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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 Tuesday the 14th to Wednesday the 15th of September 2010.
The “Monster Trade” initiations. I recommend Scaling In BUYS (0.1-0.2 contract at a time) on weakness in the EUR/USD in the 1.2925 to 1.2975 range with an expectation that 1.283 could be reached and an order to buy could be scaled in with looser stops than usual. This trade is with the EUR/USD now around the 1.296 area and so explains the initial small position size. The target areas are first the daily retracements to the 1.333 area with the longer term weekly retracements in the 1.351 and 1.388 areas. NOTE: All position trade stops are HARD stops, NOT mental stops. Remember, hard stops for overnight positions, mental stops for day trades.
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.
ALERT!!! The market has become clearer this week. We have a head and shoulder top in the USDX with the neckline being broken at 81.5 in the earlier U.S. session. The Retail Sales out of the US while stronger than expected has confirmed that the trend of the market for USD is down. With the USD’s closed under our key pivot of 81.5 and now chopping at 81.7 we will look to load up scale in fashion for continuation USDX selling. The USD daily and weekly chart here http://www.stockcharts.com/charts/gallery.html?$USD. The EUR pairs are expected to be overall weaker than the corresponding correlated GBP pairs. The topping action in the USD can also be confirmed against the bottoming action in the EUR as mirror images of each other and the EUR chart can be seen here http://www.stockcharts.com/charts/gallery.html?$XEU. In summary, the weekly chart gave a strong retracement to 1.300 with 1.330, 1.351 and 1.388 expected in short order and loading up is recommended with a confirmation of a bottom. Place your trades accordingly. All charts courtesy of www.stockcharts.com.
For the JPY while a long bias exists as the 50-day/200-day M.A. are now aligned and are now confirming an uptrend that now looks to be weakening, and a break of the daily rising trend-line could lead to a fast down move; be wary of the wash and rinse that could come before the turn. Traders should be could look at both sides of this currency within this channel trend as seen on the chart given here http://www.stockcharts.com/charts/gallery.html?$XJY.
In the GBP/USD, we saw a nice support level being formed at the 1.5300 level, and now it makes sense to look long at this level. The GBP as seen here, http://www.stockcharts.com/charts/gallery.html?$XBP, has broken up near the 50 and 200-day moving averages and a PPO buy signal looks ready to be triggered. Thus the daily trade below.
There are some reports that I note this week that could factor in some trading sessions going forward. They are:
1. Wed. Sept. 15, 2010 (4:30am EST) NZ Official Cash Rate Decision.
2. Thurs. Sept. 16, 2010 (4:30am EST) UK Retail Sales.
3. Fri. Sept. 17, 2010 (8:30am EST) US Core CPI.
The swing trade for today’s Asian-London-U.S. session is to BUY the GBP/USD @ 1.5492 with a STOP @ 1.5436 with TARGETS of 1.5725 for 220 PIPS. Yes, it is a large stop so adjust position size accordingly. Volatility is to be expected.
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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