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Some readers’ questions for this week (wk10)

Jerome is on leave today so I am filling in for him with question-answering. It has always been my stand to post questions so that everyone can benefit once an answer is posted to a question. This is something I will insist in future. Knowing that many of our members are shy, the posts are visible only to members of this community who log in.

 

GBPJPY really is it long or short?

Question from Looi

HI Jerome,

Would appreciate some advise on GBPJPY trade. Here is my Analysis:

  1. Monthly – Still bullish
  2. Weekly – last week candle had a close above 7 weeks candles and slightly above F6. It has also about 9 weeks of retracement.
  3. Daily: closed above F6. Not sure if this can consider as a firm closed as it has 3 days of about same height candles (2 bull candles closed at 148.509)
  4. Possible re-entry will be @  184.230 – 183.486?
  5. Im hesitating of longing because I dont see any firm close above f6, and it wlill be more than 300 pips to F3 to SL.
  6. Could you advise if there is any other way of looking at this trade?

My reply

""

GBPJPY daily chart

  1. Daily chart i.e. month-month is actually down trend. High was in December. January we saw a bearish expansion. February was purely a retracement. Price broke low but did not meet high yet.
  2. March beginning price perched on Feb-high. This is a potential resistance in confluence with Fib-R F6 although it is slightly above i.e. supported.
  3. Trading has always been a clash of ideas. There will be a group of bears who are waiting for bearish setup and see this as a possible resistance zone based on month-month movement.
  4. Based on H4 i.e. week-week however, the pair is definitely uptrend since first week of Feb.
  5. I don’t know your profile but if you are 1) looking at big picture on day chart 2) do not have a position yet, I would wait to see how GBPJPY price action reacts at F6 with potential to resume month-month fall.
  6. If your profile is 1) swing trading 2) intending to do a position for 1-2 days 3) closing by end of week, you should look for long setup on H4 or less. See chart below. To go long in the face of resistance, try to get as much retracement so that you are buying low.
""

GBPJPY 4-hourly chart

  1. Week – week movement up supported by trend line.
  2. In fact price made new high and higher low. Without anticipation and hoping picture to stay the same, trend is up.
  3. Today’s picture weak since it actually fell lower as yesterday. See it as a retracement for bulls to get cheaper,
  4. Potential supports based on previous days’, weeks’ low can be seen at purple dotted lines.
  5. Any visible bearish chart pattern so far? None.
  6. If price falls below the middle dotted line (the shortest one), then be more careful.

 

AUDNZD is it an EWUS at F5?

These are question from Wern.

My chart below.

""

AUDNZD 4-hourly chart

Is it an EWUS trade*?

Bearish move to 19 Feb. Then 1234 with R at 1.047. At F5, price has returned to the break of 13TL so we can put a short there. Possibility that price might go to F6. Is my analysis correct?

* Frankly what is the difference between an EWUS trade and a normal Tflow trade?

Reply

Key question: what is an EWUS trade?

  1. EWUS trade does not happen all the time. They are fewer.
  2. EWUS has so many factors coming together in a confluence that you feel happy to place limit order with small SL and go to sleep.
  3. One key feature of forex trading is symmetry. Head and shoulders offer particularly striking symmetry. Fold your chart along the head-axis and the two shoulders should be a mirror reflection. If the right shoulder is same or near same as left shoulder and has strong confluence from other factors like Fib-R, previous highs and so on, it is a good symmetry with good confluence. This is a type of formation I would be looking out for EWUS.
  4. If I were aiming at EWUS, orange zone F7 is where I would be looking. 1) Week 8 high 2) there is a minor peak there marked by blue star 3) F7 which is a good strong level.
  5. For now short is the direction to look, try to spot 1-2-3-4 setup. Now probably 1-2-.
""

AUDNZD 4-hourly chart

 

XAUUSD which is the right 1-2-3-4 count?

""

XAUUSD 4-hourly chart

Bearish move to 23-24 Feb. Then 1234 but which is the real Point 4? What happens in this scenario? How do we know the first Pt 4 is in fact wrong? They both look reasonable in terms of hitting a horizontal resistance…

I note that if we analysed first Pt 4 as being correct and entered the trade at say 1209, it might have been stopped out at the 2nd Pt 4 (1223)?

 

Reply

A or B?

""

A or B. Which is correct?

I offer a third answer qualified with my explanation.

""

Patterns can change as price unfolds

Patterns can change as price unfolds. Understanding market’s psychology is crucial.

Your original count of 1-2-3-4 from the left was correct. But when price suddenly moved up late last week and got higher than 2 (see blue star), the picture changed. Important note: Point 2 indicates a resistance and point 4 is meant to test point 2. When price suddenly reversed higher, point 2 was no longer a resistance. This would not be possible to anticipate. Can only be pointed out on hindsight. With the benefit of hindsight then, the new way to count is the one I labeled with red bubbles.

I would be mindful of short however.

Over here we are looking at big picture. And big picture shows very strong support in the 1180 – 1200 region (see this posting ‘There is something bullish about Gold‘ for the back story).

In short, if gold support at 1180 is intact and it is in fact printing potential reversal now, then February correction is a throwback to re-test support.

""

Is gold doing bullish reversal?

 

GBPUSD which is the 1-2-3-4?

""

Which is the 1-2-3-4?

I think there is a BM (big move) reversal on 2 Feb. Bullish move to 26 Feb in an upward ED (equidistant channel). Is my 1234 analysis in the chart correct? So a break of 13TL means a long at 1.5386?

Reply

Based on available setup, your 1-2-3-4 is correct. A couple of things to note:

  1. You are going long. Points 2 and 4 are your means of identifying support. If price got resisted by point 2 (because price is now below and support and resistance are interchangeable), then it cannot be the point you are looking for. Re-count.
  2. Also if point 4 got lower, re-count.

 

Caution: based on week-week movement on 4-hourly chart you are correction to look for long. But we are in fact looking for short setup based on big picture in daily chart.

Big picture on daily chart: month-month down trend followed by January – February sideways range. Last 4-weeks rally is a retracement to high of range. Short term traders might be correct to go long based on lower time frame but will hit bear setup soon.

""

Past 4-weeks up is a mere retracement of big picture

 

Update 05 March 2015 – GBPUSD and GBPJPY

It is very clear from our discussion of these two pairs above that the big levels and big trend on daily chart exerted itself. Traders who are trading momentum on lower time frame has to be mindful of big levels in order not to run into a wall.

If you find yourself in profit, important drill to consider 1) need to shift stop or not 2) want to lock some profit or not.

 

GBPJPY finding potential support for take profit

""

GBPJPY 4-hourly chart

Notes:

  1. Finding support is not meant for swing traders to go long for both shorts to find TP.
  2. There is a slight bearish expansion beyond last week low so this is a good sign and we would like to know if it will continue into the weekend.
  3. The right trade for those not in is to wait for pullback to short – sweet spot marked by orange i.e. previous resistance.
  4. Potential TPs are the potential support zones. Traders have to decide which one and how much. I marked them with stars to show their previous effect on price.
  5. Question: why did I plot Fib-Rs that is based on upflow when we want to go short? This is because these are retracement zones that bulls want to position to enter and therefore of danger and relevance to shorts. At these levels expect bulls to come in to make your life difficult. They will be reinforced by weak bulls who decide to take profit which adds to buying pressure.

 

GBPUSD same same as GBPJPY↑

""

GBPUSD 4-hourly chart

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Director, TerraSeeds Market Technician Pte Ltd. Trader, investor. @sohtionghum was picked ‘Top 70 Forex Twitter in 2015’. Operates multiple strategies.

“Dear reader, I do not have a financial license to give advice. I do not know you the reader. Your financial objective and risk tolerance may be different from mine. I am not responsible for any consequence of your action.

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21 thoughts on “Some readers’ questions for this week (wk10)”

  1. Bee Chin Clifford Su says:

    For the GBP USD I see an ED going up in MN chart, if short do we have to wait for it to clear the ED else it may bounce up for the time being ? And doing counter trend ? ^_^

    1. Soh Tiong Hum says:

      Hi Clifford, please point out if the equidistant channel you are referring to is not any of this. A good way is to do a screen capture and send it to forex(at)terraseeds(dot)com and I will attach it.
      GBPUSD big ED channel
      Anyhow, by estimation, the bottom of ED channel is 300+ pips away from price now (red, not the blue). It would be a waste not to do anything if a setup presents itself. Even if you are bullish, the best price strategy to buy is to wait for setup below so I don’t think big bulls are fighting here now.

      1. Bee Chin Clifford Su says:

        O ok I get the better ideal on how the ED should be drawn ^_^ ty. The red ED was how I drawn.

  2. Tan Kimien says:

    EUR and JPY may not be the best pairing to trade now but… is anyone looking at EURJPY H4 1234 with support around 133.40 region to long?

    1. Wern Lim says:

      Generally Euro is bearish on daily and weekly accordingly to Tflow so it may drag down EURJPY. I see your stated 133.4 support level but prefer to wait for a clear signal before deciding long/short.

    2. Soh Tiong Hum says:

      There are some similarities to EURSGD just before it made its bearish expansion. We discussed in the thread https://www.terraseeds.com/blog/2015/03/looking-at-currency-pairs-this-week-10-2015/. Adopting a month-month picture based on daily time frame, long is counter-trend. If you are looking at H4, bear in mind your support is zone formed by three week low and you need to be careful if you see sudden break to downside.

      1. Tan Ki Mien says:

        Thanks guys. Latest update is that the price has broken the 133.40 support level at H4 and heading towards the bottom of a downward channel and horizontal support level at ~132.65 region.

  3. Wern Lim says:

    Thanks Tiong Hum.
    Re GBPUSD, I appreciate you flagging the month on month downtrend. Guess it’s still valid!
    At the moment the pair is sitting on a confluence between the bottom of a rising channel and also a horizontal resistance/support going back to the start of 2015 so hopefully we will see a bounce to maybe 1.55 before possibly being rejected again. Thur’s BOE rate announcement will be the catalyst for the next move.

    1. Soh Tiong Hum says:

      I like this “Thur’s BOE rate announcement will be the catalyst for the next move.” High impact news as drivers for big move. Before that, retracement, positioning, setup and some wayang.

  4. Tan Ki Mien says:

    Been quiet for kiwi the past week but wondering if it is topping soon? Seems like a “complex” 1234 on H4 and resistance zone at 0.7600 – 0.7680 region. H1 1234 in action. Daily seems like bearish doing a retracement.

    1. Tan Ki Mien says:

      Seemed like a good resistance level when it test 0.7605. Point 4 double top as well. H1 another double top. Shorted at 7588 with tight SL.

      1. Soh Tiong Hum says:

        Hi Ki Mien, Thanks for the heads up. I will be looking at NZDUSD shortly as this entire formation is a pullback to support at Nov-Dec ’14 and Jan early this year. Keep stay with us.

        1. Tan Ki Mien says:

          I assume you mean the RESISTANCE region of 7680 which I was referring? :)

  5. William Ang Yong Ching says:

    Tiong Hum, eurjpy and eursgd have similar chart. Any reason why you dont trade eurjpy instead of eursgd?
    Thanks

    1. Soh Tiong Hum says:

      Hi William, EURJPY and EURSGD are all themes of the weakening EUR with the coming ECB QE. I wish I could cover all pairs but fact is when some of them are similar, I pull the one that comes to mind first. The concepts are similar although price action may vary slightly. If you are following a pair that we are not talking about here and there is something interesting, we appreciate if you could point it out. That may lead to more discussion.

  6. Tan Ki Mien says:

    May be worthwhile to look at AUDJPY. 1234 completed at higher TF with potential double top point 4 and price has retraced to TL. H4 tested last week’s high. H1 H&S with potential right shoulder formed and you can see the touch at 93.80. Gone short with tight SL but careful at 93.50 and 93.00.

    1. Soh Tiong Hum says:

      AUDJPY is bearish based on month-month price action and likely a big pullback. AUDJPY daily chart

      1. Tan Ki Mien says:

        good retracement on H4 to short again :)

          1. Tan Ki Mien says:

            oouch…

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