Intraday Trade Alert: EUR/USD Sell at 1.4438

Last updated 1/5/2010 11:08 AM EST (GMT -5) 9 Comments

FX360 Technical Analyst Staff

Technical Analyst, GFT

This morning's report highlighted an emerging bearish head & shoulders pattern which typically signals a sell upon breaking neckline support near 1.44. This break has occurred as prices dipped below 1.44 near 38.2% Fib support (see 30min chart). This in turn suggests bearish momentum is intact leaving the door open for prices to drop and test 50% (1.4370)and perhaps 61.8% support (1.4343).  Price have begun to rally after this morning's dip below 1.44, and now approach 78.6% resistance of this morning's dip near 1.4439 (see 2min chart) which provides a solid short entry especially when considering risk/reward as stops would be placed just above this mornings high of 1.4454. Further bearish confirmation comes via GFT's time/trend forecasting tool,  Foresight-A.I. ™ , which forecasts a EUR/USD downtrend for the remainder of the NY session. Targets have been set just above 50% & 61.8% Fib support and a decision as to which target to exit on will be made based on where price is towards the end of the NY session in addition to price action prior to each target (long bars and/or gaps prior to T1 would suggest moving stops to break-even and then exiting at T2, for example). As always, keep in mind that Foresight-A.I. ™ is not a crystal ball--it's just a [leading] time/trend indicator. So, if prices instead move above this morning's 1.4454 high, then a forecast inversion may be in progress in which case a bullish continuation is likely thus helping to define our stop (just above this morning's high). If this should occur, then another potential selling opportunity may arise on bearish Gartley pattern completion near 1.4570 (see 4hr chart example in this morning's full technical report here ).

Potential Strategy:  Sell EUR/USD if prices rally to 1.4438 risking 1.4459 (stop-loss) targeting 1.4375 (T1), 1.4350 (T2).

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Comments (9)

Vespones

January 05, 2010 at 02:47 PM ET

Congratulations Roger ! Once again you did it !

IT

January 05, 2010 at 03:20 PM ET

By my chart he never made the entry, and why did he post this artical two hours after the chart time when it was to late for any enrty?

rstojsic

January 05, 2010 at 07:02 PM ET

you're correct, IT, the euro topped out at 1.4433 just missing the 1.4438 entry. however, the chart time is in Central Standard Time (i'm in chicago) so this example was taken about 30min prior to the post time (allowing time for labeling of the charts, and a quick yet thorough write- up as possible--which, beilieve me, can be quite a struggle with these short-term intraday fx trades). thanks for reading.

NeoFX

January 06, 2010 at 10:10 AM ET

thank you Mr. Stojsic, as always very clear. I personally believe the EUR/USD may actually go back up all the way to 1.4650 R2 or even the 1.4800 61.8% fib ret. and then plummet back down again big time into the 1.3760 support region. we'll see.

anyway, I had a quick question on the AUD/USD; I went short last night on it on that 61.8% Fib retracement on daily, supported by a beautiful engulfing bearish candle (4hr chart) and what looked like a crown on the 2hr chart. also aligned perfectly with the daily down trendline from the previous two tops.

Sure enough I got stopped out. Any comment on this pair? I trade it a lot. Any idea if it's going to the 78.6% level and then fall again.

any suggestion/comment will be appreciated.

Thanks,
R

rstojsic

January 06, 2010 at 11:06 AM ET

Hi Neo, starting with the aussie....yes, the 78.6% (.9195) is definitely a key level of resistance to watch as this level put a halt to the short two day rally back on Dec 10 just before prices broke below neckline support of the daily head and shoulders pattern. For me, once i've identified a solid level of s/r on a larger time frame i like to then look at shorter timeframes for confirmation patterns...in this case, i see a bearish butterfly pattern emerging on the 30min with the 161.8% XA extension (and pattern completion) coming in also at .9195. It's also helpful to look for any continuation warning signs (gaps and/or long bars prior to entry--both of which were present prior to the daily 61.8%), and if your still not sold then you can even drop to a smaller time frame (5mins, for example) and look for another confirmation pattern. What this will essentially do is allow you to not only get additional confirmation, but more importantly it typically allows you to significantly cut down the risk (stop placement). As for the EUR/USD, if prices do continue to rally I will keep an eye on 1.4570 (38.2% of the recent collapse) as there is a nice bearish gartley setting up to complete there on a 127.2% ABCD extension keeping in mind that strongly trending markets often see only 38.2%/50% retracements so the profit potential (risk/reward) is pretty significant. Thanks for the feedback, and thanks for reading!

NeoFX

January 06, 2010 at 12:27 PM ET

OUCH!----I just realized I had drawn the Fibs incorrectly on the AUD/USD (had drawn them from peak .9400 to bottom .8740. now I see what you're talking about.very helpful tips on continuation (long candles etc.) I've been burned out quite a few times because I didn't understand this.


Clear as a whistle. THANK YOU sir!!

FxOrNotFx

January 06, 2010 at 01:19 PM ET

Hello,

Unfortunately I still don't get it how you obtain that fib. level - can you tell me please between which levels have you draw the retracements?

Thank you.

rstojsic

January 06, 2010 at 03:53 PM ET

sure, from AUD/USD double-top at .9321 (Dec 2nd) to recent bottom at .8733 (Dec 22nd)

NeoFX

January 06, 2010 at 04:45 PM ET

so would anyone suggest selling on the AUD/USD now? it looks like the Bearish Butterfly pattern has finally completed (after it spiked up a bit due to some fundamental announcements I'm guessing.....any chance this may still go up? Looks like a solid short to me.

Anyone agree?

thanks

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