USDJPY H1 – Trade Analysis

Trading the supply/demand signals directly, without taking anything else into account, is a common mistake which often leads to losses. Demand during a strong downtrend can mean it’s profit-taking or just some buying, that may or may not have a follow-through. In this trade,
1. The background was weak, and so we should be looking for short positions (in weak signals), as explained here Supply/Demand + Background.

2. Next to the demand bar, there was a no-supply test (painted as blue), that was testing lower prices for supply. The prices however didn’t rally afterwards and break its high – if professionals were interested in buying, they’d get in after such an indication of no-supply, and a rally would follow, which did not happen, and so the latent supply kept on moving the market downwards.

Demand-Downtrend-USDJPYH11

Demand-Downtrend-USDJPYH1

Sterling/Dollar – Before US Employment Numbers

Tomorrow the number of US non-farm employment change numbers will be released, together with the Unemployment rate. Before, at 9:30 UTC+1, the British manufacturing PMI will also be known. GBPUSD is on a short-term uptrend, and on the long-term, it’s near a down trendline. In the last top at yesterday’s London/US session, there was considerable supply, and as in today’s London session prices attempted to rally, it was met by further selling, shown as an upthrust. Due to this recent weakness, a break of the up trendline would be a good confirmation of a downtrend to come. If the news are positive to GBPUSD however, since there are sellers around 1.441 – 1.444, a whipsaw could occur as these could take the high liquidity as an opportunity to continue shorting.

 

News, Trend and Supply/Demand in Sterling

News, Trend and Supply/Demand in Sterling

 

Gold M5 – Supply Bouncing on the Resistance +50 Pips

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.

Supply in uptrend in Gold

Supply in uptrend in Gold M15

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.

Supply and trend turned down in Gold M5

Supply and trend turned down in Gold M5

Gold, Crude Oil and the Stock Market

These commodities have been among the biggest rises in prices in the past few months, and coupled with the bond market, give an interesting inter-market view on the global financial markets.

 

Stock Market

The latest rally has been in a great part, lead by gold/oil groups. Interestingly, bonds have been falling for the past month (interest rates rising) after a climax top, which means there is going to be a shift from interest-rates driven stocks to inflation-driven stocks. Tech stocks, the former stock market leaders, are now laggards, with NASDAQ lagging behind S&P and Dow Jones. Financial stocks, which also lead much of the bull market, have also been weak, despite the stimulus from the Fed and ECB. Getting on defensive/commodity stocks, or staying on the sidelines altogether, it’s probably the best course of action to take at the moment.

 

Gold

Trendline break on Gold

After showing persistent demand between the $1050-$1100, and breaking the long-term down trendline, it didn’t stop until major supply hit the market again. It’s good to note that there is an important resistance at $1306, and the supply here might come from the fact that there are major traders taking profits before it gets there.

 

Trading Range and Trendline in Gold

On the H4, we can see the current action more clearly – a trading range, with a slight uptrend. $1270 has been a key resistance in the last weeks, with significant supply showing every time the prices approach it. Last Wednesday on FOMC’s announcement, the prices got near this price again, and VSA showed another supply signal (purple dot), along with an high volume (red) later, with prices reversing afterwards. The key levels are therefore this resistance, and the up trendline below. In M15 there is a down trendline at $1260 right now, and as the background there is weak, this will be a good timeframe to look for shorts while prices are kept below $1270.

 

Brent Crude Oil

Brent Crude Oil uptrend didn’t pick up so fast as gold’s in the beginning, but it has been steadier. Looking at H4, it has been showing supply and down reversals at fresh 3 month highs, and it’s getting to the ‘overbought’ part of the trending channel, so I’d prefer to wait for the prices to reverse to the trendline first. If there are low volume down bars or a bullish test in this area, it’d be another long opportunity, because that would show the supply before was overcame.

 

Trend and Supply Brent Crude Oil

Trend and Supply Brent Crude Oil

Dax Intraday – Supply on a Trend

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.

 

trend and volumes trading

Trend and Volumes on Dax

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.

EURUSD Follow-up

After the high volumes that was noted on the last post (zone 1), I wrote that if prices failed to continue the rally soon, this would be a sign of too much supply hitting the market and would be a probable reversal point. In the Asian session the prices failed to rise, and a bit more supply showed up as a churn bar (green bar) after a small rally. When the London session opened, the prices went down to re-test the previous area of demand.

In (2), we can see that the volumes picked up again, and VSA showed a demand signal. The volumes were also higher than the last top, which was a good indication of renewed interest in the up move. As the background was still strong at the time, Alert System indicator sent out an alert to go long on the high of this demand bar.

Prices continued to rally afterwards, and upon reaching a medium-term resistance at 1.138, Supply signals from the current timeframe and from D1 halted the move.

In (3), we can see a successful test (the test is the dark blue bar, 3 bars ago) near the prices of the previous demand, as the prices broke its high. The background is weak though, and so taking a long right now, while possible, is risky and would have to be with a tight stop-loss. Other EUR pairs such as EURJPY are looking better, since it’s just now emerging from a double bottom with demand as the current prices.

Demand signal in Euro/Dollar

EURUSD H1 Demand Signal + Background

EURUSD – An Intraday Analysis with Volumes and Reversals

EURUSD has been in a strong uptrend after breaking out from a base last week. The prices also broke an important down trendline in a furious up movement, on high volume and wide range up bars. It’s now in a critical area that will be characterized by a high volatility.

In areas of previous resistances, this volatility and volume spikes are normal, and can be somewhat tricky to understand, but using VSA and Reversals this job is simplified as they’ll show the most important bars. We should first look at the background: it was strong during these movements, and so we should look for up reversals. In the hourly chart, the first one (zone 1) appeared at the same time as major supply, which is something to avoid. The other two (zone 2) were in an area of previous demand, and were soon confirmed by another strong VSA signal. Down reversals on the other hand, signaled less significant movements that lasted for a shorter amount of time.

Volumes, Reversals and VSA

EURUSD H1 – VSA, Volumes and Reversals

 

On to the current action (zone 3), Reversals showed a down Reversal, which marked almost the absolute high of this correction. Apart from that, after these such high volumes, I’d expect prices to continue further with small or no retracement. If they don’t keep advancing, it means much of that volume was supply hitting the market. The market has to show it’s not being conditioned by the supply anymore, with low volume bars or a successful bullish test, above the previous resistance.

EURJPY M5- Demand Signal Trade Analysis

Demand Near Support EURJPY

Demand Near Support Failed Trade

  1. The background was weak – one should only look for short trades
  2. Prices had just broken a support. This is important because near a support, there will always be increased volumes from locked-in traders, which means any demand signals could just be from stoplosses being hit. You should wait for confirmation for the prices to break-through upwards again.
  3. A bit later there was a test bar (blue bar), testing for supply at lower prices (hence the lower low). As the prices failed to rally afterwards, it means the test failed and there was still too much supply in the market, namely from the big traders who sold before this movement started (where the Major Supply signals are present). This was an opportunity to close the trade earlier.

EURJPY H4 – Trading in a Range

Euro/Yen has been ranging since the beginning of January, when looked at from a 4-Hours perspective. Volume-wise though, it has been very active, and understanding this activity is essential to know what the major players are doing.

  1. First there were several demand signals just as 2016 was starting. This halted the down move. Afterwards there stopping volume when reaching 129.0 area (red bars).
  2. More recently, there was a major shake-out, painted as Major Demand by VSA – there was a lower low made, yet prices closed on the highs of the bar, and above the previous support. This was a move to hit stop-losses which provided plenty of liquidity for professional buying.
  3. Approaching the down trendline, there was a no-demand test (pink bar) – as prices penetrated the trendline, the volumes didn’t keep up, which means there wasn’t much demand. On the next bar, prices refused to close down though, on a relatively high volume. This could mean renewed interest in an up move, and the confirmation will be the trendline break on good volume (checking the hourly might be the best). If the bearish test succeeds,  as in a failure to seeing a breakout of the trendline and/or test’s high in the next bars, I’d expect prices to drift downwards onto the support. The ultimate level to watch for is the resistance at 129.074.

 

EURJPY Volume Trading

GBPAUD H1 – Trading Intraday on the Sterling Sell-off +142 Pips

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.

GBPAUD H1

  1. Weak background
  2. Supply signal
  3. Entry on the break of the supply bar (could also be on the previous)
  4. 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.

GBPAUD H1 Trend Channel