Same old trap, retest sequence in DXY, EURUSD, SiMSCI
DXY, EURUSD and SiMSCI prints highly recurring false-break followed by re-test sequence that catches both bulls and bears on the wrong trade. When the market is playing mind games like these, watch for coming reversal.
#1 – DXY bear trap – retest establishes zone as good support turn resistance turn support
- Light blue horizontal band in this daily chart of the Dollar Index DXY paints a support turn resistance zone.
- We can see the zone as support back in February, turn resistance late May and then again support early July.
- Wash n rinse or bear trap early August was meant to trigger stop loss of buyers while tricking bears to jump a breakdown.
- Naturally as a bear trap, the breakdown signal failed. Last 2-days action appears as a retest to confirm zone as a valid support.
#2 – EURUSD 1-2-3-4, point 4 as WNR, followed by re-test
- EURUSD is a near mirror image of DXY.
- Green zone paints early July high as resistance.
- Based on observation, 29 July tail and 01 August black candle actually verified the resistance.
- But a false break 02 August followed by bearish engulfing 03 August had to trigger stop losses of bear shorts while sucking breakout longs. This is so common now I have written before describing the action as ‘herding traders into a trap‘.
- Of course whoever faded that false breakout had their nerves tested when EURUSD pulled back strongly into green zone.
- Yesterday’s black day should be a confirmation that green is good to go for resistance.
- For forex traders using Tflow® technique, this is the classic 1-2-3-4 setup (4 as WNR) followed by retest which I emphasised in this video (log-in required).
#3 – SiMSCI near exact sequence as EURUSD
- First 2 green boxes to left paints June high as resistance verified by early July price action.
- Mid-July price action turns out to be entire bull trap although this action last longer and is only obvious on hindsight.
- Early August prints bearish expansion.
- This week price action is pullback, retest of pre-bull trap resistance.
- SiMSCI action was analysed and predicted to bearish in this 22 July post although the price action did not happen exactly as foretold.
How market makes money from both buyers and sellers
When the market is faking all these moves, spiking into resistances, playing mindgames, watch out for coming reversal. The spikes are highly likely to be distribution, exits. Look for DXY strengthening, EURUSD weakening and possibly local stock market weakening coming soon.
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.