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EURUSD Retrace rally then big drop


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OK so that's a trend following strategy you are using, fair enough, but why 10340 was more my question and what happens at 10340?

In terms of evidence for a rally, as you brought that up, (and not sure what you define as a "leap" higher) there is plenty about.  First of all is the knowledge that markets don't move in one direction and that trends get broken.  Look at any trend in the past and just before it hits a turning point and then reverses it looks exactly like what you posted.  The trend is your friend until the bend in the end.

In terms of specific signals:

  • EURUSD hit a supporting weekly trend line with PMD and bounced up off it with a pin bar price action candle
  • GBPUSD hit a weekly supporting trend line and an daily lower channel line and did leap higher, with a pin bar price action candle also, and then broke out through the upper channel line, where it now resides waiting for the next move
  • AUDUSD completed a V-Bottom (EWT1-2) and then also leaped away higher, breaking back through the resistance level formed by the V pattern
  • USDCAD completed a wave B rally and the dropped sharply.
  • USD DX spiked off a weekly Triangle resistance line and a monthly down sloping resistance trend line and dropped sharply away

How many more signals does a trader need to be at least aware that USD may be entering a bearish phase?

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34 minutes ago, Mercury said:

Look at any trend in the past and just before it hits a turning point and then reverses it looks exactly like what you posted.  The trend is your friend until the bend in the end

This gets to a fundamental point in whether TA is worth bothering about or not.  If you are not following what is an obvious trend according to the indicators provided by TA, what use is TA?

This is not aimed at you personally, but do people realize how ridiculous they sound when they say things like 'a trend is a trend until it isn't'?

So what is the answer - trade in the opposite direction to a trend?  Good luck. 

Most people seem to be happy to post charts of patterns AFTER they have completed ... do these people actually trade or are they bullsh!t artists?

No wonder TA has no credibility among serious investors ...

Edited by dmedin
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14 minutes ago, dmedin said:

This gets to a fundamental point in whether TA is worth bothering about or not.  If you are not following what is an obvious trend according to the indicators provided by TA, what use is TA?

Again fair enough but it is not ridiculous to be mindful that trends come to an end.  Not all TA is geared towards trend following.  Some is geared towards spotting trend changes.  This is is the fundamental point about TA, you need to use the right kind for the circumstances.  So if you are solely a trend follower you accept that you may get stopped out on a reversal and you may lose on any trades with a large draw down at the point of entry.  If you are a swing trader you accept that you may get the turn wrong a few times before you get it right.  If you do both you deploy different signals depending on whether you are in swing mode or trend following mode.

I can only speak for myself but I only trend follow the EWT wave 3s.  In the case of USD I do not think we are in the wave 3 sweat spot for trend following yet.  I think the same thing for Gold/Silver.  So I remain in swing trading mode until my analysis gives me wave 3 turn signals.  This is about having a method you believe in but practicing it in a practical manner given the circumstances present by the price action of the markets and carious other signals you may have built into your method.

So in fact in the case o EURUSD, I agree with your trend assessment BUT I think there will be a retrace rally before the next big leg of the trend occurs.  I see the same thing on USD DX.  I have backed this with fundamentals analysis whereby I do not see a major wave 3 (or C) rally on USD until all hell breaks loose on other markets.  We aren't there yet.  Really, for me, I don't see any other way to trade long term positions that marrying fundamentals and technicals.  It is different for day trading scalpers, they have to figure out the prevailing trend on a particular day and trade between the S/R levels and avoid he whipsaw of sideways days.  Typically they close out positions at the end of each day and do it all again the next day.  Few carry positions into the weekend.  It is a totally different kind of trading from what I do but they will also have their method.

Question, if you do not have a method that involves TA of some sort then how do you decide to enter a trade; how do you decide on your exit points; how do you decide on stop levels etc etc?

14 minutes ago, dmedin said:

No wonder TA has no credibility among serious investors ...

Investing and trading are related but different, although over the years I have come to the conclusion that technical analysis is useful for investing also, especially in helping with buy low sell high assessments.  There are very many serious traders, money managers really, who use technical analysis.  These guys manage billions.  I would call them serious.  

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More pretentious perhaps?  I mean traders like to think of themselves as trading rather than gambling.  Then again investing is gambling too so...

SB is just a vehicle.  Investors have stop loss strategies too.  The only difference is that leverage carries more risk obviously.  Your thread asking whether SB is for mugs (or whatever the title is) hasn't really concluded but I think the question is wrong as mostly the thread seems to be about day trading.  It isn't SB or CFDs or IG or whatever that is causing the problem...

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Just because somebody looks at a chart before buying or selling a stock doesn't make them a chartist.  That's another one of the many logical fallacies made by the proponents of TA.

Markets aren't random, that doesn't mean you can predict them correctly using charts ...

It's not one or the other.

It's clear to me that the claims for TA are grossly exaggerated and you really need to be a full-time professional with deep knowledge of the markets you're trading on to even have a chance of doing well at this.

Edited by dmedin
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We got a massive drop on the ECB announcements and then an even stronger rally in the space of a few hours.  Maybe market players realised that despite the headline EURO bearishness of the ECB announcement it may spur the Fed to get stuck into the currency wars.  Whatever the reasons the fact that we did not see a lower low is important in my view so the whole move confirms the turn bullish, when taken in the contest of other USD pairs.  EURUSD still needs t breakout of the weekly channel upper line for me.

Short term I see this pair retracing back down a bit ahead of the Fed announcement on Wednesday evening and likely we will see some whipsaw (I am looking for an A-B-C bearish retrace) and after this concludes I expect the rally to resume with a strong wave 3.

EURUSD-1-hour_140919.thumb.png.5aa543ddefdb9681be1c20db4ea96691.png

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  • 2 weeks later...

I know you like a bit of gap-age there @elle , as do I, but to me that gap looks more like a breakaway gap from the previous medium term rally.  The close of it would therefore not be significant in the greater scheme of things for me (not saying it wont be closed, I believe it will eventually as the Euro capitulates and the global financial world flees to USD but that is for later perhaps (although who knows when right?).

I still feel we need to see a relief rally (against USD, Bearish phase for USD) before we get that capitulation.  In terms of the technicals I thing we are once again at a pivotal point on FX, which has been a long and protracted move, very unlike the beginning of a major bearish phase, which is one reason I think that is yet to come.  If the current EURUSD weekly trend line holds (and this is consistent with a similar line on USD DX) then we will probably get my long awaited rally to set up that fast and furious Bear.  If it breaks then the gap will be closed I have little doubt.  After any relief rally I believe the gap will be closed anyway so really we may only be differing on the timing and the route, assuming I am right in thinking that you see it going straight down to the gap via your channel?

It is interesting to note that a number of USD pairs are at pivotal points in addition to EUR.  GBP is fast approaching the wave 2 retrace I have been tracking; AUD is at a support zone; JPY may have already turned again (this one I think we are aligned on from memory).  Whatever is to happen should happen in the coming days I feel so we wont have to wait too long for resolution I feel.

EURUSD-Weekly_270919.thumb.png.14217b65ae4e210ab7896c6aa8f3a20e.pngEURUSD-1-hour_20919.thumb.png.8bb08faec43474db5873534a575710c7.png

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Looking back on the price action for the week just gone it seems like a turn into a rally phase could have occurred but it is not yet confirmed and so another test of my weekly support trend line cannot yet be ruled out.  However at present that weekly trend line is strong and has repulsed a couple of tests last week on the daily charts before the rally took off.  The trend line has 6 solid touches and rejections plus a couple of prior pivots (touches before the current down trend started).  This amounts to a very solid trend line in my book and will take some breaking I feel.  When it is I would expect that to be that and a significant bear market to unfold.  When I look at the big picture context for such a bear market I do not think the price action of the bearish phase from early 2018 is sufficiently strong and definitive to precipitate the kind of bear market I foresee when this trend line is broken.  Therefore my lead scenario is, as it has been for some time now, for a strong relief rally to prime the pump for a bigger bearish move when all hell breaks loose across the capital markets and there is a flight to the relative perceived safety of the USD.

In terms of the technicals they line up with a wave 1 (blue) set up leading to a wave 2 retrace rally before a strong wave 3 down.  In the near term I think we have yet to see a small wave 2 bearish retrace before the rally really gets going.  I am tracking this for a Fib 62% retest of the 1h chart channel breakout zone, or a little lower.  I have a 1-5 count up to the wave 1 (brown) and NMD at the turn.  I expect pairs like GBP, JPY and AUD to do something similar, albeit that GBP seems to be leading.

 

EURUSD-Weekly_041019.thumb.png.c3667e3d83615f5e3b9460c367518f45.pngEURUSD-Daily_041019.thumb.png.da9c58429b4aa773db542ff6094b8b5c.pngEURUSD-1-hour_041019.thumb.png.b9fa8b61a6ccd80758b78b30b947e7a8.png

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EURUSD looks to have turned but we have seen this before only to suffer a reversal and fresh lower lows within the weekly chart Triangle channel.  Therefore, while I am Long and will hold and add on any credible pullback and rally price action, I need to see a break of that upper channel line to get confirmation that the trend has switched to a counter trend rally.  The price action on other pairs and DX is encouraging that this time is the one.  While I think GBP will rally stronger there will be a reversal phase (check EURGBP) at which point we may see EUR rally harder while GBP goes bearish for a time (not like there isn't plenty of political risk about that could drive that!)

EURUSD-Daily_111019.thumb.png.64d3557523723f54ad07daa7275d5ad2.png

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  • 3 weeks later...

Signs that the retrace rally is finally on.  The Fed blinked yesterday and likely there is more to come.  On the technicals front price has broken back out through the weekly chart resistance trend line, but still needs to close firmly above this at the end of the week.  More immediate perhaps is a horizontal zone of resistance that price is now approaching.  A firm breakout here will result in a strong rally phase I feel that should carry to the Fib 38% zone at least.

EURUSD-Daily_311019.thumb.png.ef61315e04c163befc51063a20e79a21.png

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No break out today alas, waiting for tomorrow's NFP and ISM manufacturing data releases maybe.  Looks like a small scale A-B-C retrace off the channel resistance line, similar on AUDUSD.  Might see another leg lower tomorrow or overnight, which could reach the Fib 50% but would expect price to return above the weekly channel line and close above by the end of play tomorrow if a breakout is on the cards.  Hopefully we will actually see a confirmed breakout tomorrow on both EURUSD and AUDUSD, maybe also GBPUSD.

EURUSD-1-hour_311019A.thumb.png.2f74b0c626c18d26a1fe1849fe3bceb2.png

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So no breakout so far and now 2 scenarios present, similarly to USD DX (see my what is the USD doing? thread).

Scenarios:

  1. Small scale a-b-c retrace of the recent high that just failed to break to a new high and then the rally fires up and breaks through that overhead key resistance (a la the chart from my previous post - turn may come around the Fib 62% 11,117 area)
  2. Much longer A-B-C retrace that retests the daily trend line breakout zone, again at the Fib 62% but off the larger rally and this time circa 11,000.

Ya pays yer money, ya makes yer choice.  Again the critical point is a break through the 11,160 key resistance area but if the market were to offer up 11,000 then that would be excellent to get ahead of the rally.

EURUSD-4-hours_011119.thumb.png.3c54e9430bc801ceedc67b664f3b62e3.png

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