Prices are just now breaking-out the resistance at 191.93, formed at 5/June. The background is positive, though the market has been on a strong trend for 3 days now, so a pause after the break-out is likely. I want to see a good volume on the break and a test bar (gray histogram bar) afterwards. Given the circumstances, it’s likely the market will have to be shaked-out, with prices coming to 191 2 price level, so the stop-loss can’t be too tight.
Like I wrote in the previous post about USDCAD, there was an high chance of a false break-out of the 1.253 resistance due to the weak background, and previous supply signals at that level, meaning it was a likely distribution level. The candle that took prices above the resistance, yet closed below it, due to selling pressure, was a good confirmation of the false break-out and hence a good spot to short. Closed the trade after 2 bullish congestion zones.
This pair has been showing significant supply at 1.25 and up, with no previous resistance, which means it isn’t overhead supply (which is usually not something to worry about). The most significant resistance is at 1.25369, which is the high of the previous supply bars. There is a trendline coming from almost the beginning of this rally, since 12th May, which is the level to watch for an eventual short trade.
There is a high chance there will be a fake break-out, in order to get more longs trapped and to catch the stop-losses of shorts, which would confirm that this is in fact distribution. This would be a break-out with either low volume, or a break-out with supply signal right above the resistance after it was broken. To the downside, a break-out of the trendline with good volume would be a trend change signal, if the background keeps at being weak, and given the weakness behind. At the moment the pair is making successive higher lows, which means that for now the prices are being supported, and the dynamic trend is giving the same indication as it’s still up.
Brent crude oil, which is related to the Canadian Dollar, as Canada is a big oil exporter, is on the lower part of the trend channel, and recently showed a demand signal, at a previous strength area. It’s not showing the sideways movement as USDCAD is though, so I’m waiting for prices to stabilize at this level or to make a higher low, and for the background to change to strong.
In GBP/USD there were multiple demand signals near the lower part of the channel, but since their lows weren’t sustained for much longer, this wasn’t accumulation, but rather take-profits on short positions. My trade ideas in H1/H4 are either to wait for prices to get near the support at 1.508, or if prices sustain the most recent lows, I can start thinking of the most recent demand signals (with a very high volume red histogram bar) as accumulation, which could change the trend. A selling climax, a wide-range candle making lower lows with extremely high volume, and which Analytical would mark as Major Demand, could also mark the end of this trend.
EUR/USD on the other hand, already paused the downtrend ahead of the Pound, and more demand signals above the support at 1.081 would be a sign of accumulation (= long-term trend change). This could be bullish for GU as these usually go hand in hand.
In the most recent EUR/USD rally there was a short opportunity, at Thursday, as the background was weak and there were many weak signals, which made a significant downtrend very likely. Looking back, the major trend was still down, despite the pause at 1.08, and there was another important factor going on: the volumes of the most recent demand signals were surpassed the volumes of the most recent weak signals, which was an indication the rally was about to fail. The close was on a strong signal after the Dynamic Trend had already changed to up.
GBPUSD is trading near a support formed at 19th May, and is also near an up trendline coming back from 20th April. After the Pound bull market being stopped by professional selling around 1.578 (purple signals), and consequently going into a correction, more recently it has seen buying at this level. This may mean this is actually re-accumulation, and so the bull market may be sustained. The background reflects this and it shows up as strong.
If prices stabilize in a few more bars (i.e. they don’t make lower lows), and make a higher high, there is a potential long entry in a down bar. Meanwhile it’s important to notice that there is another validated trendline, to the downside. So if prices break the support, and the background keeps being strong or neutral, I’ll look for a strong signal near the lower part of the channel.
1. The important in the trendline setup is that there is no significant supply recently, that could turn the trend down. In AJ there was some selling when there was a rally attempt, but since the volumes weren’t that high, they were no reason for concern.
2. Wait for a long entry bar, shown by the volumes histogram above the histogram bars. Here they were low spread down bars, but there are others, like low volume down bars, tests, etc… There were actually 2 supports to choose to where to place the stoploss, but the support at 94.306 is more significant, and it wasn’t too far away, to keep a good R:R.
3. Exit in a weak minor signal (minor no-demand) when prices are approaching a previous long-term resistance.
The background is weak and there was a recent weak signal. But when prices got near the dynamic trend changing point, it was already green again; prices then spiked up, which goes to show the danger of not following the rules. Now in GU it’d be interesting to see another weak signal to see if there is another dynamic trend setup, or if prices come down to 1.5155 they’ll be near a trendline, that with the right background, can give a potential trading setup.
The Yen is on a trending channel, and recently got to the upper part of it. After an attempted break-out, the market quickly reversed, which was marked as supply by a purple dot above the candle. Looking back though, we can see there was an avalanche of demand bars around the 118.500 level. It was also accompanied by very high (red) volumes. Looking even further back, more such signals can be seen, starting from 18th March. This is actually a retracement of an uptrend started in January/2015, which is where that up trendline in the chart is coming from.
Given the accumulation signals, given enough time, the balance is tilted to the upside, so I’m not looking for shorts in this pair, even if there is a high chance that it’ll reverse to the support at 118.486, or even just to the up trendline – and there’s where I’ll be looking for longs, in a test bar. A break-out of the 120.842 with good volume would also be a good confirmation of the potential strength behind.
With the background strong and with strong signals before, there is a high chance that the trend will turn. So after the dynamic trend turned bullish, entered after an entry bar marked by the volumes histogram.
When the prices approached a previous long-term resistance, I closed half the trade; then even after seeing supply signals I didn’t exit, because in strong trends like this, there needs to be a large amount of supply to stop it. So I waited for the dynamic trend to turn red first, and so then closed the rest of the position.