Day Trading Rules - Trade What You See Not What You Think

Thursday for euro was a NR7/ID (narrow range 7 & insider day). Since euro already stayed in a top range for 5 days, such kind of volatility dried up would indicate a high probability trending day on Friday. For a NR7/ID, there is no need to predict which direction market will breakout, cause either direction is possible. We just need to follow what the market is leading us.

The first short signal was given at breakdown Thursday's low. On hourly point and figure chart, it's a double bottom breakdown at 1.3500 confluence with the break of support trend line. The second short signal was given at breakdown the bottom of the top range, on hourly point and figure chart, this was a breakdown at major support at 1.3433.


1st downward target: 3356 (average daily range)
2nd downward target: 3265 (average daily range + 1std)
3rd downward target: 3174 (average daily range + 2std)

The major downward movement happened in London session. In US session, euro found support at its daily 2nd downward target. By the way, Friday formed a WS7. This was a classical NR7 setup. Detail information about NR7 setup can be found in Linda Raschke's Street Smarts: High Probability Short-Term Trading Strategies or Toby Crabel's book.


Cable made a similar breakdown at the bottom of its top range. Before the breakdown, cable already made a series of lower highs and lower lows, on point and figure chart, cable formed a downward channel, the short signal was given at the double bottom breakdown at 1.4533, confirmed by the breakdown from the channel at 1.4433, then followed by the breakdown from the support at 1.4400.



Yen met the same resistance from 99. Last week on hourly point and figure chart, there was a triple top false breakout. This time we got a double top false breakout. History does repeat itself.

Apply Point and Figure Charts for Forex Day Trading

On hourly point and figure charts, yen made a double top pattern at 98.50, which is at the same level of the triple top before last week's slide. Then the double top breakout met the same resistance from 99. It would be interesting to watch whether this up thrust will challenge the key 100 level.

Euro met a double top resistance at 3633 in early US session. The slide ended with a higher low, which indicates buying interest.


On pound's candlestick chart, it's clear the lower highers indicate selling pressure.

On hourly point and figure chart, pound formed a downward channel. After met the overhead resistance from the top of channel, pound broke down from the pivot point (4598). The slide stopped right at the bottom of channel, which is also the 38.2% fib retracement level. The key support level 4392 is still intact.

After five days of top building, euro's daily range contract and today is a NR7/ID, we might have a trending day by the last trading day in March. Yen formed a NR7.

03/16/09 Forex Market Comments

As mentioned on Friday's post, both euro and pound did breakout. The tricky part is before the breakout, there were shaken outs on Sunday afternoon. Both breakouts happened at 3:00am, and reached daily high before the US session. Euro also made a new high in 20 trading days (H20). The whole US session retraced back and found support at Friday high. Both euro and pound formed a nice up channel on hourly chart. It might be an opportunity to enter long position when the retrace touches the lower bound of the channel.

Japanese yen still stays at the top range. And today is a NR7/ID (narrow range 7 and inside day). If yen does breakout, it could challenge the key 100 level.