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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 Wednesday the 12th to Thursday the 13th of January 2011.
The swing trade for yesterday’s Asian-London-U.S. session was a continuation of a prior 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 gave over 120 PIPS and over 150 PIPS for the continuation trade depending on how the trade was managed. Not bad for two days work.
Alert note: The EUR/USD knifed through what was to be key a key pivot area by some 50 PIPS. This move was impulsive creating a slingshot move from the 1.2965 area on the nose and indicates further weakness in the USD after perhaps some minor pullback. The Monster Trade is back on.
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 0.985 and is now a BUY again. The AUD/USD is now on BUY at 0.985 to 0.995 with scaled in BUYS (0.2 contracts at a time) with a STOP just under 0.980 as this decline looked to be the final washout coming from AUD trade balance release and any 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. Re-entry or adding to existing positions if not stopped out is recommended with scaled in BUYS (0.2 contracts at a time). 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?$XAD.
The USDX is now at 80 having sliced through the 80.5 area after failing at the 200-day moving average. The 80.5 area is still the key area to watch for any signs of a reversal move and more strength in the U.S. Dollar or to contain that strength for renewed/further weakness in US Dollar. Based on yesterdays impulsive price action and slingshot buy set-up triggered on the 30-min chart, I expect the weakness continue and then that should lead to breakouts of many currency pairs after some period of consolidations. This week players are back in force and so far they look to be selling the U.S. Dollar. That being said, let’s look at the charts. The USDX has carved out a very wide range bound by the 200-day moving average (DMA) and now 50-day M.A. for the dollar as seen in the USD daily and weekly chart here http://www.stockcharts.com/charts/gallery.html?$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 has recaptured the resistance at the 200-day moving average and challenge of the 50-day is now expected after some chop here. 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?$XEU. Place your trades accordingly. All charts courtesy of www.stockcharts.com.
Recent sterling strength has given way to weakness on Dollar strength. The GBP bounced from the the 200-day moving average and PPO daily BUY against a weekly SELL signal soon to turn to a BUY means we could look to cautiously buy on any weakness, as seen here, http://www.stockcharts.com/charts/gallery.html?$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.
This week’s key reports are now upon us. They are:
1. 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.
2. Fri. Jan. 14, 2011 - (4:30am) UK PPI Input and (8:30am) US Core CPI and Retail Sales.
There is no swing trade for today’s Asian-London-U.S. session.
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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