One of our favoured set ups, against a back drop of over extension

Hi

I am guessing yesterday will have resulted in mixed trading results for our followers.  With us not getting a price action reversal of our support level and not making Daily pivot many of you won’t have traded. For those that entered on the price action reversal and got in around 1.3101 price went directly to our take profit 1 area.

Today looks like more of the same as the market fights between the desire to push up based on the fundamental changes brought by the ECB and the FED, but also fights the feeling of over extension. I expect there may be a good entry in either directions today.

Context
European bond buying and US easing monetary policy are changing the financial picture. The Euro is rallying and for now we must respect that picture however uneasy it makes us feel.. We are in the calm after months of major financial announcements and discussions and are now waiting as we digest the information and hopefully head back to a more normal trend. The next major news is likely to be Spain asking for a full bailout. You imagine that’s already partially priced in.

Technical Analysis
The first thing I notice on the charts today is not the pivots but the descending triangle with the base being tested again at this point, a break of this would provide some momentum short. The 4Hour charts also look a little double toppish.

Our pivots remain in bullish order but the distance from monthly pivot to its cousins weekly and daily pivot is reaching danger level. We are a little over extended and longs must be watched because of this. Price action and Daily pivot are set up in our favorite way. Daily pivot has lifted and if price tests it, it will do so heading in the same direction. Over extension or not we will look for a long entry here.
Once again on Monday we didn’t see a test of DP.

The Day Ahead –
We need to trust the technical set ups. If daily pivot is tested we can look for a long of it, (and in fact even a price action reversal if we want to) remember to tuck your stop behind the parallel support level if you enter this.  If the base of the descending triangle is broken we can trade the retracement short. The two best entries wont appear at the same time and we may get a look at both during the day.
Bias- My overall bias is still short, but the market is the hands of the Bulls at the moment
 NO TRADE:
BEST Short entry: Break of the base of the descending Triangle, the safe entry is to wait for a retest around the trendline, the more aggressive is to enter on the break.
BEST Long Entry.. The success rate when price breaks the pivot travelling in the same direction as the pivot is massive. Its good enough I will ignore the over extension and get in the move. I would like a higher high and low before if I can get it. Stop below support, 2/3rds off at DR 1 and maybe give the rest a bit of a run.

Other entries..  We could look for a reversal bar off DP, and trade the bottom of it short. It would be a great entry if it does reverse from there.

RED NEWS
12:00pm EUR German ZEW Economic Sentiment

All the best
PBT