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GreenForexTrading.com
ForeX forX-tra Gr€€n
Hi everyone,
In this e-mail I am going to give you my view on the markets for Thursday the 27th to Friday the 28th of January 2011.
The swing trade for yesterday’s Asian-London-U.S. session to SELL the EUR/USD @ 1.3727 and a TARGET of 1.3650 giving us up to 70 PIPS depending on how the trade was managed.
We have a Monster Trade update since first recommended at 1.000.
The “Monster” Trade. Last week’s key Chinese data has passed as the key 0.985 level holds. Now the AUD/USD at 0.995 is a BUY on any daily close above 1.000. Sentiment wise, this AUD/USD is set for further gains, and the 1.000 level needs to be bested for good. With a STOP now raised to just under 0.985 and any further decline would invalidate the rationale for the trade (see below). Should the AUD/USD decline any further this trade will be closed for the time being as the AUD/USD is still expected to yield 1000 to 1500 PIPS over the next 2-3 months, maybe even sooner. Adding to existing positions is recommended as scaled in BUYS (0.2 contract at a time) on any daily close above 1.000. 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 indicators, which are now neutral and working on generating BUY signals on the daily and on the weekly as long as it stays above the zero line. 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 but seems to be consolidating in this region. The AUD is seen here, http://www.stockcharts.com/charts/gallery.html?$XAD.
The Dollar continues its recent bout of weakness as it took out support near 78 on the USDX but like yesterday it has managed to chop back and forth above and below that critical level. The Dollar chart really concerns me because as of now, there are no signs of bullish divergence in the indicators or anything else that might signal that the move lower is coming to an end. I am watching it carefully to see when it will uncover a definite, defined support level. It looks as it is trying to hold here near 78 but we shall see. Still no real fundamental take on the markets and so I will go straight to look at the charts. The USDX has carved out a very wide range bound by the 200-day moving average (DMA) and now 50-day M.A. as a new ceiling with a new weekly PPO SELL signal to back up the earlier daily PPO SELL for the dollar as seen in the USD daily and weekly chart here http://www.stockcharts.com/charts/gallery.html?$USD.
The EUR pulled away from the declining 50-day moving average and another pullback to the 50-day M.A. in the 1.33 area is increasing as much as a continuation move is possible. With the backdrop of a PPO daily BUY signal against a new weekly BUY signal all would seem clear but technically a pullback here would allow a safer entry to go long and should happen before further gains to the upside can happen. The current upside was expected to be limited to the 1.37 area with a possible retrace to 1.34 before 1.41 can be seen on future dollar weakness as seen in the chart here, http://www.stockcharts.com/charts/gallery.html?$XEU. Place your trades accordingly. All charts courtesy of www.stockcharts.com.
Recent sterling strength was whacked on poor UK GDP report and will look for stabilization at the 50-day M.A. for entry for now. Cable bounced from the 200-day moving average and PPO daily BUY against a new weekly BUY signal and we could look to cautiously buy on any weakness, as seen here, http://www.stockcharts.com/charts/gallery.html?$XBP.
The S & P downgrades Japan’s debt and as warned here ad nauseam, traders should still continue to use caution in trading the yen as the JPY pairs are neutral and supported by slightly rising 50 and 200-day moving averages. With the backdrop of a PPO daily BUY signal that looks to be rolling over into a SELL while still in a weekly SELL signal that now looks flat, we are still in a wash and rinse scenario with a slight bullish bias for the time being as the Yen inches along the 50-day M.A. as seen on the chart given here http://www.stockcharts.com/charts/gallery.html?$XJY.
Today’s session key reports are:
1. Fri. Jan. 28, 2011 - (5:30am) CHF KOF Economic Barometer and (8:30am) US Advance GDP.
The swing trade for today’s Asian-London-U.S. session is to BUY the USD/CHF @ 0.9428 with a STOP @ 0.9397 and a TARGET of 0.9518 for 90 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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