A-B-C-D Trade - page 51
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EUR/USD breakout candle above 1.3637 moved too fast for this technique (waiting for close of candle above that price).
The 138.2% regular extension was hit. That was plotted from Asian High to Asian Low. The 161.8% = 1.3686
From an ABC plot:
FE 100 = 1.3662 (hit), FE 127 = 1.3675, FE 161.8 = 1.3692
Reviewing EUR/USD. We had posted the early Euro session extension, which hit its FE 127 before traders exited ahead of high-impact U.S. data at 12:30. Looks like some also thought to take advantage of the dip and bought.
As the market shifted through the data, one of which was a better-than-anticipate adjustment to 2nd Quarter GDP (annualized), pair ratcheted down about 100 pips. An initial head fake to the upside resulted in pair probing slightly above the FE 127.
The attached 5-min chart also includes:
1) Retracement fibs (blue) plotted from Asian High to Asian Low.
2) ABC (black fibs) early Euro session. We posted FE levels.
3) ABC (red fibs) after data:
A = 13:00 high 1.3683
B = 13:55 low 1.3617
C = 14:35 high 1.3659 (61.8% retrace of A-B)
FE 100 = 1.3592
FE 127 = 1.3575 (hit)
FE 161.8 = 1.3552
The FE 127 is about the same price as the 23.6% retrace fib (blue).
The FE 78.6 (this minor FE fib not shown on past posts) is the same price as the 61.8% retrace fib.
The FE 61.8 is virtually same as the 78.6 retrace fib.
The more fib pulls have in common the stronger the S&R, relative to our style of trading.
If trading beyond the FE 100, another reason to exit at the FE 127 is the end of the European session. Pair subsequently bounced back up near the Asian high.
As promised, we will highlight some candlestick recognition. The candlestick formation or patterns on shorter interval charts are not as reliable. Having said that, they are not completely useless. We find them more effective when paired with another sign of possible reversal.
This ABC’s Swing C occurred at the 61.8% fib (retrace of A-B) of 1.3658. The 2nd candle on at that pivot is a “Hanging Man”, a reversal pattern. The pivot at Swing B is a Doji, which is or almost a colorless candle, denoting indecision and potentially a reversal.
We will point you to Steve Nison’s book “Japanese Candlestick Charting Techniques”, as it is the best one. As mentioned in the indicator thread, and as many viewers already know, he was credited with bringing the Japanese candlesticks to the West. There are others, also listed in this site, that are good. We’ll list the indicators later that are on this site that can recognize some of these formations for us, in a more comprehensive post about the subject.
Why are the break candles often large, meaning the market is moving fast? It means that many other traders, including large institutional traders, see the SAME support and resistance as presented herewith. And yes, some of the big boys also use or recognize the ABC technique and patterns. We’re sure, some have automated software that plot these patterns.
We’ll post a USD/CHF trade that we did during the Euro session later. We mentioned the support levels a few days ago.
EUR/USD – Oct 1st
Attached 5-min chart highlights the ABC plotted on Asian Low – Asian High – Pivot C at end Asian.
1) We made a bounce trade off Swing B based on previous European session’s (Sept 30th) high of 1.3683 (green horizontal line). Small probe above that to 1.3689 before retrace occurred. Our 10-pip stop-loss withstood that.
Profit target for retrace was the 38.2% fib of A-B, which was 1.3666. This was also where it pivoted to form Swing C. Thus, risk/reward was 10/15. Our actual fill on SELL order was 1.3681 and we captured a net of 11 pips. The reason we filled at that price was due to order being manually executed. We also placed cushion on the auto exit end.
2) The ABC had parameters (red) of:
A = 05:55 low 1.3629
B = 07:20 high 1.3689 (Asian High)
C = 07:50 low 1.3665
FE 100 = 1.3725
FE 127 = 1.3741
FE 161.8 = 1.3762 (target- hit 09:40 GMT)
Entry could not wait for close of a 5-min candle as it moved too fast for that. If you switched to 1-min for view, it confirms that we could have gotten in at a not-too-outrageous price. Remember we must calculate worst-case price for a 1:1 risk/reward, in advance of entry.
3) The retrace fib (black) pulled from Asian High to Asian Low had regular extension levels of:
138.2% 1.3712 (same as the FE 78.6)
161.8 % = 1.3726 (about same as the FE 100)
261.8% = 1.3786 (hit 20:25 GMT)
4) Retracement fibs (blue) from Sept 30th Asian High to Low had regular extension levels of:
138.2% = 1.3667
161.8% = 1.3686 (this was near ABC’s Swing B and also provided resistance for bounce trade)
261.8% = 1.3764 (about the same as the target price FE 161.8)
*****
Arrows denote Euro data at 06:00 through 09:00, with GBP at 08:30. U.S. had 12:30 and 14:00.
Arrows point to bounce trades between Swings B and C and off top at 09:40 GMT.
*****
Due to data early European session 08:00 – 09:00, it was tricky and difficult to sidestep. However, due to the nice swing parameters, we could have exited at the FE 100 for about 20 net pips just before 09:00 data. We did not trade this and opted to trade the bounce just prior to this group of data.
Looking at the chart, we can see the opportunity to trade the bounce off the top at 09:40 1.3763 and exit in advance of the 12:30 data. This had 2 resistance fibs per above list.
Total bounced down was about 43 pips to 1.3720. Plot retrace fibs or simply target the black 161.8 of 1.3726. First pivot was 1.3729 for gross + 24 pips.
****
Breakout plus two opportunities to trade around data.
Attached 5-min chart of USD/CHF during the European session. We were monitoring the situation that day (eveening for us) with regards to Spain's general strike and refocus on P.I.G.S. nations. There were numerous data releases through 09:00.
Our alarm went off on USD/CHF at a key support level. We had plotted retracement fibs a few days ago from:
Low = Sept 24th 14:10 .9779
High = Sept 23rd 08:35 .9899
138.2% = .9733
161.8% = .9705
Pair hit near the 138.2% retrace fib on Sept 28th, then revisited Sept 29th.
We proceeded to plot ABC:
A = Sept 30th 09:30 high .9762
B = 09:35 low .9728
C = 10:00 high .9748
FE 127 = .9705 which is the same price as the 161.8% regular extension.
Our entry was .9727 and we survived a small pullback before taking profit for +9 net pips. The pair bounced very quickly off .9707 and we didn't want to chance losing everything to gain a couple of pips more.
Notice the Doji candle at 10:35, which got near the 161.8% and bounced. That colorless candle formation often signals a reversal. It closed at .9714.
As mentioned, we feel that these formations are less reliable on short interval charts, but can be useful when combined with other tools. In this case, pair was near the 161.8.
We saw the Doji and exited manually at .9714 and filled at .9715 + 3-pip spread = .9718.
Almost all candlestick formations are reversal signals. It is important that a trend was in motion before the reversal signal occurs. An example would be that we cannot have only one candle going in a direction and recognize the next candle as a reversal signal.
If you switch your chart to the 1-hour, you can see how well market respected that fib plot. The 22:00 candle, which stopped at the 50% fib, was a Doji and the pair reversed after that.
Currently, during Oct 4th Asian session, we observed/recognized following thus far.
Doji candle on EUR/USD 1-Hour 01:00 candle. Next candle contained total upward bounce from 1.3753 to 1.3771. Using 5-min plot ABC:
A = 01:55 low 1.2746
B = 02:05 high 1.3760
C = 02:15 low 1.3755
FE 100 = 1.3770 (hit at 02:30 candle), which is about same price as the 61.8% retrace fib form session high to low.
Entry at open of 02:00 5-min candle price 1.3753, and S/L below Point A by 1 or 2 pips. Risk/reward = 9/15 net pips.
Bounces:
EUR/JPY 05:55 114.60 for about 23 gross pips to the 50% retrace fib 114.83.
EUR/USD 05:40 1.3748 to 78.6% retrace fib 1.3776 from 23:40 to Asian Low for about +26 gross pips before a full retrace to 1.3784 at 06:30.
USD/JPY now near session low from 0:00 83.31
Edit: Prior to Toyko was 83.28 low which was touched at 06:30.
Data ahead include higher impact at 08:30 GBP data, 09:00 European data and 14:00 U.S. data.
USD/JPY
Add the Ichimoku indicator to the 15-min chart. We'll see pair resting on thin cloud which serves as support at the moment. We don't anticipate break down and some profit taking to bring pair up prior to close os Asian session.
Retrace fib plot is high of 04:45 83.65 to low of 06:45 83.26.
38.2% = 83.41
50% = 83.46
61.8% = 83.50
78.6% = 83.57
Remember we monitor cross-pairs. In this case EUR/JPY and EUR/USD.
Both were at resistance fibs now, which affect subject pair USD/JPY.
USD/JPY 1-Hour had 06:00 Long Legged Doji candle.
While threat of intervention holding USD/JPY from further decline during balance of Asian. EUR/USD and EUR/JPY took a move down during 07:00 hour ahead of European open at 08:00 and subsequent data releases per previous post.
Immediate suppoert for EUR/USD is the 138.2% regular extension of 1/3712, and 161.8 of 1.3696.
EUR/JPY 138.2% = 114.35 and 161.8 = 114.19
Both Euro crosses pivoting now on 5-min.