Monday, March 23, 2009

Inside Day for Three Major Currency Pairs

Friday was inside day (ID) for three major currency pairs. Since there was no reduced volatility, we should be on alert about false breakout.

At the beginning of London session, euro made a triple top on candlestick chart, just 2pips shy of Friday's swing high. Noticed the divergence given by the MACD, even if euro did breakout, we wouldn't take a long position. There was a strong support zone just above 1.3500 (swing high 3533, Friday's low 3516, and 23.6fib 3524.) 3500 is today's downward average daily range. Since the uptrend was already established, the probability for euro to reverse is slim. The downward movement took Friday's low by 32pips, then crawled back. That's a classical stop hunt. Now euro formed a perfect top range from 3736 to 3516.

Unlike euro, pound did breakout, but all three attempts failed, and formed a triple top.

Yen was staying in an upward channel, made a series of higher highs and higher lows. It retraced more than 61.8% of last week's slide. On hourly point and figure chart, yen made a double top breakout. Yen reached its upward average daily range 97.30.


Ben 10 said...

so according to mr.horas kent (reminiscences of a stock operator) if i want to go long eur/usd i have to put limit order long above 1.3736 am i correct?

im long gbp/jpy daily chart

Trader Rich said...

If you take the breakout of top range as a long signal better be careful. Euro is notorious for the false breakout and whipsaw. Even the uptrend is established. Patience is needed for the trend to follow through. Confirmation is needed for a range breakout setup.

Ben 10 said...

thank you !
I agree .... false break out is what destroy my account lol, do you have solution ? what about using point and figure charting to separate between true and false break out? is it that good? if i may ask .... what indicator or tools you use for a range break out confirmation?

Trader Rich said...

Point and figure charts definitely helps to filter out smaller fluctuation. As mentioned in my recent post
Point & Figure Charts for Forex Day Trading
, the box size of hourly point and figure charts for euro and pound is 33pips, the reversal gonna take 100pips. You might find some useful information in today's market comments.

Ben 10 said...

is it possible to scalp using point and figure charting (P&F support and resistance line pattern)on 5 second chart data from oanda?
i just curious about the result and like to try though .

i read all you have in this blog .... lol!

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