August, 2010


30
Aug 10

GBP/CHF Triangle Formation

This post comes courtesy of a client who asked us on Twitter to do an analysis on the GBP/CHF pair. He noted that we’ve seen repeated test of the 1.5780 lows and asked if this would be a good area to go long. I took a look, originally he asked about the weekly chart but I thought this daily chart was a good way to show the triangle that it was forming. This triangle spans almost 2 years in the making, starting in Oct 2008. As we can see the 1.5780 is our support, with a descending triangle forming with lower highs. In the short term, this could create a good swing trade from the 1.5780 BUT would only make sense if you keep a very tight stop, and maintain a viable risk/reward ratio for a swing up to the 1.6200 area, because the risk of this breaking the 1.5780 support is still possible. I’d shoot for about a 4:1 risk/reward ratio on such a trade, so about 80-100 pip stop, with a long position shoot for the 1.6200-1.6250 area. At the same time at any point keep an eye out for the 1.5780 area for a potential break of that SIGNIFICANT support level (ALMOST 2 Years in the Making!!). Thanks to foregiven2 on Twitter for pointing this out, and if there are any pairs we’re not following that you have a question about, feel free to ask us on Twitter.

If anyone has questions regarding this post, please feel free to email me at marc@cashmechanics.com

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25
Aug 10

Short USD/CAD Opportunity

Just noticed this while looking at some charts. A few weeks ago, we played a breakout of a triangle that formed on the USD/CAD and that gave us a good 200 pip run up to 1.0670 resistance area. Now that we’ve hit this level, we see the formation of a triple top in a channel with 2 retests of this level in the last 2 days. This gives us a pretty good short setup, however keep in mind, since this level has been rejected 3 times since early June, it’s a major level and could go either way, and if we do break to the upside, should give us some great moves also. We see divergence also on the CCI which gives us the Short bias on this trade, but a move higher certainly is still possible. The lower end of this range is 1.0130 which is about 450 pips away, if you were looking for this swing trade, I would put a stop right above the 1.0670 area and take profits every 100-150 pips or so. If we do break above the 1.0670, first target would be the 1.0820 area and should reach that relatively quickly.


25
Aug 10

Short EUR/USD Opportunity

Looking at a 4hr EUR/USD chart, we’ve see a major correction in the run up for EUR/USD over the last few weeks. Our Primary support level at the 1.2750 level also happened to correspond to the 50% fib retracement level and we saw a nice bounce off that. Once that broke,  we saw a bounce off the 61.8 % fib retracement level and a pullback towards the 50% level. And this is where we are looking for another shorting opportunity with the 61.8 as an initial target, but the 76.8% fib level as our final target around 1.2430 area. As of this post that is a little over 200 pips away.

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22
Aug 10

EUR/USD Continuation of Bearish Momentum

If you review the analysis of the EUR/USD in last Sunday’s Weekly Insight, you will see that we wanted to see if the 1.2910-30 area would hold as a resistance.  It held and price eventually progressed to new lows breaking the 1.2750 area.  In terms of the bigger picture (4 hour chart and above) this means we would expect new lows to continue until price proves otherwise.  This doesn’t mean price will continue lower from its present level immediately.  On the smaller time frames, we can easily see a bounce back up to the 1.2750-85 area.  That is the nearest resistance on the larger time frame.  If price breaks through those levels, then we will watch the 1.2885 – 1.2930 area for further resistance.  I would look to go short on the larger time frames at these levels only.  If price reaches these areas, watch for bearish confirmation before entering.  When taking a trade on this time frame, you must use larger stops (80-100 pip stops minimum).  Your target should be set at no less than 150-200 pips .  Since you would be trading with the trend on the bigger picture, these targets are realistic.  If price breaks the 1.2930 area resistance and is able to sustain those levels, it is time to re-evaluate the momentum on the bigger picture.  This means you should no longer be short and you should stop looking for shorts until the market shows further evidence to support a bearish trend.


19
Aug 10

EUR/JPY Triangle Breakout

Today we’re going to look at a 1 HR EUR/JPY chart with a potentially bearish triangle forming over the last 2 weeks with lower highs and lows sitting around 109.30 area. The key area to look for on the downside would be the 109.30 area, if we break below, the next low is around the 107.40 area (almost 200 pips). There is a chance however of a move up to retest that trendline before heading lower, so based on that, it is still possible to retest trendline and move higher, so we’re also keeping our eyes out on 109.90 area for a breakout to the upside which is possible. Targets on that should be about the high 110-111 area.


17
Aug 10

Long $GBPUSD Setup

Today we’re going to look at a 4 hr GBP/USD chart. As you can see we’ve been in this nice uptrend channel since May. It was previouslly violated on the upside but has since come back down to retest the bottom of this trendline. This 1.5540 area is where the trend-line begins and we’re going to keep an eye out for this level. A reversal of GBP/USD since its moves up from the low 1.40′s isn’t out of the question so we’re going to wait for a confirmation of either a bounce back into the channel or a break downward. With the CCI bullish divergence, my preference would be for a Long Position but again, we’re going to wait for this to play out, and see (next 12 hrs). If we see a bounce up, we should conservatively see 200-25o pips to the upside, however if we break lower, 1.5300 would be an initial target (250 pips). So either way we should see some good moves.

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15
Aug 10

EUR/USD Weekly Support & Resistance Levels

This week the EUR/USD has broken a major swing low at 1.3120 area.  Since this break, it has been pushing lows. The recent swing low is 1.2749.  The price has also closed near this low for the week. At this point, the EUR/USD has shown enough evidence to support a bearish argument.  In terms of a swing trade, I would look to short a replacement into a significant resistance level before opening a position.  Remember this pair has pulled back over 600 pips without a retracement.  This means that there is a good chance of a 100-200 pip bounce before this overall bear trend continues.  Since the trend can be identified as bearish, wait for the retracement.  1.2840 area is the first line of resistance.  If price gets here, look for hesitation and signs of reversal before opening a position.  If price can push through, look for 1.2940 is the next area of resistance.  If price pushes beyond 1.2965, that would confirm that the momentum is changing back to bullish on the bigger picture and also means all bets are off on the short side until further evidence can be identified.   If you establish the short, you will want to see price work its way to new lows over the next couple of days.  If 1.2749 cannot break, then we may be in a new range bound market.  Take profits if price fails to break that low.    If you are going to attempt to buy the bounce, do so only as a scalper and expect small profits because at this point you are fighting the overall momentum.

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13
Aug 10

Long $USDJPY Trade Setup

This is a longer than typical trade we look at here, but I thought was worth mentioning. Looking at a Daily USD/JPY chart we see that we’re in a triangle with a double bottom forming at the 85.00 area and expecting a bounce off that level back up towards the triangle trendline in the 92.00 area. We also started to see the bounce off negative CCI divergence to confirm the move here. This gives us a pretty solid 500-600 pip target range, with just slightly over 100 pip risk on the downside if we crack 85.00. My suggestion is to scale in and out of the trade, for each move of 150-200 pips upward, take some profit.

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11
Aug 10

Continuation of our $USDCAD Setup

This is a continuation to the setup we had in USD/CAD the other day. We saw that breakout from the flag formation that we saw to the upside and shot right up to the trendline resistance level we plotted. At the time of this post, we’re less than 20 pips away. From this scenario, if you are long, you should take profit and wait for the next setup. Because of the Divergence we see on the CCI, there is a better probability of this bouncing off and fall back towards 1.0200. However, CCI has not yet turned downward, so going short here would be jumping the gun and a continuation higher and breaking above the trendline is still possible. I suggest waiting for a confirmation either a rejection downward, but if we continue above the trendline we should still see about 200 pips to the upside.

If anyone has questions regarding this post, please feel free to email me at steve@cashmechanics.com

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9
Aug 10

Interesting Setup in $USDCAD

I was looking at the 4 HR chart on USDCAD and saw this interesting pattern forming on a fairly long time frame triangle that has been forming since late May. We can clearly see the bottom forming with the 3 rejections off of it at the 1.0100-1.0130 level. Since the last bounce we have formed a VERY tight range in the last 24 hrs indicated by the RED CIRCLE. This consolidation zone looks very much like a flag or pennant formation which is a continuation. Typically this would suggest a move higher from this range and we would expect the 1.0400 area where the trend line is to be the target. However, at the moment the 1.0300 area of resistance has been tough to crack, and we could just see this fall apart back to the 1.0100. Either way, we could see well over 100pips on either side, so keep your eyes out for this level. Should expect something before or around the FOMC meeting tomorrow at 2:15 PM Eastern.

If anyone has questions regarding this post, please feel free to email me at steve@cashmechanics.com

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