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GreenForexTrading.com
ForeX-tra Gr€€n
Hello Everyone,
In this email I am going to give you my view on the market for the Asian/London sessions in the market for today, spanning Sunday the 15th to Monday the 16th of August 2010 and the week.
The swing trade for last week’s Asian-London-U.S. session was to SELL the EUR/USD in the 1.2875 area with a STOP @ 1.2905 and a TARGET of 1.2784 was stopped out technically at 1.2908, a lousy 3 PIPS that could have yielded over 100 PIPS if not stopped out. I have witnessed this lately on quite a few newsletter trades. This brings me to my point of the week. HARD STOPS PLACED WITH A BROKER SHOULD NOT BE USED BY THOSE WHO SUBSCRIBE TO THIS NEWSLETTER, or for any of your personal trades really. Hard stops with a broker should only be used to trade through a report or some lame official that will be speaking that could affect the currency pair that you are trading (to prevent you from blowing up your account), otherwise, ALL OTHER STOPS SHOULD BE MENTAL STOPS. With over 800 subscribers in thin summer trade/Asian market conditions, a number of order entries can be seen by brokers as ripe for hunting, pooling and picking. If, for whatever reason you cannot watch the trade and must use a hard stop with a broker, I recommend adding 10 PIPS to the stop. Keep in mind that this might affect the risk/reward profile of the trade and you will have to make your best decisions accordingly. If in doubt, DO NOT TRADE!!! It is OK not to take a trade. This is why it is explained on the website. Lately I have noticed a fair amount of the newsletter trades being stopped out on spike reversals on thin volume by 2-3 PIPS. This requires adjustments in the Live ForeX Trading Room to avoid looses as this is indicative of hard stops being pooled, hunted and then taken out before the primary trend resumes. Had the trade not been taken out, over 100 PIPS would have been had by all. Most stops in the newsletter trades are far away from defined levels that they really should not even come close to be taken out. For example, last week’s trade entry at 1.2875 from a defined upper range of 1.2880 and a stop at 1.2905…take-out print at 1.2906-1.2908 in less than 5 seconds on very thin volume. Remember, commercials (i.e., banks) get money out of thin air and will give it to their proxies as overnight REPO loans and marginal stops are easy pickings. Never said trading was easy.
Enough of my rant. The dog days of summer continue. The major news last week was the U.S. Interest Rate non-decision release, which surprised to the downside and sparked a round of US dollar buying/short covering. It is interesting to note that the buying was panicky and explosive in natures making me believe like all flash moves will be also somewhat short in duration. The EUR/USD pair this week or next could see the 1.2500 area with USD Index approaching the 84-85 area. From last week “…another reason to believe we are on the verge of a major reversal soon is that statistically speaking, after several weeks in a row of USD weakness, the chances of a rebound is more likely than ever. A small news event could spark a snowball effect of profit taking and rebalancing of portfolios, therefore use extreme caution at following the current trend (Sell USD) this week.” We now look for short term continuation buying in the USD into the 84-85 area were we will start to scale in positions for another reversal heading into September. Key support/resistance and weekly retrace levels in the USDX are 83.38, 84.4 and 85.4 (38.2%, 50% and 61.8% Fibonacci retraces of the prior 88.71-80.08 decline), and the 83.4 resistance level is in play with the 50-day moving average just overhead at 84.0. This can be seen in the USD daily and weekly chart here http://www.stockcharts.com/charts/gallery.html?$USD. Place your trades accordingly. All charts courtesy of www.stockcharts.com.
The declining action in the USD can also be confirmed against the advancing action in the EUR as mirror images of each other and the EUR chart can be seen here http://www.stockcharts.com/charts/gallery.html?$XEU. It is interesting to note on a relative strength basis that the EUR advance has occurred mostly on a decline of the dollar as a weighting of currencies is examined and can be shown by comparing the fact that the EUR still has not reached its 200-day M.A. before reversing while the USD had tested its 200-day moving average. This expressed weakness in the EUR will be the basis for another “Monster Trade” initiation in the future.
The JPY broke above the 200-day moving average; after bouncing hard at the lower 50-day moving average and went ballistic for a while being the anti-dollar and now looks to be in a trending move with a long bias as the 50-day/200-day M.A. are now aligned and are now confirming an uptrend, as seen on the chart given here http://www.stockcharts.com/charts/gallery.html?$XJY.
The GBP as seen here, http://www.stockcharts.com/charts/gallery.html?$XBP, is at the 200-day MA and expected to bounce here. The fundamental outlook still shows more gain for this currency. But with current USD strength, timing becomes important and remains probably the most resilient currency against USD.
There are some reports that I note this week that will factor in some trading sessions going forward with the UK reports being the best ones to trade on pre-report sentiment. They are:
1. Mon. Aug. 16, 2010 (5:00am EST) EUR CPI.
2. Tues. Aug. 17, 2010 (4:30am EST) UK CPI.
3. Wed. Aug. 18, 2010 (4:30am EST) UK MPC Meeting Minutes.
4. Thurs. Aug. 19, 2010 (4:30am EST) UK Retail Sales;
(8:30am EST) U.S. Unemployment Claims followed by Philly Fed U.S. Manufacturing Index at 10:00am EST.
4. Fri. Aug. 20, 2010 (8:30am EST) CAD Core CPI.
Again, traders should be aware of key daily and weekly retracement levels, especially given the thin summer trade
The “Monster Trade” initiation. Waiting for the EUR/USD to top out for a rebound as we will gauge sentiment as the USD flirts with recent retrace and key levels so look for this in upcoming newsletters of what we will scale into. Live Trading Room members will get first crack at these entries with more precise defined levels to minimize risk.
About Scaling In
Scaling in simply means breaking up the initial entry position into multiple parts and deploying them at selected intervals, instead of firing the entire trade magazine all at once. The only reason we might resort to scaling is if we have good reason to believe our expected support zone may have become obsolete.
We usually take an initial position in our expected support zone with a fairly tight stop. Obviously if we get stopped, we were early to the trade. Early is just another word for “wrong.” If stopped, we reassess and adapt to the new market reality. If we were not early, and our position shows us that we are right, then we add to that position once the trade has managed to “prove” itself by advancing out of the support zone box, raising our trailing/trading stop in the process. The two or more portions make up a full position. When we speak of scaling, it means we have become willing to break up the trade entry into two or more parts, with the first part at the very top of the expected support box and the second part within it. Rarely will we ever take a new position outside our expected support box.
The swing trade for today’s Asian-London-U.S. session is to BUY the EUR/USD in the 1.2775 area with a STOP @ 1.2745 and a TARGET of 1.2857 for 80 PIPS.
That's it for today. Remember that I trade in the Live Forex Trading Room between 1am-6am Eastern Time. I will be hosting my regular 3-4 hour session and assessing and exploiting PIP opportunities as they arise.
Enjoy trading and good luck everyone!
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