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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 Thursday the 6th to Friday the 7th of January 2011.
Yesterday’s swing trade for the Asian-London-U.S. session to BUY the GBP/USD @ 1.5470 with a STOP @ 1.5445 and a TARGET of 1.5555 was good for up to 80 PIPS depending on how the trade was managed.
We have a Monster Trade update since first recommended last week at 1.000.
The “Monster” Trade. NOTE: The AUD/USD has corrected and is now at a point where it is do or die. Giving pullbacks to enter our BUY at 1.010 down to 0.9950 with the expectation that 1.000 can be tested and that the 1.007 area should be the next considered target area so that stops can be moved up to the 0.9950 area. As given earlier, an initial entry was placed at 1.015 and buy points added later on weakness. With AUD/USD now at 0.9930, I now recommend scaled in BUYS (0.2 contracts at a time) if not done so already with current existing positions being HOLDS. The looser stops than usual is moved up from around 0.9800 to just under 0.9840 with the expectation to move the stop up to 0.9950 should the 1.007 be reached (so explains the very small position size) as any further decline would invalidate the rationale for the trade (see below). The AUD/USD is expected to yield 1000 to 1500 PIPS over the next 2-3 months, maybe even sooner. 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 is now retesting 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?$XAD.
The USDX is now at the line in the sand with the move above 80.5 and now at 80.8 that could possibly lead to further strength to the 82 area which a possibility is given yesterday’s action of strength. The 80.5 area is still the key area to watch this week for any signs of a reversal move or renewed weakness or further strength in the US Dollar. This week players are back and so far their initial intentions looks to buy the U.S. Dollar. That being said, let’s look at the charts. The USDX has carved out a very range bound by the 200-day moving average (DMA) and now 50-day M.A. support gave a bounce back into the range as seen in the USD daily and weekly chart here http://www.stockcharts.com/charts/gallery.html?$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 now that another pullback to the 1.300 area has happened, again looks to be breaking down and 1.286 is a possibility. Technically, the key 1.442, 1.495 and 1.600 areas are expected to be seen longer term (should the EU hold it together) and the charts are looking increasingly ugly so we will scalp either way in the EUR as seen in the chart here, http://www.stockcharts.com/charts/gallery.html?$XEU. Place your trades accordingly. All charts courtesy of www.stockcharts.com.
Recent sterling strength has given way to weakness on Dollar strength. The GBP bounced from the the 200-day moving average and PPO daily BUY against a weekly SELL signal leaves us looking either way, as seen here, http://www.stockcharts.com/charts/gallery.html?$XBP.
Traders should continue to use caution should the JPY pairs being neutral also bound by the 50 and 200-day moving averages and a PPO daily BUY signal against a weekly SELL but moving up soon for a weekly BUY but we are still in a wash and rinse scenario with a slight bullish bias for the time being as seen on the chart given here http://www.stockcharts.com/charts/gallery.html?$XJY.
This sessions reports are:
1. Fri. Jan. 7, 2011 - (7:00am) CAD Employment Change and Unemployment Rate and (8:30am) US Non-Farm Employment Change and Unemployment Rate.
The swing trade for today’s Asian-London-U.S. session is to BUY the EUR/USD @ 1.2980 with a STOP @ 1.2965 and a TARGET of 1.3050 for 70 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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