Eur/USD being in a clear downtrend, the old adage of sell the rips and buy the dips comes to mind. Trying to read the charts in a more conservative fashion requireds catalysts for entry in trades. EUR/USD is setting up for a text book short possiblilty.
ADX reading 15.41 with a new high in DMI- means that the next leg down has poential to extend strongly in price and in time duration to the downside.
After a snap back rally one could have see the over bought RSI crossover a few days ago a good time to test the waters with a small short position. But having been a little off in a couple trades lately Im really trying to extert more patience and just follow my systems as they signal to me.
The next chart I labeled the clear favored wave count to me, remembering that wave 3 is most of the time the longest wave and never the shortest wave. Forex markets have a beautiful symettry to there patterns so I use a basic measured move to project the possible end of wave 5.
What will be my catalysts.
1. A break of the yellow trend line would signal a initial first position. with a stop loss being slightly above the minor high of 1.33.
2. A compounding 2nd positon would be triggered s the EURUSD breaks cloud support. I really like to see a trade setup really close to where the cloud
gets noticably thin. This tells me that it wont take much push to fall through the ice at this point. Curiously, also I have found that areas on the chart where the cloud “flips”
are sometimes very good entry zones as far as timing.
Targets: a minimum target is labeled with the blue line and 5 notation (1.22). I think the Eur/USD will find a consolidation down here considering it is a major primary support zone and if it broke this zone with conviction, parity would be the next stop.
I also wanted to update you guys on my AUD_JPY trade (which we actually used the FXA etf as a proxy)
Summary of Previous post: I saw a coil triangle pattern forming and I knew the next move out of this zone was going to be quite big.
I drew all these targets of this type of trade. a Straddle or Strangle is what I thought would be the most prudent. Turns out the calls, even though being profitable withered away from volatility decay and the puts wont perform until the trend reverses. But my analysis was accurate we just should have been outright long instead of using options. Since we are nearing the inital upside target on this trade I expect to see a minor reversal within the next month.
Euro is trading near session lows at the $1.321 level as Spain forecasts 24% unemployment in 2012. China reportedly was buying Gold a few days ago when a large US fund started dumping during Bernanke’s speech. Dow Jones crossed the 13,000 mark over 50 times in 3 days. Also, Bank of America cut its Q1 GDP forecast from 2.2%-1.8%. Maybe high Gasoline prices are really cramping the consumer. IMF reports that the threat of a major global slowdown has ended as macro numbers are getting better. Big Lots, CTIC, and Overstock are set to report earnings today.
