After breaking the down trendline mentioned in our latest analysis post, AUDJPY started a healthy uptrend. On the 80.500-80.600 level high volume without any price progress was seen, and on a news event it went down on a wide range, in the 15 minutes timeframe. On a reaction to this down move, while the background was weak, a down reversal appeared (on sensitivity 4, which has the best Rating on this pair/timeframe), where the short was taken. A Minor Supply Signal confirmed the weakness on this reaction. The stop-loss was set above the previous high, and the take-profit near the up trendline, for a +29 pips move.
In the first hours of today’s London session, activity and volumes spiked up in gold. This activity, VSA showed, was major supply hitting the market, just below a high formed days before, on heavy supply, at $1258. In the last post we noted that below $1270, the “control point” of selling of the last weeks, we should be looking for shorts in lower timeframes, and this was the ‘golden’ opportunity.
In M15 there were multiple supply signals, and the background turned from strong to neutral.
In M5 the dynamic trend turned red shortly after, when the short was taken, with SL above the previous high and TP a bit above the down trendline, where buying is to be expected. Prices went down on wide range and reached the target, with the rally afterwards showing low volume. When prices attempted to break the trendline, VSA showed Minor Demand, and the price then went up on high volume. The no-demand test shown in M5 (pink bar) succeeded, as there was supply afterwards and its low was broken, which is a temporary stop of the uptrend. The background is strong in M5, and more demand, or a bullish test, just above the broken down trendline, would be a long.
After a break-out of an important support at around 9300 on 8th February, DAX, along with the other European and American indices, made a significant retracement and rallied above the break-out price. The chart of M15 below shows the second rally, with prices reaching the previous high.
During this uptrend the background was strong, and any supply signals that appear need confirmation for a short to be taken. These can mean various things – some traders taking profits, short stop-losses being hit at important levels, or just selling that had no follow-through among other institutional traders. Counter-trend trades should be taken on a lower timeframe, using VSA signals from the above timeframes, so you’re more likely to spot an exit bar, such as a demand signal.
Over the next week, it’ll be interesting to watch if there is more supply at this level, with DAX breaking the up trendline on the intraday with good volume. On the more long-term side, to watch if prices falls below the break-out price.
As the Sterling is selling-off for weeks in a row, it makes sense to look for intraday opportunities in GBP pairs. Likewise, gold is also getting stronger, as the Dollar weakens, and AUD is directly affected by these movements, as Australia is a major gold exporter.
Since 6th January, GBPAUD H1 has been forming a round top, which is a typical distribution pattern. Most importantly, VSA confirms it, as the there have been major supply signals in H1 and above timeframes, and sluggish movement. The background has also been weak, and an opportunity arose when there was a minor supply signal in H1, to which there was an alert given.
- Weak background
- Supply signal
- Entry on the break of the supply bar (could also be on the previous)
- Exit on take-profit. If not having exit, with the low volume bars, it would be wise to atleast close the order partially and get in at a better price.
The prices are now approaching a previous support at 2.017, and are on the lower part of the trading channel. There could be opportunities to counter-trend trade, if prices can stabilize above the recent low at 2.02457 and demand comes in.
AUDUSD M30 Trade analysis:
- At the time of entry background was strong – it is wrong to be bearish in this place. Only weak background is a sign that imbalance between supply and demand is in favor of supply.
- Strong signal before trend changed. In addition, there is no weak signal. This is also wrong for a short trade.
- Entry was made when dynamic trend turned from green to red – ok.
- The trade was not closed after strong signal appeared in the chart. You should close the trade immediately in this place. Reversal signal is supporting exit in this level.
NZDUSD is moving in a trading range. The area between the upper and lower trend lines is known as the trading range. In VSA terms, the (sideways) market is trading within its range, and will continue to do so until applied (selling or buying) effort makes it break out.
A trader who uses VSA principles will analyse price action in the top and bottom quarters of the trading range, because important observations take place in these areas, as the price heads for the supply or support lines.
The area above the supply (higher) trend line is known as overbought and the area below the support (lower) trend line is referred to as oversold.
One more important line in this chart – long-term resistance. Price already several times reversed near this line. Therefore, it is important to observe price behavior near this area.
- Background was strong.
- Strong signals (2 Minor Demand signals) before trend changed. Reversal signal also confirms market turn in this place.
- Dynamic trend turned from red to green.
- Entry in a low volume down-bar. Stop-loss below previous low.
- Exit by reaching TP level.
Total: + 37 Pips
NZDUSD H1 Trade analysis:
- At the time of entry background was strong – background didn’t have time to turn weak and it is wrong to go short in this case
- Weak signal (Minor Supply) before trend changed (moreover this signal appeared near mid-term resistance) – this is a correct setup for a short trade.
- Entry after dynamic trend turned red – it is o’k (the best way to open trade in a low volume up-bar while the price is not far from market turn). It is better to place stop-loss above resistance (in our case it is below – not o’k).
- Trade has to be immediately closed after two Minor Demand or Demand, Major Demand signals, because there is a big chance that prices will turn direction after this signal. Reversal signal also confirms market turn in this place.
AUDUSD was moving in descending triangle. It was possible to draw a down-trendline and market turned 4 times near this resistance. Lower limit of this triangle was a support line. Recently it was broken by wide spread down-bars with high volume.
The following trade was opened after another reversal near the down trendline:
- At the time of entry background was weak.
- Weak signal (Minor Supply) before trend changed. Reversal signal also confirms market reversal in this place.
- Dynamic trend turned from green to red.
- Entry when price still didn’t move too far (stop-loss is placed above down-trendline)
- Exit after 2 Minor Demand signals
Total: + 77 Pips
EURJPY M30 Trade analysis:
- At the time of entry background was still weak – it is wrong to go long in this place, because only strong background is a sign that imbalance between supply and demand is in favor of demand.
- There were several strong signals before trend changed – it is o’k. Reversal signal is also confirming market turn.
- Dynamic trend turned from red to green – ok.
- Entry was made in a low volume down-bar – it is a good point to enter the market, because low volume in a bear move shows that there is no selling pressure. It means that professionals are not interested in lower prices right now. Only one thing – price has moved too far after the trend changed and there is a big risk that market will turn soon.
- This is a mistake that the trade was not closed after weak signals appeared in the chart. You should close the trade immediately after 2 Minor Supply or 1 Supply, Major Supply signals. Reversal signal is also supporting exit in this place.
One more trade in USDJPY opened after previous analysis. As I discribed, the market is moving sideways and 123.74 – is a key level which represents resistance to higher prices. Again price changed direction near this resistance. I waited another signals and shorted the market.
- Background turned to weak.
- Weak signal (Minor Supply) before trend changed. Reversal indicator also confirms market reversal in this place.
- Entry after dynamic trend turned from red to green (stop-loss is placed above long-term resistance)
- Exit by reaching TP level
Total: + 49 Pips