After my previous blog post on Best Practice: BM on AUDUSD, AUDUSD did another BM. Let’s see how we can take advantage of this clear trending pair.

On the Overview

Big Picture view of AUDUSD on the Monthly charts

• On the higher time frame, we can see that price is currently at resistance. So does that mean we’re going to short?
• No, don’t forget our timeframe for reference is always on the H4. So let’s see what H4 looks like.

Closer look at the H4 time frame

H4 chart plots a clear trend, strategy and pattern

• Week to week it is very clear that price is heading up with 2 previous bullish expansions fitting a big move criteria.
• At the moment, we can see a familiar 1234 pattern forming.
• We are now missing a potential point 4 which we can predict using Fib-R of the flow as well as previous boxes highs and lows.

Looking for trade zone for point 4

(Note: we do not trade at the trade zone. We only enter upon a trigger)

Possible Support as seen on the D1 charts

• Plotting some lines at where price confluences with previous boxes highs/lows with Fib-R levels.

Going back to the H4 charts

Possible Trade Zone in H4 charts of AUDUSD

• Another tool which can be used to predict is the equidistant channel.
• Again, I emphasize that we do not trade at the trade zone. Instead the trade zone is where we expect point 4 will form.
• With point 4 forming at these support levels it will fit into our criteria of a good point 4.
  • Support of previous Boxes High/Low
  • Fib-R Level
  • Higher Time Frame Support and Resistance
  • Equidistant Channel
• Beyond this, you can also do a final check with the Bollinger Bands and OsMa.

(Update 21 Apr 2014 by Jerome)

Using Bollinger Bands and OsMA as checks

• Think of Bollinger Bands as a rubber band; at the outer edges, price tends to snap back.
  • Looking at Price now, it is closer to the oversold region (lower band) so chances are higher that it will head up rather than down.
• Based on OsMa, plotting a trendline on point 2 and point 4. (In this example, I’m using the latest 2 turning points)
  • We can see a Bullish divergence forming. This also points to a higher probability that price is heading up.

Jerome Lee

Last time, many things that I wanted were just dreams, now I see them as possibilities. I’m looking forward to own pent-house suite in Manhattan overlooking Central Park because forex trading with Tflow® makes it possible. Find me on Google+