A-B-C-D Trade - page 313
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This morning's 08:00 GMT ECB report had negative caution, which sent EUR/USD on a strong decline.
The attached split-screen has 30-min session colors with HAMA_T3 and MurreyMath1.0 (MML) on the left.
We can clearly see the breakout of the Asian Low 1.23645 during the first hour of the European session. Price remained below the HAMA_T3, with the 14:30 pullback, likely due to profit taking near end-session, contained.
The 4-hour chart on the right employs Ichimoku with GAB?HAMA_T3. Price currently is at the top of the Ichimoku cloud as support and exit option.
We also used a RSI divergence indicator DPTRSI as a guide. It caught a few of the major swings and change in trend (CIT).
We labeled GAB Pivots with white vertical dotted lines.
Aug 7th 12:00 GAB Pivot was top of most recent move.
Aug 8th 12:00 GAB Pivot was pullback. The pullback was contained by the HAMA_T3 through Aug 9th 00:00 period.
Current bottom is at the top of the Ichimoku and also the 2/8th MML.
If using fibs, the Aug 8th/9th B-C swing produced 161.8% extension at 1.22882 for an exit option.
The attached 4-hour AUD/USD utilizes the Standard Deviation Channel (SDC) tool, found on the MT4 platform.
The plot points are high-to-high June 20th 16:00 and July 19th 12:00.
Confirmation of this plot came July 25th 00:00 Low touching the lower channel, and Aug 2nd 00:00 Low touching the mid-channel.
That set up the Aug 10th 04:00 BUY when price made a revisit to the mid-channel.
On Aug 9th we also inserted indicator !LinRegrBuf, which gave us a tighter view of channel action. We left settings on default of UseClose = true and barsToCount = 50.
The yellow channel lines were drawn by us manually to show position of channels before it self-adjusted. It didn't move much, as witnessed by the last position of the channels before the week ended (multi-color).
This indicator was useful because it basically was dividing channels between the SDC's upper and mid-channel levels, but with a slightly different slope.
We can see price hit the mid-channel of the !LinRegrBuf as resistance, which was an exit option.
It gave a little more precision for diagonal S&R. Horizontal S&R was a fib plot (not shown) using High = 1.06120 Low = 1.04961. This produce the 61.8% fib at 1.05677.
Conversely, a fib plot off the B-C swing using Low = 1.05293 High = 1,06120 produced a picture of a 138.2% extension to the downside near the SDC lower channel. Price then ascended to the 61.8% of the plot, and near the !LinRegrBuf mid-channel.
The ENTRY options for this BUY:
1) The 04:00 candle pulled back from the SDC lower channel (1.05059), after probing below to 1.04961. Therefore, an entry was successful with a reasonable S/L below the SDC lower channel.
At worst, S/L location = just below the 161.8% extension fib 1.04782 off B-C plot.
2) Entry can be effected at the open of the 08:00 1.05130. with S/L just below 1.04961 (04:00 candle's pivot low).
3) We can see the DOJI candle at the close of the 08:00 period. This was right at the SDC lower channel. Entry atg open of the 12:00 candle period 1.05140. S/L just below 1.04961 (04:00 candle's pivot low).
***
A BUY at the mid-channel on Aug 2nd or 3rd was also reasonable when seeing price respect SDC prior to that point. However, experienced trader would have had to dance around the data/news.
If trader unsure of fib plot, can try using MurreyMath1.0 for horizontal S&R (Chart 2).
You can reproduce these plots since price is not moving on the weekend.
There is a correlation between various currency pairs and instruments, which simply means they often move in the same direction.
Using the indicator MultiInstrument4, we highlight the correlation between EUR/USD and GOLD on 1 1-hour chart.
We also have GAB, HAMA_T3, and mv-i-Chuvashov_1_3.
Let's focus on the most recent activity. The Chuvashov plotted a horizontal BUY trendline at 1.2314, which we extended with a white one. Price broke through that level on today (Aug 13th) during the 12:00 (GMT+2) period.
We can see the GOLD price movement (closing price) as illustrated by the gold colored line. The turning points were extremely close to those of EUR/USD.
We drew a white horizontal trendline at the 2 bottoms of GOLD during Aug 10th and 13th. This assisted as the 2nd dip of GOLD gave us support for EUR/USD at the same BUY trendline level generated by the Chuvashov.
That correlation provided another trade opportunity, a BUY at the pullback into the HAMA_T3 and trendline support. It also gave us the "TIME" of correlation.
In other words, when anticipating the bounce on GOLD, off that 2nd dip (revisit of previous bottom), we were able to arrive at a time to BUY EUR/USD, which was additionally confirmed by the 2 other indicators for support.
The 2nd chart is a split-screen. The chart on the left contains line graphs representing the closing price of GOLD and EUR/USD (red). We can clearly see the turning points are very similar, and thus "correlated".
Gold's 2nd dip and bounce up came 4 hours BEFORE the EUR/USD rise.
This is a continuance of the last split screen, with the various plots on 1-hour charts. After the Aug 14th 01:00 GMT BUY on EUR/USD described on last post, , we had a SELL.
Chart on the left is the same line graph for both instruments, with the same white trendline on that GOLD double bottom at $1607.00.
After GOLD bounced up off that support and peaked at $1650.50, price declined on U.S. Retail Sales, which was blamed in part for less confidence for potential QE3. Support at $1607 was broken during the Aug 14th 13:00 GMT period.
The chart on the right is the same EUR/USD 1-hour with normal candles, and HAMA_T3. We labeled the Aug 14th 01:00 GMT BUY, and the current subject Aug 14th 14:00 SELL at open price of 1.2332.
We can see the HAMA_T3 provide resistance barrier for this move down. If S/L not trailed too tight, this SELL position reached a maximum of +69 gross pips ( 1.2263) during the Aug 15th 15:00 GMT period.
On both charts, we saw a breakout. They were off 2 different S&R plot techniques and on 2 different instruments.
The chart on the right also saw price respect the white support trendline at 1.2314 after the breakout. Price bounced twice but was contained by the HAMA_T3, before extending down.
Plotting with fib tool, it was a 161.8% extension to the downside to 1.2273 by today 12:00 GMT. Trading to this level = +59 gross pips.
Here's a 4-hour chart on Crude Oil.
We used SQ9 (22.5 Factor 56) indicator, with starting price 77.28, which was the June 28th bottom. This was clearly the most recent significant pivot low.
We drew yellow horizontal lines at the important 180-degree (85.36) and 360-degree (93.84) levels.
We applied Gann Activator Bars to assist in smoothing, and the HAMA_T3 for trend and S&R.
June 29th 21:00 bar (GMT+2) hit the 180-degree and bounced down to the HAMA_T3. Trading from 85.30 to the 113-degree level of 82.30 gained 3.00.
That 113-degree level was also at/near the HAMA_T3 upper wick on July 2nd 17:00 period (GMT+2).
A fib plot using High = 85.30 Low = 77.28
The 38.2% retrace fib level = 82.24. This was another confirmation at Take-Profit target.
S/L options include just above the 180-degree level (tight) or just above the next level up, the 203-degree level (86.40). Compromise is halfway between those 2 levels.
If the TP target was 3.00, the S/L must make sense for good R/R.
**
The play at the 360-degree level (93.86) saw an overshoot. Therefore if the S/L was too tight, a stop-out was there. If we used the next SQ9 level up, the 383-degree (94.92), that was not breached.
Decline was to the 315-degree of 91.85, a gross gain of 2.00.
While the SQ9 levels and the HAMA_T3 can be seen in advance of entry, we have to remember that the HAMA_T3 moves. When price first reached the 360-degree level, the HAMA_T3 was at the 315-degree (which was about 2:1 R/R).
Crude tested the 360-level for quite some time. This made calculation on the HAMA_T3, which is a moving average, rise and come closer to the present price.
The plan at entry saw about 2:1 R/R, trading to the 315-degree. After the shift in the HAMA_T3, a conservative trader can elect to exit at the 338-degree (92.76), when it came close to the adjusted HAMA_T3 zone.
Hit to 360-degree occurred at Aug 7th 17:00 bar (GMT+2).
Decline to 92.82, just above the 338-degree (92.76) and HAMA_T3 = Aug 8th 13:00 bar (GMT+2)
This exit produced a gross gain of about 1.00.
Amid "jawboning" by German Chancellor Merkel, supporting ECB action to support Euro Zone:
Chart on left is 1-hour with session colors, MML, and fib fan using yesterday's low and today's high.
Price spiked up at onset of Merkel comments, only to whip back down. Segment of the market chased that bit of drama on the BUY side and got burned.
Chart on the right is a 4-hour with GAB and HAMA_T3, with Ichimoku. We used dotted vertical lines to identify GAB Pivots, which are reversal points.
The last GAB Pivot was upon the close of the 08:00 (GMT) 4-hour bar. Sellers entered at the open of the 12:00 bar 1.23425.
Trading to the top of the Ichimoku cloud had TP price target of 1.23090 (reward = 28 pips).
Trading to the bottom of the Ichimoku cloud had TP price target of 1.22870 (reward = 40 pips).
Add spread/cushion. U.S. data at 14:00 removed some day traders, or delayed entry.
S/L analysis:
1) Using the 4-hour 08:00 bar's high of 1.23809 was a 40-pip risk. We can determine that this risk is too high.
2) Using the mid-point between the 5/8th and 6/8th MML = 1.2374 + cushion. Risk = 35 pips. This should be the maximum risk, if TP target is at the low cloud level.
3) Another option would be the just above the 5/8th MML price of 1.23596, as seen on the left chart. Risk = 23 pips. This held up if we added cushion of 6 pips or more.
The fib fan provided one more support, at the 78.6% ray, which coincides with the Ichimoku cloud bottom. More Merkel comments allegedly responsible in support and bounce up.
Gold did not decline as dramatically, moving down about $5.00 albeit with violent whipsaws.
Another opportunity arose from our recntly posted SQ9 plot on 4-Hour Crude Oil (chart is GMT+2 hours). We had drawn a yellow horizontal line at the 360-degree level 93.84.
Also deployed were Gann activator Bars (GAB) and Heiken Ashi Moving Average T3 (HAMA_T3).
As price sustained above this level on Aug 15th, it bounced off of the 383-degree. This was a retrace, and aside from plotting retracement fibs, we look for:
The HAMA_T3 as support
The 360-degree as support
These 2 aspects shall further support reason to BUY on this pullback, at this price level. Entry = 93.95 (including spread/cushion).
Fib plot has this entry level as its 50% retrace. That was easy to see as move started at the 338-degree, and gained 2 levels to the 383-degree. The retrace was one level to the 360-degree, and thus a 50% retrace.
S/L can be placed just below the HAMA_T3 candle, which had a range of about 66-cents. The low is 93.23. Add 10-cents cushion and S/L = 93.13. Risk = 82-cents (00.82).
To plan a Reward-To-Risk (R/R) ratio of 2:1, we need to take-profit (TP) at 1.64 + 15-cents cushion = 1.79 and at price of 93.95 + 1.79 = 95.74. A white trendline marks this price level on the chart.
The targeted TP level was also just below the SQ9 405-degree. A fib plot using Low = 92.69 High = 94.89 produced a 138.2% extension at 95.73.
TP hit during the Aug 16th 21:00 bar period (GMT+2).
Price closed the week after hitting the 161.8% extension level of 96.26.
Here is 1-hour AUD/USD (GMT) chart with SQ9(Price) 5760. This version of the indicator includes our adjustment to add more levels, allowing us to use a starting price that is very distance from our current price.
We used the historic high for this pair of 1.10792 (July 27, 2011), and direction down of course.
We now plot fibs (blue) based on this weeks High of 1.0527 and Aug 15th Low of 1.04541.
Late Thursday Aug 16th, price pullback hit the 61.8% retrace fib level of 1.05273.
We can also see BAJA Bearish Divergence, with the 2 peaks on 18:00 and 23:00. (The RSI is set to 4-period for BAJA Divergence)
S/L options include:
Just above the 473-degree 1.05335 (tightest option)
Just above Aug 14th pivot high of 1.05402
Just above 78.6% retrace fib of 1.05472
Let's say, at worst Entry placed after price declined below the 495-degree of 1.05078. We'll also use the S/L of 1.05402 + cushion = 1.05462. Therefore, Risk = 40 pips
TP1 = 1.04541 which is Low of fib plo t+ cushion = 1.04601. Reward = 47 pips
TP2 = SQ9 583-degree 1.04311 + cushion = 1.04371 Reward = 60 Pips
TP3 = SQ9 585-degree 1.04056 + cushion = 1.04120 Reward = 95 pips
The 585-degree is also near the 138.2% fib extension of 1.04088.
Plotting off the B-C swings (Low to 61.8% retrace fib) produced extensions of:
138.2 = 1.04259 and 161.8 = 1.04084
All of these fib extension levels and the two SQ9 levels were hit (with cushion).
***
If we used the HAMA_T3 (not shown), the break to the downside occurred during the Aug 17th 02:00 period, with closing price of 1.04963. This was another entry option.
Not to confuse the new(er) traders/learners, we now attached more charts with additional confirming aspects to the AUD/USD.
1) This 1-hour chart uses Gann_SQ9 with adjustment to ExtDepth = 100. This means we need the high of the last swing to be Aug 9th 04:00 1.06120. We can now see that the Friday (Aug 17th) bottom was at the 180-degree.
2) This was a recently posted (post #3123) 4-hour chart with Standard Deviation Channel (SDC) in orange color. The Friday Aug 17th decline hit the SDC lower channel.
The smaller multicolor lines are the generated by the indicator !LinRegrBuf, and automatically adjusts. After the Aug 16th peak this plot was able to align that with the peak of Aug 9th. Therefore, its lower channel line was important since it intersected our SDC's lower channel line.
***
Chart 3
Another trick that may occasionally help is dividing the SDC channels in half (or a fib ratio).
Let's divide the middle and lower channel. To do this we can use the fib channel tool that is available (free) on the MT4 platform. Click "Insert", "Channels", and Fibonacci".
Point your mouse cursor to one of the channel's lines and double click, which will make to dots on the lines appear, then right click. Select "Fibo Channel Properties".
In the "Fibo Levels" tab, click "Add". On left box "Level", double-click and add .5. On right box "Description", double-click and add 50. Click O.K. For this example, you can delete the other levels that are default levels.
The top fibo channel line will have 3 dots. The bottom fibo channel line will have 1 dot. In order to drag, the dots must be on. Double-click one of the channel lines.
Now, drag the 2 main plot channel lines to align with the SDC's the upper and mid-channels. The line with 3 dots should align with the SDC's upper channel. The line with 1 dot should be aligned with the SDC's mid-channel.
Now we can see the 50% level (blue dotted line), splitting the SDC space in half diagonally.
Price bounced off this 50% level on Aug 15th 04:00. This was the Low of our aforementioned fib plot.
We also see respect of this when price pivoted there during the Aug 16th 04:00 period.
These 2 hits to the 50% level essentially made that a support trendline. This often can be used in breakouts. It was broken (1.04830) during the Aug 17th 04:00 period.
To duplicate the automate !LinRegrBuf plot, align SDC tool to Aug 7th 20:00 and Aug 15th 04:00 (low-to-low plot).
If an experienced trader was able to do that, and see confirmation when the Aug 16th 20:00 peak hit the upper channel, it would be an advantage.
This is a repeat of our lessons on how to use these tools together.
Previously we showed the GOLD correlation with EUR/USD. Now we added Gold leading Crude (Pink) on 1-hour chart (left) with the MultiInstrument4 indicator.
The blue vertical dotted line is the Aug 20th 13:00 GMT pivot low of Gold and EUR/USD, while Crude did not pivot until 16:00.
Chart of the right is 4-hour Crude.with GAB and HAMA_T3. The first white arrows was recent comment on bounce off the HAMA_T3 and SQ9 360-degree on Aug 16th.
The second arrow identifies another bounce off the HAMA_T3 (low of 95.02), which was at the High of our fib plot, during the Aug 20th 15:00 period. That bar closed with RSI(4) divergence, hence a GAB Pivot.