As mentioned, buyers are attacking the 112.25 zone with modest strength, but this looks more like a relief rally and the true sellers are waiting.
Analysis
POINT A: Upper range high @ 4530. Lower range @ 3830 (dotted horizontal line). ~700P range.
POINT B: Consolidation & bearish breakout.
POINT C: Price bounces off key zone (yellow) 4025 - 4050.
POINT D: Breakout / retest of zone (on both sides). Bullish channel. New high prevented @ peak.
POINT E: Channel breached, key zone tested and held again. New high printed @ F.
POINT F: This high is not higher than Point A (sellers still in control).
POINT G: Zone tested again; bottoming pattern.
POINT H: Sellers parked @ roughly 50% of range.
Strategy
The ideal price would have been @ the 50% retrace. However, GBP buying is rather soft, and you can get in a bit late as it doesn’t look like the pair can catch a bid for a retest of that 50% zone. Initial target would be the origin point (our key zone). Sellers will look to breach that. Buyers will look to hold current levels for another attack @ the midpoint of the range.
Trivia question of the week: Who can tell me the significance of the years 2000, 2008, 2011 and 2016, as they relate to the current price level of the S&P 500?
65% of FXCM Retail positions are currently long, per DailyFX Plus SSI. This is typically used as a contrarian indicator, so, we may see some more selling here.
M5 Chart
As mentioned, the most recent wave up had been corrective and there really wasn’t any sign of buy-side conviction. Was waiting for a higher price, and buyers @ the top to get trapped, to see that nice impulsive leg down.
Topping pattern added confidence / tight stop + deep target. After seeing the breakout, and the 20EMA holding price down, I knew we were in business. Volatility increased @ the bottom and I initially had a deeper target (which is why I didn’t cover @ the original test of my target). But, ahead of NFP, there’s no need to give any money back here.
The entire move was roughly 180P - I captured 140 (roughly77% of the move). You’ll rarely ever be able to capture 100% of a move (highly improbable) - but, If you can capture over 60% then you’re on to something.
$10.60 is key for bulls.
Instrument caught a bid first trading day of APR.
Buyers need to hold $10.60 and attack the 20EMA. Clearance of the MA would open up a test of the right shoulder and ultimately the MAR highs.
Sellers would be looking to breach $10.60. A breakout could open up a deeper retracement into the impulsive buying we saw to start the year off.
UGLD stalled off the M1 20EMA @ $11.59, but the above pattern looks promising for higher prices as the neckline survived its initial downside test. Longer-term, buyers are looking to clear $11.60 to usher in a potential major short-squeeze and foundation for an extended rally and new bull market.
14,346 is the origin point of the leg that created the new multi-year high for the Japanese index (3 green x’s). A very pivotal moment in the maturation of a bull market is a test of the “most recent low, that created the most recent high”.
16,000 needs to crack first, to open up 15 and a test of 14,350.
This doesn’t seem too far-fetched given the current price action story.
Each 1 - 2 combination above highlights a support level (1) taken out by sellers (yellow circle), then re-tested and held as resistance. This is how a market where sellers are in control moves. New highs are prevented, whilst lower lows are carved out.
Bears need to old 17,250 for confidence.
Buyers need to attack 17,250 to open up 18,000 and 18,500.
14,350 is my “line in the sand”.
Watch this index and these levels as it may signal where the JPY-crosses are heading.
USDJPY was lagging a bit, but sellers stepped up 6 minutes later @ 10:55 AM EDT.
One of the major factors this trade was based on is the fact that the Nikkei and the S&P had already broken out to the downside, but the Yen was churning. This provided an opportunity to get short on risk for the very near-term in anticipation of the two indices pulling down the Yen.
The ratio of long to short positions in the EURUSD stands at -2.33 as 30% of traders are long. Yesterday the ratio was -1.49; 40% of open positions were long. Long positions are 23.4% lower than yesterday and 16.3% below levels seen last week. Short positions are 19.5% higher than yesterday and 41.4% above levels seen last week. Open interest is 2.3% higher than yesterday and 15.1% above its monthly average.
