Week 49

[Anna-Maria 10]

The triple whammy of: thin holiday trade, renewed rumors of Central Bank diversification & potentially narrowing yields sent the $ Bulls scurrying for cover late last week.

 

Much of late Thursday-all Friday activity can be attributed to technical bullying on the part of the Bears, as the Indx got shunted to these early summer lows. Next level reaction zones aren’t far off, with the 78.6 sandwiched between the focal points for Bear target area’s.

 

These pairs are approaching oversold on the mid frames, and with trade cranking back to near normal levels next week, the emphasis will once more turn to the Data releases.

 

The (ftrs) consensus regards a reduction of rates at the March 21 meeting shifted quite aggressively last week from 11% to 51% on the back of recent under par data output.

 

Next weeks data bag is full of goodies on both sides of the pond, & with a heavy presence of Fed Chief rhetoric, the stage looks set for increased volatility!

 

[torero 10]

So what are gaps like in forex? Do these get filled like in futures? Looks like I'm witnessing one right now on Cable right after the Tokyo open. Maybe 50% fill? The spread is incredible--- 10 pips!!!! Wow! My mistake... bid 1.9150, ask 1.9400!!!!

[pipMonster 10]

Hi Torero,

 

I've been trading forex for a few years now and haven't seen a gap like this. Smaller gaps sure. This is quite unusual.

 

Right now, I'm out and flat, watching the market. I most likely won't be engaging until near the end of the Asian session. I find this price action incredibly interesting.

[torero 10]

Yeah, I was amazed to see a 24hr market with a big gap as strange too, unless some big news over the weekend may have something to do with it. I had the alarm on the break of the gap to fill but in the end, I overslept and missed the move. No biggie. Asian close, London open should be interesting.

[Anna-Maria 10]

Hi Torero,

 

I've been trading forex for a few years now and haven't seen a gap like this. Smaller gaps sure. This is quite unusual.

 

Right now, I'm out and flat, watching the market. I most likely won't be engaging until near the end of the Asian session. I find this price action incredibly interesting.

 

They do occur every now & then. Thankfully, they're the exception rather than the norm.

 

You were certainly in an advantageous timeframe across there Jack, if you'd considered trading the pullback

 

But yeah, waiting for London to deal it's hand is probably the better option in these types of cases - wait for the genuine flow to reveal itself!

 

Looks like Euro & Cable are the only one's not to fill their gaps at the mo.

[Kiwi 16]

This reminds me of when i went long QQQ at the opening of 2000 ... It was about 3 days before it stopped going down

[torero 10]

Looks like it did fill in the end, I saw it stopped at the high of Friday but it pushed to closing. I got stopped out on that trade. I'm staying out until I see a better entry. I still see 9500 as target but not sure with this gap now, unless it makes over the top of the gap. But by then, the reward from there to all time high is a bit small. What do you think?

 

[Anna-Maria 10]

I guess if you're confident that the current fundamental is still to the $ neg, then triggering as close to the pre-gap support line (c9330) offers the better opp?

 

It allows a decent r/r entry to test the further $ downside potential?

 

Ignoring the spike high, the playable range is quite well defined.

 

It's simply a case of what you perceive to be the lowest risk opportunity if you're considering triggering at all.

 

Bear in mind, there's a whole slew of data/Cent Bank chatter this week - each camp will be trumpeting their side of the $ story!

 

But for now, it's still dawing the magnet to the $ negative until the data proves otherwise.

 

[torero 10]

Yes, I had my stop at 9336 and it took it out in one swoop when Tokyo closed. I thought it was safe, now I have to redraw it 9300 as support despite this spike down was a freak. I'll pass this up until I have a clearer answer possibly tommorrow. Yes, I agree I'm still looking for long plays.

[cowpip 10]

Hi torero!

 

This may be a good time when an analysis of things beyond just the currency of choice may be beneficial. The large move up last Friday was primarily stop-loss / order momentum driven. There was no particular reason (nothing really noteworthy) for the drop in the dollar. In the last few weeks/months, Fed chatter has been more hawkish than dovish, despite the poor numbers that have been reported. Yield's have also not responded the same way as the currencies have, which leads one to speculate that this large move up may not have a whole lot of breath left specifically because the move itself wasn't driven by a fundamental trigger. Sure, it may be the start of an overall longer-term dollar decline, but I wouldn't personally discount the strength of the dollar yet. As Texxas stated, there's a lot of Fed chatter coming up this week, and with some level of discomfort probably being noticed by the Euro 'bosses' not wanting to see the Euro strengthen too fast, persisting low expectations for future rate rises in Japan, and continuing anticipated optimistic outlooks (and a cautionary stance regarding inflation) by the US Fed, there's plenty of impetus for the dollar to regain some control in the short-term.

 

I'll continue to play what price action dictates, but I have learned it's always wise to keep one eye on the fundamental drivers as well. When they both align, the moves can be quite forceful and long-lasting.

[torero 10]

Looks like a reversal is in place on 15min charts, seeing triple-top plus a Heads-n-Shoulder. I missed the entry near 9454 but will wait to see if it comes back up for a small kiss.

 

[Anna-Maria 10]

One or two Fib levels to keep in mind on the Cable, should the buck attract a few supporters off this current high.

 

The 23.6 hits on yesterday's low zone, with the 50% marker nudging the high of the previous retrace leg kicker.

 

Those 2 upper Fibs will have a lot to say regards the strength of any dollar retrace in my view, providing of course price actually manages to push that far.

 

This pair is quite extended, which is nothing new for Cable, & for now it still remains a "dip buying" play.

 

We still have the Core PCE & the ISM (Manuf) numbers in the print queue for the remainder of this week + another stint on the rostrom from Charlie Plosser at the eco/growth conference in Philly & Bernanke addressing the Research (Monetry Policy) Forum in our Capital on the same day.

 

Don Kohn & Jeff Lacker are also scheduled to speak Friday, but most of the day's activity will have subsided by the time they take the stage.

 

Still plenty of fun & games left in the bag into weeks end - remains to be seen how much energy the $ Bears have to run these Bulls a little farther

 

[Anna-Maria 10]

 

This pair is quite extended, which is nothing new for Cable, & for now it still remains a "dip buying" play.

 

Still plenty of fun & games left in the bag into weeks end - remains to be seen how much energy the $ Bears have to run these Bulls a little farther

 

 

Price has shifted over a cent during the Tokyo session, but more importantly, has remained ($) bearish above yesterday's activity.

 

For those who enjoy their shut eye, the lower risk opp was farther back as it ramped back thru the 1.95 round number - but another possible leg in occured off the Asian top pre-London.

 

Sure, it's pushing the limits, given the run already printed since last nigh's NY close, but nonetheless it's a typical signal with a sensible get-out option if this new high fails to ignite any follow thru.

 

It's sometimes difficult to stay loyal to a consistant set of trigger parameters, particularly when the trigger/set up occurs at extreme price activity - but as long as caution is observed regards a clear, defined exit in case of negative expectancy, the triggers/set ups can still be actioned.

 

Just because price has & is threatening new highs/lows doesn't equate that it's necessarily the better option to automatically look for reversal behaviour!

 

I much prefer to allow price to tell me categorically that it's time to fold & stay sidelined.

 

[torero 10]

I got stopped yesterday from the short (tight stop), had tunnel vision and saw the small patterns. When I got stopped out, I went back up higher timeframes and saw the big picture. Sure enough, I took a wrong position. I shorted at support (9459) on 60min and 240min frames.

 

This morning I went in with stop buy at 9490. Had to leave my laptop so I set the trailing stop with 20 pips trailing. Finally I got stopped at 9540. Not bad, it right at my target.

 

Now a new game with new highs, I'll just keep buying pullbacks.

 

Tex, one question. What are you thoughts on using trailing stops on forex? Have you used it with any success? I use this when I can't babysit it.

 

[Anna-Maria 10]

The 5min frame snapshot of the 15m trigger at this potential entry zone.

 

For those who prefer to keep their risk tight and/or jump on the momentum with decent exit 'trade-off' to check the flow, have the opp of catching these types of triggers.

 

The "early blind b/o punters" who jumped on as Frankfurt opened (thru 9530) would have had to sit thru a painful 40pip pullback to c9520 if they hadn't already encashed - thus maybe shaking them out of their positions?

 

Sure, like I've mentioned before, occasionally price doesn't 'pull-back'...it merely continues to chug along - fair enough. But rather than simply wildly triggering as price busts thru a prev area of activity, it's often preferrable to wait for price to show it's true intent?!

 

At least if it does continue in your direction after the pull-back, you've done your utmost to ensure you're respecting your risk & technical parameters?

 

If it unseats you at that point, then fair play.

 

[Anna-Maria 10]

 

Tex, one question. What are you thoughts on using trailing stops on forex? Have you used it with any success? I use this when I can't babysit it.

 

 

No, I haven't ever used a physical (software) trailing stop facility, if that's what you're asking?

 

Fortunately, if I've triggered an entry & get sidetracked with another pair or task, there's always someone else to assist in managing the position - be it a swinger or an intraday trade.

 

But they're a pretty cool option if you're otherwise indisposed.

 

Anything which helps protect your hard earned research-entry work can't be a bad thing huh?

 

Account preservation is the No 1 priority in trading. If a trailing stop is available to you & offers peace of mind, then it makes sense to incorporate it into your arsenal.

 

Another very good there, nice one!!

[Anna-Maria 10]

This morning I went in with stop buy at 9490. Had to leave my laptop so I set the trailing stop with 20 pips trailing. Finally I got stopped at 9540. Not bad, it right at my target.

 

Now a new game with new highs, I'll just keep buying pullbacks.

 

 

That last line on my prev post was meant to say: 'Another very good trade, nice one'

 

You sure snagged it at the premium lower risk entry as it moved away off the Asian open! - offered good stop/exit protection placement as well.

 

Yeah, until it begins to display topping out/exhaustive behaviour (clear lower tops on at least the hourly frame), then it still remains a buy play in my book too.

 

We'll get a clearer view of events after today's/tomorrows data for sure. But another leg up thru the weekly resistance zone & this could continue to trek!

[torero 10]

9570 is an recent historic high isn't it? If we get past this, it'd be since 1992 since we've seen such weakness in the dollar (the Brits visiting America must be estatic!).

 

One observation I noticed but it's too early to make a conclusion and please correct me if it's off, and that is usually one market pushes it higher (say, Tokyo), then settles or consolidate until another market London opens and continue the advance, etc. This is truly amazing to watch.

[torero 10]

And another triangle! I made another long since I got stopped out and still see more advance ahead. Let's see if NY can push it up higher.

 

[Anna-Maria 10]

One observation I noticed but it's too early to make a conclusion and please correct me if it's off, and that is usually one market pushes it higher (say, Tokyo), then settles or consolidate until another market London opens and continue the advance, etc. This is truly amazing to watch.

 

It works pretty much that way whilst prices are in trend mode sure. Bear in mind, the volumes are very low on the European pairs during Tokyo. Most of the time price is contained within reasonably tight ranges & doesn't get going until London opens it's doors.

 

It can just as easily fake (printing a 2b type action) & get shunted aggressively in the opposite direction too.

 

But generally, your observation regarding the Tokyo shifts pattern carries weight in these types of activity we're currently witnessing.

 

Not quite so sedate or well behaved in range mode, but that's another story

[torero 10]

Stopped out from moving stop from last trade. I think th consolidation here may be forming into a triangle again but not taking anything for granted. I'm seeing another pullback and moving upwards again. Taking another long here.

 

[torero 10]

Near resistance 9754 and booking profits and wait for another possible consolidation. I think I'm very lucky to be starting to trade forex in a bull trending market like this. I know the good times like this might not last but hopefully I'll be aware of it when it ends because it seems a bit too easy to believe it.

 

[torero 10]

Long again at support near 9650 area and at trendline support. Wait for NY open and see if it'll take it higher again.

 

[torero 10]

Taking profits and run here! See you all Monday!

 

[pipMonster 10]

Torero,

 

You make this look way too easy! Very nicely done.

 

I've been doing fairly well recently trading the end of the Asian session and London cross.

 

I'd like to give a shout out to Texxas and the S/R levels explained in an earlier post in Cable Musings. Thanks! Very nice tip.

 

This past week I've removed most indicators except 60ema, 200ema and MACD on higher TF charts. I also turned off the price 'line' on Oanda charts. It seems to help me concentrate on the 'area' where price is and not so much on the price itself. It also helps with pattern recognition which includes price exhaustion for entries and exits.

 

I'm already looking forward to next week hoping to continue swelling the account for the holiday draining at years end.

 

-pipMonster