A-B-C-D Trade - page 334
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USD/CAD Daily chart. SDC plot at 2 peaks Jan 28th & Feb 12th.
FC plot A-C aligned to those same 2 peaks, and B to Feb 7th low.
Today, we saw price hit SDC mid-channel and .9999 which is of course round number bounce play.
The FC -50 (mid-channel) also in area.
TP options include FC -68.6 level.
S/L tightest level, see MurreyMath1.0 on 15-min, just below the -2/8th of .9995.
Can use these levels for TP as well. The 4/8th = 1.0040.
Trail/move S/L as per your style or plan.
Update on the last USD/CAD daily chart and plots with SDC & FCT.
Pair got extra boost from G20 statements, which caused a spike down on gold (started 13:00 GMT). The commodity currency CAD affected and therefore USD/CAD dragged up.
Pair also partially influenced by economic data release (13:30-14:15 GMT).
We can see today's candle body respecting the upper SDC channel, while the candlewick touched the FCT upper channel.
U.S. holiday today.
We are watching USD/CAD make an extension to the upside.
***
Meanwhile the British Pound has been taking a pounding, but probably welcomed in today's world of currency wars between nations.
Our fortune cookie tells us that GBP/USD shall find pivot support at 1.5370, with S/L around round number 1.5300.
***
Slightly more near-term:
We've been monitoring a Standard Deviation channel (SDC) plot (orange color), based on 2 obvious peaks Sept 21st and Jan 2nd on the daily chart. We repeat that the deviation is set on 2.00.
We proceeded to stack a fib channel (FC) extending to the downside of the SDC. We aligned the FC (blue color) to the full height of the SDC, from top channel to bottom channel, then dragged it to align with the bottom channel.
Essentially, it will be a 100% extension of the SDC, to the downside. Price is currently sitting at this level, of 1.5460.
This area is also the 131.4% horizontal extension of Jan 10th/Feb 5th leg.
***
Bigger picture:
The weekly SDC utilizes plot points Jan 2, 2011 and Dec 25, 2011, which is the yearly calculation.
We see nice confirmation on Apr 22, 2012 when the high bounced down off the upper SDC channel, which also was a trendline from the peaks of Apr 24, 2011 and Aug 14th, 2011.
Price made a 131.4% extension (labeled 31.4) to the upside on Dec 30, 2012. Pair has subsequently reentered the SDC and is currently just below the -31.4 channel level. This of course is derived from aligning the FC to this plot.'
We drew a white trendline to the low of May 27, 2012, price 1.5267. This area is the major support, just above this year's low of 1.5232.
1.5267 is also near the 168.6% extension of Jan 6/ Feb 3 leg (same leg as daily analysis).
***
Therefore, to recap, support levels are:
1.5460
1.5370
1.5267
Bank of England's (BOE) Minutes released 09:30 GMT, which is monitored like a potential high-impact data event, came out "dovish". This sent GBP/USD to further depths.
It has now touched the 1.5370 support level and dipped below it to 1.5292, which is the S/L area. The maximum low of this thrust shall be 1.5200. That meant a lower R/R. If entry had not been made, decision would be to either BUY here or at the max low.
***
On our weekly chart analysis per last post, price is at SDC mid-channel intersected by white trendline low of May 27th. The SDC mid-channel is usually a bounce trade, as "reversion to the mean".
Attached weekly chart also has more recent SDC plot using highs of Apr 29th and Dec 30th. Stacking the FC to downside, its mid-channel also intersects present price point at original SDC mid-channel and May 27th low.
***
Usually, trader would consider most of the volatility has subsided. by now and look for the bounce trade. If the sentiment is considered too strong against the position, there are always other opportunities.
Per our previous posts, is it dangerous to be in with a small S/L during high-impact data releases such as BOE Minutes.
Now it's the U.S. turn with FOMC minutes at 19:00. Initial indication of decline with GBP/USD and general USD strength continuing. Can expect whipsaw action.
Between BOE and FOMC, only bolder scalpers trading the bounces. Otherwise the fundamental and breakout traders chase the decline, even with wide spreads and whipsaws.
CFD SPY ended yesterday's session at the lower channel of our SDC plot, which utilized the 2 peaks of Feb 1st and Feb 19th.
It gaped down at open today and is testing the 131.4% expansion to the downside. The horizontal 78.6% (1.50.28) also acting as temporary support now. That derived from plot Feb 4th low 149.42 and Feb 19th high 153.43.
*****
4H Gold SDC used 2 lows from Jan 4th and Feb 15th. Price hit the 100% expansion to downside yesterday, probing slightly below. The bounce up to TP 31.4% just achieved today during 15:00 GMT.
*****
GBP/USD beat down further during Asian, but started to recover early European and further supported by medium-impact GBP economic data released.
From technical analysis view point:
Per last comments/post, our weekly plot had support around 1.5267, and max low of 1.5200 for yesterday's thrust after BOE and FOMC.
Price was pushed below that in heightened enthusiasm during Asian. To secure a return toward the upward levels, one can use a 15-min or 30-min cross-over trigger with the indicator HAMA_T3.
On the 15-min, price hurdled psychological 1.5200 level 09:00, just ahead of GBP data release. Pair waded through slew of U.S. data, and retouched aforementioned 1.5267, which now acts as resistance.
The lows achieved for this pair were 2-year lows. A lot of BUY orders therefore expected at these depths.
The overnight gaping of the CFD products make it problematic for those that want to trade with higher leverage.
Let's use the SPY as an example. The last chart showed price ending yesterday at the lower channel level of the SDC.
If the trader had entered a BUY and was forced to stay in overnight, trader would have suffered negative consequences with the gap down at open the next day.
Based on the mid-channel as 160 points TP and 50 points S/L (12% of SDC with cushion), we had a plan to risk 2% on this trade and had about 3:1 R/R. Good, right?
Price gaped 0.66 (66 points or 66-cents) the next day at open. That was 32% more than the S/L amount. This means the trader is responsible for the additional loss. In this case, it translates to about 2/3 rds of one-percent of the account.
If the gap was larger, say 3.00, it would be a pretty big hit to the account. That would equate to losing 6 X the original S/L amount, or equivalent to 12% of the account.
It happens often, therefore must exercise caution with leverage. This also occurs in the world equities and futures markets. However, for a trader that has only operated in Forex, this aspect of the CFD market would be an area of indifference.
The CFD market is relatively new, but American citizens are prohibited from participation. Something about violating the S.E.C. laws. Have a feeling it also threatens existing players in the equities/futures markets.
In an "Oh Wow!" moment, we see GBP/USD low from yesterday:
SDC plot on weekly chart using highs of Sept 16th and Dec 30th. Stack fib channel (FC) twice. This would be the same as changing the setting for deviation to 10.0 (ten).
Aligning the FC from mid-channel to lower channel would produce the next resistance at its -31.4 price of approximately 1.5423
The difference is the interior levels in the FC double stack. This method provided smaller ratios (tighter). For example, price has already rebounded to its first level 31.4 of approximately 1.5261. But, we have the next ratios -50, -68.6 above (1.5331, 1.5405) as smaller intervals.
***
The MurreyMath1.0, when set on 60 (P = 60), resulted in its 2/8th at 1.5137. Its next resistance is the 3/8th 1.5381.
***
A 100% extension from leg Jan 10th 1.6178/Jan 28th 1.5674 (best viewed on daily), got pretty close to yesterday's bottom as well. This plot's low was significant for fortune hunters, as price used that as resistance on Feb 12th to start a new swing.
Moody's downgraded the U.K. near last week's close, causing a spike down with GBP/USD and this morning's gap. The gap did close, along with other pairs that were influenced.
Much of GBP weakness had been priced in as witnessed by its dramatic fall since the new year.
Some of the short-term bounce traders and fortune tellers got out prior to the news Friday. As per an article on fxstreets.com, this pair had been in consolidation from the 2008/09 decline and 50% retrace.
Swing and position traders may see this as a breakout of the consolidation, to the downside of course.
Price is below the Jan 8, 2012 low of 1.5234, with the next major low from May 16, 2010 (1.4224), which is about 1,000 pips apart. May good fortune be with us all.
FCT plot on 1H EUR/USD, using peak to dip on Plot Line A-C.
A = Feb 20th 20:00 low 1.3270
B = Feb 22nd 15:00 low 1.3144
C = Feb 25th 13:00 high 1.3318
Market moving fast to downside. This is one method to find S&R. Attached pic taken prior to any bounce up.