The EURUSD correction bounced from the 50% fibo level of the prior upleg. I entered long at Bar1 on the breakout pullback from the bullflag. CLosed the long with 56pips profit at Bar2 after a bearish pin. Still looking for long setups.
I entered two shorts on the DAX. I sold 1 lot Bar1 on the pullback into the bearish gap but closed the short at Bar2 at break even as there was no sign of follow through selling. I re-entered the short at Bar3 on a small bearish pin bar as the index rejected the upside at the session high. I took profit at my initial target near the morning’s low. Nonetheless after some sideways price action the index extended its downside so I have missed the bulk of the price movement. Profitable day but another missed opportunity.
The current support on EURUSD seems to be a key level due to the confluence of the followings:
1. Feb-7 swing low
2. 38.2 fibo retracement of the 1.2875-1.3861 upleg
3. 61.8 fibo retracement of the 1.3245-1.3861 upleg
If this level support fails it will open downside to test the 1.3245 level as next objective. We need to see a firm lower low for a bearish trend otherwise the current price action remains indecisive.
The EURUSD is testing a confluence of supports: 38.2% fibonacci retracement, major swing high and prior swing low. A measured move form yesterday’s top would violate this support range, look for downside failue with bullish reversal signal there.
Last Friday the EUR broke the short term bullish tendline against the Dollar and the Swiss franc as well.
On the EURCHF a firm break below the 1.2820 level would confirm the bearish 1-2-3 reversal on the 4h chart with first target at 1.2727 then possible extension to retest the 1.2400 lows. On the daily chart the recent upside seems to be a correction with further room to the upside (in case the 4h reversal fails) without violating the 1d downtrend.
The 4h trendline break on the EURUSD chart was not retested yet, however on the downside the next significant level is the 38.2% fibonacci retracement of the Jna.10-27 upmove.
After a failed attempt yesterday the USDCHF broke above it’s prior high at 0.9708 with a pullback following a channel line overshoot on the 30m timeframe. The rising 30m trend channel indicates the bullish bias prior to the breakout. The 61.8% fibo resistance is still yet to break therefore I debate with myself wether to enter long at the 0.9725 or wait for a deeper correction. We are too far from the EMA50 therefore I think I stand aside for now.
I entered short USDCHF in late
European trading session on a sharp pullback to the 50% fibo level.
The strong bullish momentum makes this trade risky therefore I use
a tight 30 pips stop. Even if there will be a successful bullish
trend break on the 4h timeframe I expect a pullback to retest the
breakout level.
EURUSD: Failed at 1.3448 near
the 38.2% fibo retracement level on the daily chart. A break below
the prior low at 1.3056 would signal that the downtrend would
resume. I expect further sideways price action before a decisive
breakout from the current bracket of 1.3100-1.3400.
EURGBP: Sharp fall testing short-term
support at 0.8448 with scope for further downside if breaks lower.
EURCHF: Corrective upmove after it
failed to extend the downside. Only a higher low would let me trade
the long side.
My trading strategy aims to capture ‘with trend’ trades against countertrend pullbacks. The method that I try to employ is to enter on the break of the trendline of the pullback. There are numerous trading sites describing the technique how a trendline break should be traded. In a previous post I quoted Al Brooks, the writer of the book ‘Reading Price Charts Bar By Bar’, how he interprets countertrend pullbacks. Another representation of trendline breaks was described by Vic Sperandeo in his book ‘Methods of a Wall Street Master’ and known as the 1-2-3 reversal.
There are several ways that the price can break a trendline. The tricky part is to be patient and endure the provocation to jump straight into action when the price is forcing its way through the trendline. The best way is to wait until a minor pullback (in the direction of the countertrend pullback that we are trading against) tests and confirms the breakout. Both of the above mentioned methods emphasise the key element of a pullback testing the trendbreak.
On the above chart I marked the trendlines of three pullbacks against a bullish trend. The breakouts show different types of trendline breaks. The first breakout did not retest the breakout and the only way it could have been traded was the breakout above the small doji just before the break of the trendline. The second trendline breakout had a retest of the level of the breakout while the third retested the trendline itself with a higher low. In fact both latter examples formed 1-2-3 reversals. I also marked a fourth trendline which was tested but not broken. The sharp selloff that followed was a clear example why it is important to wait for break of the trendline.
These examples also show how deep the pullbacks were on the fibonacci scale. The first two pullbacks reached and exceeded the 61.8% fibo retracement level. The third didn’t even scratch the 38.2% level. It is worth note that the angle of the pullback trendlines are also different which suggests that the momentum of the pullback does not necessarily provide any clue about the quality of the breakout.
The second chart shows two reversals after trendline breaks which tested the extreme of the prior trend. The aggressive way to enter is to place a stop entry order below the low of the bearish pin bar testing the prior high. A more conservative entry method is a stop order below the swing low prior to the test of the extreme. In case of the second example – which was a perfect pullback trade – the price retested the conservative entry level as well offering a second entry for the conservative traders.
The EURGBP has extended its pullback beyond my expectations. I have to admit that I still have problems deciding which cycle I should refer as ‘trend’ on the 4h timeframe, the bearish trend channel or the upswing with the higher highs and higher lows which is marked by the fibo retracement scale on the attached chart.
The pair may post a double bottom here but there is no trendline break on the 1h timeframe yet. The current downleg breached the 61.8% fibo level of the prior upwave therefore it suggest a failed double bottom here with scope to test the channel support near 0.8300.
Contrary to this it will be a partial pullback having a short term double bottom with 0.8460 first target.
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