Context
In the big picture we remain bearish as the pivots are lined
up perfectly monthly pivot, weekly, daily pivot, down. The balancing issue is
that all are over extended. Today is Friday and I don’t trade Fridays as market
volume can be low and the combined effect of intraday and intra week traders
revering their positions for the weekend can cause unusual moves. If you trade
Fridays I suggest that you half your risk.
Yesterday's Report -
http://clip2net.com/clip/m0/1337907971-clip-47kb.png
The EUR/USD started yesterday over extended with the daily pivot
600 pips away from the monthly pivot. This is extreme for the pair with 460
pips being an often used reversal area. We again had a symmetrical triangle or
pennant shape which is a continuation pattern short. On our favored 30 minute
chart we were presented with an unusual longer term resistance line and an very
short term intraday support line. The price break short was too aggressive and
without an entry for us. But for those of us who stayed around we saw two
entries long off our resistance line as forecast in yesterday’s report. The
first entry comes after price breaks and retests our line… the line breaks but
the long tail doji next bar gives us the signal. Entry top of the bar and stop
bottom, target daily Pivot. A classic S shape entry with the only concern the
lack at entry of a higher high.
The second entry is the classic and great reward for those
that waited. Price having broken and
cleared our resistance line puts in a higher high and then retests the line
creating a higher low. Entry still top of the doji, stop at the bottom and
daily pivot the target.
Technical Analysis
EUR/USD is clearly in a bearish mode with its long term
support level broken. It is also now even further over extended and relevant
S/R levels and trend lines are hard to find. For me price is to over extended
to go short, and momentum makes going long pretty dangerous. We do continue to
see aggressive moves down, and slower retracements which suggests we still have
momentum short. I still expect a pause in the move today.
It’s interesting to note for future years that the over
extension maybe seasonal with this year’s 600 pip Monthly to Daily pivot gap
following 540 in this week in 2011, 970
in 2010 and 790 in 2009.
The Day Ahead – I don’t
trade Fridays but for those that do…
http://clip2net.com/clip/m0/1337909733-clip-47kb.png"
I understand that conventional wisdom says to go short, but
my preference would be to be patient and find a quality long entry if one turns
up; we still have previous major support (1.2677) to retest as resistance and 2
open gaps above us. The market may make some effort in that direction as
traders close out positions for the weekend.
To enter I would need a break and retest of daily pivot, or
later in the day a bounce of our trendline back to daily pivot. The trendline
bounce would require price to already be showing a higher high, with the bounce
confirming a higher low.
Short entries need to be of our normal high quality and
would only be considered after a retracement. Today’s pivot isn’t a high enough level for me
(despite being around the 382 retracement of yesterday’s move) unless we have
seen another break short first. My preferred level for a short would be off yesterday’s
short term resistance between 1.2597 or 1.2604.
News Today GMT
There is only orange news today.
Remember Monday is a US public holiday and another no trade
day for me. It will be an unusal week with Friday being the first and NFP due.
This means the last week of this month could trade like the first week of most
months.
I will try and post about my entry methods to improve
profitability of winning trades and reduce losing trades.
All the best
PLB
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