Short Selling Day for Both Pound and Euro

Euro made a fake breakout at the beginning of London session. A temporary support was found at pivot point 1.4006. The breakdown from the descending triangle pattern gave away the true intention of the market - downward. Pivot point also shifted as resistance after the breakdown. Euro reached its second downward goal at 1.3892 (average daily range + 1sd).


Pound had a similar behavior as euro. There is a strong resistance from 1.66 (on daily point and figure charts, pound formed a triple top pattern at 1.66). After breakdown the top of former day 1.6474, it changed as resistance as well. The downward momentum found a temporary support at the confluence zone of pivot point (1.6379) and 10-day EMA (1.6368).



The forex trading strategies for a short selling day is to follow the downward momentum and establish short positions. For both pound and euro, the high probability and low risk forex trade signal was given at the breakdown of former day's high and pivot point respectively.

Forex Strategies for the Decline Phase 05/07/09

In the last post I used British pound as an example to discuss the forex strategies for the advance phase. Yesterday (05/07/2009), pound made another textbook example for the fourth phase in a full price cycle - the decline.

In the decline phase, the market is in a downtrend, usually a short selling day in The Taylor Trading Technique, in which the price action tends to make lower lows and lower highs.

On hourly chart, a bearish engulfing pattern indicated resistance at 1.5160, and the shooting star confirmed the resistance. A 40-pip top range was built from 1.5147 to 1.5106, which is a counterpart of base building phase. Likewise, there are multiple false breakout and breakdown signals to fool reckless bulls and bears.

Pound formed a double top pattern around 1.5160, while MACD made a lower low, the bearish divergence is marked on both 15-min and hourly charts, which confirmed the trend reversal. After the shooting star, there is a quick drop caused by the 7:00 event - Bank of England's Official Bank Rate. There is no way to trade the event, which is almost 100-pip drop in just 1 minute. There is no need to chase the event either. After the event settling down, pound offered multiple great short opportunities for shrewd trader. There are three opportunities to short rally top, and at least two to add position at breakdown horizontal support level.

To summarize the forex strategies for the decline phase,

1. only short position is considered during the decline phase

2. entry A: short at rally top

3. entry B: short at breakdown horizontal support level

Just for argument's sake, the definition of phases is only for forex day trading purpose, which might be only identified on hourly or 15-min charts.