This week, we have some questions regarding EURGBP, EURJPY and CADJPY from our community which we will be addressing.
EURGBP: Should I fine tune to lower time frame if I can’t find an entry on H4?
Mervin poses the question
Saw it broke through weekly ed channel – bias short.
Unable to find a proper pattern in D1 & H4 so went down to H1 to find pattern.
Found a 1234 pattern, will wait for H1 close below 13TL.
- Agree that looking for price to continue downwards is correct as trend is still down.
- I would prefer to see a H4 pattern as it would help to show that the retracement has been completed.
- In addition, this H1 pattern does not fully meet the requirements of pt2 at a Box High.
- In this case, we see if there is any chance for a H4 pattern to form.
- On the Monthly Chart, we see price at a Support Zone, this signifies that price could be looking to retrace. Next we see if we can find where is the immediate resistance price can retrace to.
- Next immediate resistance clearly see as previous years highs. We move into the H4 chart to see if this zone has any immediate meaning to us.
- The resistance zone meets up with previous 2 weeks lows. This would form a immediate zone of resistance for price to re-test to. This re-test would also complete a 1234 pattern.
EURJPY – Is there any opportunity at the moment?
Question from Mervin in the form of 3 charts.
- Agree with direction to short as trend is still down.
- Agree that we would need to wait for a retracement. However area of retracement marked is too far as the analysis is done on a Weekly chart thus price would need to retrace 1000pips to reach the resistance.
- Instead we want to see if there is anything nearer / closer to current price which we can plan for.
- Looking on the higher timeframe, we see price is close to several boxes lows and highs as possible resistance.
- Next we want to see if these levels have immediate impact for trade opportunities on H4.
- H4 chart shows that price is currently into the resistance zone, however there is no discernible 1234 pattern to be seen. This could mean price could retrace back up to the higher resistance if the current one breaks which might give us a 1234 pattern for us to trade upon.
Key Points to Note:
- When looking for Support and Resistance levels, they should be close to current price for it to be meaningful.
- Levels will lose their immediate relevance as they become further and further from current price.
Question by Ee
Re blog entry on 6 March for CADJPY, a bearish expansion on H4 did happen. It was also mentioned to enter, we would need to see a Doji and evening star on daily chart which I think happened at Pt4 below.
1. Does this mean we can enter anytime after bearish candle (candle next to candle at pt 4) was observed?
2. I’m not sure if I got my TP points identified correctly in the H4 chart? TP 1 = 93.295
3. SL will be 15 pips about pt 4 (96.81) and therefore 96.96?
- Firstly to clarify, there is no need to see a Doji or Evening star to enter at the retest.
- There were a few ways to enter this trade:
- WR: Enter upon close of candle
- Retest of point 2 if you missed the WR: Limit/Pending Order
- 13TL: Enter upon close of candle
- For entry using candle close (WR & 13TL), take note that it should not be too far off after the close as this would mean a larger SL.
- In terms of TP, I would not use that flow as point 4 would be higher than the start of the flow. Instead I would use the larger downflow.
- Note also there is a immediate support approaching, which is a previous year high and several month’s highs and lows. This would be a good place to exercise trade management before targeting the next leg if support breaks.
Note: Trade management means taking some profit, shifting of SL to BE or more to protect profit etc.
Updated 18 Mar 2015
Included question from Ben on USDCAD.
As shown from the Day time frame chart, we can see that its clearly an up trend for this pair since SEPT 2014 and the rally is strong enough to boost all the way to end of 2014 followed by a BULLISH expansion since Jan 2015 this year.
- Question #1: Is my equidistant channel drawn correctly? (Refer to Image #1)
There is a consolidation in Feb and a BULLISH expansion LAST WEEK.
Looking at H4, i have identified the 1,2,3,4 pattern when the CONSOLIDATION starts in FEB 2015. (As shown from the chart below)
- Question #2: Is my equidistant channel for the 1234 pattern drawn correctly? Also is the Support & Resistance regions (Blue & Red Lines) I’ve identified correct? (Refer to Image #2)
- Question #3: Last week we saw a BULLISH expansion, if we zoom in to last week in the H4 time chart, can we use the T-FLow Strategy – under TRENDING – BM conditions all met -> CONTINUATION UP.
BM conditions: prior trend UP / minimum 2 boxes abt the same high / 1 box expanded across 2 minimum boxes / Low of consolidation of boxes is at SUPPORT ZONE / high + close of last week is 35% of previous highest box. (Refer to Image #3)
Hence, according to the T-flow NOTES, it says entry at next box for this stretegy, which is this week.
As shown in the next picture below, there is a break out of consolidation Trend line, WRMB of many boxes testing the key support line at 1.2624. This line is previously a key resistance during the consolidation period is Feb, now its turning into key SUPPORT.
Question #4: How should we go about for this trade since there is no 1,2,3,4 pattern form since last week bullish expansion. CAN we compare the retracement of OCT – NOV 2014 period and match the box high & low with current period retracement box high & Low to prove price Action. This is taught by Binni during BP class on other currencies to prepare for Short trade. But i try to re-apply the concept on LONG position trade. (Refer to Image #4)
Question #5: Hence as shown below, there is a WEEK close & day close above the pink box, justifying a BIG bull arrival allowing us to Long even there is no 1,2,3,4 pattern?
- I would not draw the equidistant channel this way as it doesn’t tell me much information. Instead I would zoom into the immediate price and look for any possible channel. (Refer to below USDCAD: D1 Chart showing Resistance and Equidistant Channel)
- Based on the equidistant drawn, I notice that price is now near resistance and just jumping into a trade without any setup could potentially be a painful experience.
- Note that the equidistant channel I drew is not based on any 1234 pattern but just trying to find any recent highs and lows and connecting them together. Thus in reference to question #2, an equidistant drawn on a 1234 is to determine 13TL, therefore, points 1 and points 3 must be used as the starting point and ending point respectively. Subsequently, adjust the width of the channel to meet point 2. (Refer to USDCAD: 13TL using Equidistant Channel as seen on D1 Chart)
- For Support & Resistance levels, since we’re on a D1 chart, we can always take the immediate turning points as levels to take note.
- Agree that this can be seen as a BM strategy, however I would not see it as a WRMB.
- At this point then I would prefer to wait for price to come back down to retest the immediate Support and form a 1234 pattern in doing so. (Refer to USDCAD: Small 1234 on H4 chart)
Reply from Tiong Hum
Jerome has done a good job addressing the questions here so I would like to make some addition selectively only. Specifically, these are the questions I would like to address:
Question #1: Is my equidistant channel drawn correctly?
Question #4: How should we go about for this trade since there is no 1,2,3,4 pattern form since last week bullish expansion?
- Firstly we have done a video ‘What is the best way to draw equidistant channel in MT4‘ and I would like to share that again.
- Next there are no ‘correct’ channels. You just have to make sure that they look logical to you and that most of the \/s and /\s fit well.
- You may have noticed by now that when you use equidistant channels, no matter how precisely you fit them, they shift when you change to a chart on a different time frame. This imo degrades their usefulness.
- The correct way to approach them is as a guide i.e it tells you ‘oh this pair is uptrend’ and ‘price is near resistance or support’ etc.
- For precision work, you go back to horizontal levels, 52-week highs and lows, edges of boxes, Fib levels and so on.
- Regarding question #4, this is my answer: find another pair that does! Lol!
Update 19 Mar 2015
2 more questions, from our community this week.
- EURGBP (Update from earlier question)
Mervin updates his earlier question on EURGBP after price has done a pullback to create a pattern on H4.
- Following the 2nd push up by FOMC last night, this pattern is still valid and pending a valid trigger.
- Take note to ensure the lowest high is closed below to ensure it does not become support.
Note: There is an EU Summit happening today and tomorrow which could impact movement in EUR.
Questions about AUDUSD from Ben
- Can i say its a Double Top Bearish Chart pattern for AUD/USD pair as shown below ?
- Is there an Evening star candle pattern at picture 2, which implies bearish sentiment price action.
- And also the correct short 0.7613 at the neck line, did i drew correctly?
- I think its better to see Double top at Day time frame as its more stable right?
- Did i mark the neck line short position correctly?
1.) I would not say that is a valid Double Top pattern. There are a few characteristics of chart patterns:
- They appear at turning points, either highs or lows.
- They is usually a symetry to the pattern. (Left shoulder and Right shoulder about same high, Both tops about the same high etc.)
- They are more convincing on higher time frames as they are signs of reversal.
2.) We don’t place so much emphasis on candle stick patterns with the exception of hammer and shooting star being possible indications of WR. For Tflow® we will look at trend through the boxes, identify opportunity via the 4 strategies (BM,WRMB,H4T,H4R) and determine entry via the 1234 pattern and triggers (WR,13TL,F6)
3.) I would not have entered on this and would wait for a 1234 pattern to trade. In addition, the correct approach for F6 should be drawn from pt1 to pt4.
4.) Yes, a higher time frame chart pattern would be more preferred.
5.) For a neckline on Double Top, we would draw a horizontal line at the low of the trough.
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