Play of the Week


8
May 11

EUR/USD: Support Is Near

EUR/USD: Major Support Area Near

This pair finally had the correction that was overdue. This kind of correction makes for a great deal of confusion. Keep in mind, the price is still trading above 1.4250 and 1.4000 which are very significant support levels. There are some bullish arguments left in this pair: Price has penetrated a significant bullish trend line on the 4 hour time framew which it has not completely cleared yet, The 4 Hour CCI is showing a clear higher low which means bearish momentum is declining, and price is hesitating around the 1.4350 area which was a previous support. At the same time, there are some new bearish arguments now that this correction has appeared. Most notably is the weekly candle that has closed as a bearish engulfing candle. We have not seen one of these on that time frame in a long time. So at this point, I am leaning more toward the long side, but I want to see clear stability before taking any kind of swing trade position., A higher low, a break of a previous swing high, a bullish engulfing candle on the 4 hour time frame would be some confirmations of stability. Without these signs, I cannot define risk or any specific levels to trade on the larger time frames. The key here is to wait. If price continues to sell off and breaks the key support levels mentioned earlier, then I simply step aside and reevaluate.

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1
May 11

EUR/USD: Next Significant Resistance 1.50

The previous week was pretty impressive in terms of EUR/USD strength. Retracements have been small and short in duration which is typical in a bullish environment. Logically, this pair is overdue for a significant retracement, but until there is any evidence of this in the price action, I will continue to look for long opportunities. For the upcoming week, I will be watching for a retracement back into the 1.4650-1.4700 area for a long entry with a stop placed at 1.4580. Entering the position will require bullish price confirmation. I will not enter the position simply because price happens to be in the area of interest. If price falls through this area, I step aside and re-evaluate. My profit target is 1.4980 which puts my reward/risk minimum around 2:1 which is acceptable . Overall, watch significant lows on larger time frames, as long as they are maintained, the bullish trend is still intact.

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24
Apr 11

EUR/USD Trend Still Intact

Previous week saw some serious increase in volatility and still price made new highs. Siginificant supports were broken temporarily but were recovered very quickly. This week I am looking for retracement to the 1.4350 support area for a long position. Stop place should be around 1.4230 area and target 1.4650. 3:1 risk reward is acceptable. Overall support area is 1.4000 to 1.4150. If broken and lower prices sustained, hold off on any new positions and re-evaluate conditions.

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17
Apr 11

EUR/USD Consolidating

The EUR/USD pair has maintained a 200 pip range this week. In terms of weekly volatility, this is a very small range and appears as a small spinning top on the weekly chart. This range-bound condition implies indecision and a lack of buying near the newly established 1.4500 area resistance level. The broader trend is still bullish because price has not broken below any significant supports. The nearest support level is 1.4350 area. If this price breaks, watch for the next support around 1.4250 – 1.4300 area. If this trend is going to stay intact, these levels should hold. Also if you look at a 4 Hour chart, a negative sloping trendline can be drawn from 1.4515 to around 1.4490 highs and a positively sloping trendline can be drawn from the 1.4350 area low to the 1.4370 area low. Together these trendlines present us with a triangle price formation which is a classic chart pattern. Triangles are trend continuation patterns. As long as the supports mentioned above hold, look for an upside break of this formation toward the 1.4600 – 1.4650 area this week. As a result of this analysis, I am looking to go long near the lows of the range. I will look to buy around the 1.4370 area with a stop around 1.4290. My take profit order will be place around 1.4540 area. Risk/reward is slightly over 2:1. Keep in mind, there are not many bearish arguments in the price action at the moment, but it is possible that this pair can correct a good 300 pips or more from these levels. This means if the 1.4250 area support breaks and lower prices are sustained, I will stop looking for longs and wait for the market to present new information.

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10
Apr 11

EUR/USD Watch For Retracement

Once again, the EUR/USD pair has closed out the week on its highs. This pair has been nothing but strong and every pullback has been a buying opportunity. On the bigger picture, this pair is in the process of breaking a weekly bearish trendline resistance that may still be in play at these levels even though there are no particular bearish price action confirmations at this time. Also on the 4 Hour chart, take notice of the new high on price and the subtle lower high on the 14 period CCI. This price warning is also present on the weekly time frame. This information suggests that the current bullish price momentum is weakening on the larger time frames and points to greater potential for a healthy correction in the next week. From the bullish perspective, there are two bullish trendlines intact on the 4 Hour time frame, and our new significant support level is around the 1.4350 – 1.4250 area. This week, I will be looking for price to pullback into this range and find support. I will be watching for bullish candle reversals and other chart formations to confirm that there are buyers present. Once I am satisfied with the supportive price action, I will look to get long somewhere within the range. My risk will be measured by how near I am buying to the 1,4250 area. I will be referencing the 1.4250 area to place my stop which means it will be somewhere around the 1.4230 area. Remember there are no exact numbers in this. Also keep in mind because of the nature of this advance, this pair may experience a broader correction and you must be ready to step aside if the corrective scenario unfolds. A break of the 1.4250 area will imply further weakness and it is possible that price may work its way back to the 1.4100 – 1.4050 area overall. Since the trend has been so bullish, I have no intentions to go short at this time. If price can break the 1.4000 overall, then I will re-evaluate and consider larger time frame shorts. If you are interested in participating in a corrective movement in an environment that is generally bullish, consider trading smaller time frames only in order to reduce risk.

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27
Mar 11

EUR/USD Retracement Area Buying Opportunity

The EUR/USD has retraced back into a possible support zone from pushing new highs recently. Since the bullish effort which was complete at the 1.4250 area, the EUR/USD has retraced to the 1.4050 to 1.4080 area early in the week and again into the close of the week. This is an important area to consider. The 1.4050 – 1.4000 is a significant support that can easily be observed on a larger time frame chart. As long as price can sustain itself in this area and not close significantly lower than 1.4000, I am looking to go long. The nice thing about this area is the risk is well defined by the low of the previous retracement to the 1.4051 level. So at this point, I am looking for some bullish confirmation, such as a hammer or buy trigger formation on the 4 hour time frame, or a higher low chart formation on a 1 hour time frame to confirm the support is holding. Once convinced, I will open the long and place my stop around the 1.3980 area. Depending on my entry, my risk should be somewhere between 50 and 80 pips. If this pair stays in this corrective formation and does not take out the lows, the price should head back up to atleast the 1.4200 resistance area and possibly up to challenge the previous highs around the 1.4250 area. In terms of classic chart patterns, we are in the middle of a pennant formation which is usually a continuation pattern, and that is the premise behind this trade. The alternate scenario that will cancel out my long premise is if price pushes below the 1.4000 area. In the alternate scenario, the correction may go further and test the upward sloping trendline around the 1.3950 area. If this scenario materializes, I will wait to see how the price action in the 1.3950 plays out before taking any positions.

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20
Mar 11

EUR/USD New Highs

In the previous week, the EUR/USD has made significant bullish progress and closed on its highs. It is important to understand that when a price makes new highs, we have to keep two ideas in mind until the market proves otherwise. First, we have to expect that price will continue higher, and keep making new highs over time until a major support is taken out. Second we have to expect resistances to keep breaking and supports to hold as long as this pair maintains its important support levels. One problem that I notice, especially with short term traders is that they don’t pay any attention this these ideas and get too caught up on resistance areas on the smaller time frame charts, especially when there is a smaller counter-trend move in progress. In the upcoming week, I am looking for a healthy retracement back to the 1.4000 area support. I will view such a move as a buying opportunity and look to put on another long position. I will be watching how the price action unfolds on the smaller time frames in that area and wait for confirmation before taking the long position. I will place my stop somewhere below the lows of the unfolding market action, which I am anticipating to be in the 1.3940 area. There is an upward sloping trend line in the area and I am expecting price to atleast stay above this support. If price breaks the 1.3940 area and sustains lower prices, then I will hold off on any new longs until I get more bullish price action. Overall if 1.3850 area is taken out, it will imply a broader correction is taking place and I will re-evaluate the condtions for the possibities of a short position. If the market gives me my entry price, I will be expecting it to go to new highs, most likely the 1.4250 – 1.4300 area. This is a major resistance that if broken would be extremely bullish for this pair. I plan to take profit in the 1.4250 area. Remember this is a scenario that I would like to see play out in order for me to participate. If the criteria is not met, then there is no trade for me to enter.

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13
Mar 11

EUR/USD Look For Higher Prices

The week before, we watched the EUR/USD pair finally break the 1.3850 resistance and push to new highs to close out the week. In the week starting 3/6, the pair peaked at 1.4034 and has been in corrective mode until the close of the week. The correction throughout the week can clearly be seen on the 4H time frame (highlighted by the counter trend channel lines). This corrective action is now complete as the price has broken the bearish channel and has sustained these prices into the close of the week. The overall support that needed to be maintained in order to continue looking for longs was 1.3700 – 1.3750 and this important swing low is still in effect. At this point, I am still looking for price to offer a retracement so that I can go long. Ideally, the retracement lower should not break the dominant trend line that connects the 1.3750 low. That would put my entry range somewhere around 1.3790 – 1.3820 area. If price makes it back to this range, watch for bullish reversal patterns on your intraday time frames. The 1.3750 swing low becomes your reference point to define your risk and place your stop. I am looking for the EUR/USD to work its way back up through 1.4000 and possibly to a new high in the 1.4150 area over the next week. There is significant overhead resistance in the 1.4200 area so I would expect price to have a tougher time there. As traders you must be flexible. This long scenario has a higher probablility at this point. If price breaks below 1.3750 – 1.3700 and sustains these prices, this would cancel the long scenario. Wait for the market to provide new information before taking any new positions.

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6
Mar 11

EUR/USD Higher High Confirmation

Previously, the EUR/USD pair has been showing persistent signs of strength. Ever since the Bull Flag breakout in mid-February, price has finally taken out the 1.3850 resistance and has pushed up to and touched the 1.4000 closing out this week. Price could not sustain the 1.4000 level, but overall selling pressure has been minimal. For the upcoming week I am still looking for continued upside. There is very little arguement for the short side at this point. Remember in upward trending markets, resistance breaks and support holds. This means don’t get caught shorting resistances, especially on the larger time frames. The EUR/USD has 3 upward sloping trendlines that are still intact. The slope of the trendline 3 is the steepest and most likely to break. This is not a trend reversal signal, it just means momentum is slowing. Look for support at trendline 2 or 1. Also I will be watching the 1.3850 level carefully for price action reversals back to the long side upon any retracement back to that level. 1.3850 was a significan resistance and I now expect it to act as an important support level. If price holds up without closing below this level on the larger time frames, I will be looking to go long with stops around the 1.3750 area. The first upside target from here is in the 1.4190 area which is related to a level from the weekly chart. If price breaks the 1.3850 – 1.3700 support zone, I will hold off on longs and reevaluate the conditions from there.

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27
Feb 11

EUR/USD Watch For Bullish Continuation

Recently, the EUR/USD confirmed a break-out from a bull flag chart pattern observed on the 4 hour time frame. Since the break-out, there has been some buying opportunities, but trading has been very difficult because of the choppy nature of the price action. I always tell our traders to make sure to analyze larger time frames, especially when the intraday charts become confusing. A weekly chart will tell you that a higher low has been formed, and if you look at the candlestick that just closed, there is a long tail on the bottom. Also, notice the upward sloping trendline on the 4 hour chart is still intact. These are bullish signs. The most recent action may have been bearish intraday, but I believe this is a buying opportunity in the bigger picture. For the upcoming week, watch for price to hold above the 1.3700 area. If a 4 hour candle or larger time-frame closes below the 1.3700 swing low support, I would stop looking for longs and wait to see how the market behaves from there. As for long positions, it is important to wait for momentum to shift back to the bullish side. This means price should take out a swing high from a smaller time frame atleast, and not break below support levels. If the bullish signs persist and we see some price action follow through, we can see a break of the 1.3850 high and push into the 1.4000 area this coming week.

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