In Trading Strategy Examples: Quick Charts

I posted the following on Twitter the other day, in prep for the 3100 handle getting approached. I did not, however, anticipate it happening this rapidly until I took a deeper look at charts last night. We broke through an upper trendline within the existing EUR/USD downward move and couldn't make it up to the spike base circa 1.3250. We topped out the golden ratio, again, of the break itself (see line marked A).

The measured move from line marked B is what I posted to Twitter. Couple things worth noting here:

Yes, you bet your rear there are a lot of order flows surrounding the 3100 handle. Whether stops or limits it doesn't matter. They are going to attract interest and pull price towards them. I knew there would be protection ahead of this level because part of that component is undoubtedly stops, which almost always see fighting directly ahead of them. There was also a large option ex being talked about around that level, though I can't in good judgement put a lot of weight on that.

Couple things:

1. Draghi's comments were decisively dovish this morning and

2. There is far too much juice underneath this level to be ignored.

So next steps:

1. remain short bias anticipating levels in bullet 2 – I am mainly basing this on major EUR strength today and a lack of support at this level. It has been 3 hours and we've only pulled back about 15 pips. If it DOES hold then c'est la vie – it might want to do it regardless ahead of nonfarm.

2. if we do seek to go long I want confirmation in the form of a trendline break and retest 1.3085 area is the first major pivot, then 1.3065, then right at/slightly above 1.3000.

3. patience for payrolls. too much on the plate to be taking anything longer term, fresh, in the immediate future.

But anyway, these are the moves, how they were located, etc., etc., etc. But as you can tell, my confidence isn't racing on this one today and better off looking elsewhere at these levels, or until something else shows its face.


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Showing 3 comments
  • Geoff

    I have a slightly longer term inner TL drawn on the 4hr chart. Are you looking at this one as well? Note that it completed the golden ratio (AKA the Wonka Bar Golden Ticket Pattern – WBGTP) on the move down today. I’m guessing this is the last big push we’ll see before NFP?

    • Steve W.

      I had it, yes but I refrained from using it on the MM because I like to see a bigger retest on the last leg. The retest is usually what “normalizes” the trendline and basically validates the measurement. My % rate jumps a long way when I use that simple rule of thumb. I was thinking something more along these lines:

      Haven’t been too thrilled with this pair today in general though aside from the obvious following the ECB. Willy Wonka’s Golden Ticket will have to wait until options expire at the 3100 handle. I just closed this position anyway, calling it a draw. There is a reason the Euro hasn’t broken that figure today and I don’t think I’m in the mood to speculate why.

  • Geoff

    Bigger retest = more hits = more confluence? Makes sense, that obviously goes with the dao of NBT. Would you say you primarily wait for a break/retest (and in the case of multiple TL break candidates, waiting for the one with best retest) as opposed to anticipating a break and getting in earlier at a better price? Assuming you shorted the retest in that rangey area of 1.3254-1.3220 that’s a pretty decent haul even if we haven’t yet gotten to 1.3100.

    Homer Simpson: DOH! STUPID OPTIONS!

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