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GreenForexTrading.com
ForeX forX-tra Gr€€n
Hi everyone,
In this e-mail I am going to give you my review for the year past and view on the market for Monday the 10th to Tuesday the 11th of January 2011.
The swing trade for yesterday’s Asian-London-U.S. session to BUY the EUR/USD @ 1.2935 with a STOP @ 1.2905 and a TARGET of 1.3088 is still in play at 1.300 for up to 65 PIPS so far depending on how the trade is/was managed.
We have a Monster Trade update since first recommended at 1.000.
The “Monster” Trade. NOTE: The AUD/USD has corrected and retested a key pivot area at 0.990 and FAILED. If not STOPPED OUT, the AUD/USD is now on HOLD at 0.9850 with a STOP just under 0.984 as this decline could be a final washout coming from AUD trade balance release and any further decline would invalidate the rationale for the trade (see below). The AUD/USD is still expected to yield 1000 to 1500 PIPS over the next 2-3 months, maybe even sooner but a wait and see approach towards some bottoming action is needed for re-entry or adding to existing positions if not stopped out. Again, 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.
Why the “Monster Trade”? In the AUD/USD sideways action of recent weeks has served to further unwind the earlier overbought condition while forming a Head and Shoulder bottom continuation pattern on the 4-hour chart with the neckline coming in the 0.996 area. The interpretation of the pattern in the AUD/USD presented in the last update, which was that it is marking out an upwardly skewed bullish "running correction”, remains unchanged. All that has happened in the past few weeks is that it has reacted back across the up sloping channel to arrive at support near its rising 50-day moving average and has retested that area again. As we can see on the chart this reaction has resulted in a further easing of the medium-term overbought condition as shown by the PPO indicator, which is now neutral on the daily moving up while the weekly is moving towards a BUY signal. The noted convergence of the short-term downtrend channel earlier last month was an indication that the AUD/USD would soon break out of it to the upside to resume its advance and make new highs, which it has. The AUD is seen here, http://www.stockcharts.com/charts/gallery.html?$XAD.
First off, a reminder (from www.zerohedge.com ):
“In a rare example of forensic market analysis, the WSJ tackles the topic of market moving info leakage, focusing on some peculiar action ahead of last week's bombastic ADP number which ended up being the traditional contrarian indicator we have been saying for months that it is. The WSJ observes: "Data from two independent sources show that trading in select currencies and future contracts surged in the seconds before last Wednesday's unexpectedly strong private-sector jobs report from payrolls processor Automatic Data Processing Inc., raising suspicions that someone obtained the report ahead of its official release. Analysis of exchange-rate prices from foreign-exchange platform EBS revealed a disproportionately large 0.12-yen spike in the dollar versus the yen in the last tick period before the clock hit 8:15 a.m., the report's official release time. The tick data, provided by CQG, are broken up into small, intraminute periods as per the feed from EBS."And just in case someone is confused how illegal front running works, here is the explanation: "Anybody who placed those orders stood to make large gains (unless you were short) in the subsequent minutes as first high-speed trading platforms and then regular investors put through big buy orders after ADP reported an increase of 297,000 in private-sector jobs, nearly triple the consensus estimate for a 100,000 gain." We are confident the regulators are all over this most recent example of the Efficient Market Hypothesis meeting Johnny 5.” <<< Note the sarcasm of the last sentence.
Bottom Line: Why I emphasize Hard Stop timing and placement before reports in the Live Forex Trading Room as the GBP/USD trade we were in on that day could have easily cost over 100 pips turning a marginal gain into a deep loss.
The USDX is now at a sustained move above 80.5 that could possibly lead to further strength to the 82-83 area. The 80.5 area is still the key area to watch this week for any signs of a reversal move or renewed/further weakness in US Dollar. Should such a reversal take hold, then that should lead to breakouts of many currency pairs after some period of consolidations. This week players are back in force and we will let them show their intentions should you decide to trade this week although watching position size is still advised. That being said, let’s look at the charts. The USDX has carved out a very wide range bound by the 200-day moving average (DMA) and now 50-day M.A. for the dollar as seen in the USD daily and weekly chart here http://www.stockcharts.com/charts/gallery.html?$USD.
The EUR moved higher into resistance at the 1.340 level for a test of the underside of the declining 50-day moving average at 1.35 and another pullback to the 1.287 area has happened. Technically a bounce is here in key support zones with resistance at the 200-day moving average just above. Should the EU hold it together higher prices would be expected on future U.S. Dollar weakness as seen in the chart here, http://www.stockcharts.com/charts/gallery.html?$XEU. Place your trades accordingly. All charts courtesy of www.stockcharts.com.
Recent sterling strength has given way to weakness on Dollar strength. The GBP bounced from the the 200-day moving average and PPO daily BUY against a weekly SELL signal leaves us still neutral, as seen here, http://www.stockcharts.com/charts/gallery.html?$XBP.
As shown from the quote earlier, traders should still continue to use caution in trading the yen as the JPY pairs are neutral and also bound by the 50 and 200-day moving averages. With the backdrop of a PPO daily BUY signal against a weekly SELL signal, we are still in a wash and rinse scenario with a slight bullish bias for the time being as the Yen attempts to recapture the 50-day M.A. as seen on the chart given here http://www.stockcharts.com/charts/gallery.html?$XJY.
Most of this week’s key reports are spread throughout the week along with some banker speak with more reports later in the week. They are:
1. Wed. Jan. 12, 2011 - (5:00am EST) EUR Industrial Production.
2. Thurs. Jan. 13, 2011 - (4:30am EST) UK Manufacturing Production; (7:00am EST) UK Official Bank Rate; (7:45am) EUR Minimum Bid Rate and (8:30am EST) US PPI, Trade Balance and Unemployment Claims.
3. Fri. Jan. 14, 2011 - (4:30am) UK PPI Input and (8:30am) US Core CPI and Retail Sales.
The swing trade for today’s Asian-London-U.S. session is a continuation of yesterday’s swing trade to BUY the EUR/USD; and if not still in then BUY @ 1.2965 with a STOP @ 1.2930 and a TARGET of 1.3088 for 120 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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