GBP/USD: space +51 pips; time 1h 12min

I haven’t been following my momentum setup lately, but one trade yesterday was begging me to take it and here it is: +51 pips GBP/USD.

EUR/GBP short position taken

We are short EUR/GBP from 0.9123 on a breakout below neckline/support zone on the 4 hour chart. Our target to the downside is 0.8870 and our stops go above the resistance area represented by the 4 trendlines together with the 8 and 21 moving averages.

Update 1: with the vast contribution of the idiots and morons from the ECB on Thursday, we did not get the the follow-through that we had expected. We are moving our stops to break-even to avoid a move against our position, although technicals are still strong and support a bearish move.

Update 2: we’re gonna stop here for the moment although we are leaving pips on the table; the bears look exhausted on the hourly chart and a retracement is possible so we are taking profit at 0.8985 for 138 GBP pips, that is about 202 USD pips.

NZD/JPY long position taken

We have acted will full caution on this one, but the break above 50.40 had proven reliable. We are long from 52.36, looking to add on a re-test of 50.40 area and with a target of 55.70.

In support of our trade – rising trendline from February the 2nd, which we will use as a stop-loss indicator together with sustained breakout above daily trendline dating back to November the 4th, 2008. Also – daily MACD rising to the highest levels in one year is likely to bring renewed buying pressure in the market.

Update 1: profit taken at 54.50 for 214 pips. Looking to re-enter long on a retracement.

USD/JPY long position taken

The USD/JPY 4 hour chart above displays a nice inverted head and shoulders pattern which broke above neckline yesterday and price action is currently re-testing neckline support.

I am long from 90.05 targeting 92.80 (just below 76.4% Fib retracement of recent down-move, area also coinciding with January the 8th price gap). In support of our trade also comes the recently established up-trendline from January the 21st and February the 2nd.

The risk for this position is somewhere below 89.00, flexible and adapted to price action as always.

Update 1: stops moved to break-even

Update 2: trade closed for +175 pips

AUD/NZD diamond formation presents bearish opportunity

I am not going to review the diamond formation as it represents a somewhat complicated concept and I would prefer my readers to consult the information available on Investopedia:

http://www.investopedia.com/articles/forex/05/DiamondBear.asp

What we have above is a daily AUD/NZD chart – my favourite. As a matter of fact, in 2 years since I’ve been trading AUD/NZD I never encountered a single loss. Usually I keep this pair for myself as people don’t like it due to it’s spread, but this setup tends to be very educative.

So, we have the ABCD diamond which we know it’s bearish; we have the multi-month up-channel (the wider channel that you can see on the chart) and also a narrower channel dating back from 2007.

We observe that the narrower channel was pretty much respected and – even with breakouts above and below it – price action returned within the channel boundaries and recent tests of channel support in November 2008, December 2008 and January 2009 re-instated the channel boundaries.

Next we have an Elliott wave count supported by a bearish MACD divergence into wave 5.  As you can see, wave 4 developed as a triangle which had a bullish breakout in January 2009 (a few days ago) and – at the time I’m writing this – wave 5 is currently under development.

The question arises: where can wave 5 end so that we can get short and catch a huge corrective move? Resistance comes in 2 areas:

- minor channel resistance around 1.2700 (preferred for the best case scenario) or

- multi-month channel resistance + hystorical highs both coming in the 1.3000 area

I am already short from the current levels 1.2430. I will be looking to add both into 1.2700 as well as into 1.3000 if we see that for a ride all the way down to 1.1400. Will be updating the post as the trade developes.

Update 1: I was short from 1.2430, 1.2700 and 1.2880. Closed everything today, a few minutes ago, at around 1.2430, waiting for another re-test of the top to enter short again. For now + 730 NZD pips and looking to re-short soon.

USD/CHF bullish and looking for breakout

First of all let me remind you of this picture that I placed a few weeks ago together with my comments.

http://andreitaga.wordpress.com/2008/11/10/usdchf-multi-week-reversal-ahead/

We are bullish in the long run as the sequence is clearly impulsive. Wave 3 seems to be on the way, the only thing needed for confirmation is a break above former highs of wave 1.

Scaling down on a more detailed chart, we can see an inverted head-and-shoulders formation threatening to break above neckline in the coming sessions. Technical target for the formation would be around 1.2300 which coincides with 161.8% Fib projection from waves 1 and 2. However, as the pattern is so clear, be prepared for the market to pull a lot of tricks!

This time we are looking for a break above neckline sustained by strenght. What I mean is – the market will be looking for every way to play against us. Nobody gives up his money without a fight and this is some big money we’re talking about. It’s the same psychological effect as a cat caught into the corner. So I want to see not only a break above neckline but also a break above 61.8% Fib projection from waves 1 and 2 and with some very solid candlesticks (no spikes to the upside) in order to get long!

Wait for your entry until the best conditions arrive and don’t worry – there’s plenty of space because once the bulls get the entry done correctly nothing can stop them.

The first trick that the market is going to play - in my opinion – is the triple bottom that appears on the hourly chart and just broke to the upside.

Triple bottoms are hard to find but in the same way – hard to reverse so 1.0870 is line in the sand for the bulls. The problem is how long will the market retrace until going back to play the triple bottom? My opinion – until 1.0970. That doesn’t mean it will actually retrace until 1.0970 what it means is that it can retrace to 1.0970 and still maintain bullish bias.

I will be looking to get long from 1.1050 and around 1.0970 if we see that for a play of 1.1260. If market breaks below 1.0870, all bullish bias is negated and the target is 1.0730 very fast. So this is somewhat a win-win scenario.

USD/JPY long position taken

We are long from 94.12 on a break above resistance area 93.50-60 and looking for 95.60 to the upside. Will be updating the post as the trade developes.

Update 1: we have closed our trade at 93.97 as price action is looking for a short-term top. -15 pips on this one

Principles of technical analysis applied to my blog visits

Technical analysis can be applied not only to trading – but to virtually anything that can be represented on a chart. To prove this I took a picture of my blog visits: we can see a down-channel which was broken a few days ago with price action stalling at previous highs and turning back to test the former channel resistance – now turned support. Since then price action rallied a significant number of… visits… breaking above resistance and threatening former highs which come around… 42 daily visits. We’ll see if that happens.

The same situation could be witnessed for another one of my blogs, a few months ago:

We can see a trendline resistance which was broken and price action rallying to about 500 visits. Since then price action turned lower and we can see a re-test of former trendline resistance – now turned support followed by a double top in the region of 500 visits and then capitulation, with the blog ending at 0 (zero) visits sharp, a few days after taking this picture.

I placed these pictures not only for entertainment purposes, but because sometimes these types of correlations can shed light upon scattered pieces of knowledge. In the end this blog is about learning technical analysis, we’re here to learn and we can use any means as long as it takes us closer to our final goal.

AUD/USD long position taken

We are long from 0.6956 and looking to play the overnight gap @ 0.7070 as price action seems to be forming an ascending triangle. Stops go under the triangle base. Will be updating the post as the trade developes.

Update 1: profit taken at 0.7070 for + 114 pips and the trade goes to State of the Art category as price action never went a single pip against our position.

USD/CHF long: space -33 pips; time 12 hours

As nothing is forever in this world, our momentum setup had to give us another loss. -33 pips USD/CHF this time in 12 hours if we do not consider overnight or 36 hours overnight included.