Based on recent analysis of USDCHF, I waited strong signals near the trendline. I didn’t have to wait too long.
- Background is strong. The price crossed down the trendline and was in oversold zone. This is a good point to look for strong signals in order to enter the market.
- In this point appeared strong signals – Major Demand in M15 and Demand in M30 timeframes. This is a wide spread bar on high volume (shake-out). The bar closes on the high. It means that there was more buying than selling and now we can expect the price to move up.
- Dynamic Trend changed from a downtrend (red) to an uptrend (green). Now we should look for entry bars.
- Long in a down bar after the trend changed.
- Close after weak signals (Minor Demand and No-Demand in H1).
- The indicator has recognized a very strong signal (Major Demand). This is a down-bar which closes in the middle on high volume (the volume is higher than during previous several days). If this volume was bearish – why the bar closed in the middle and the next bar is bullish? It helps us to understand that there was more buying than selling. This is a shake-out (smart money are buying all sell-orders coming into the market) and starting point of bullish trend.
- We draw up trendline with as minimum 3 touches. It will help us to identify when the price will be in oversold zone (under the trendline).
- The price has come to oversold zone (under the trendline) without weak signals in the background. Major Demand signal helps us to understand that this is not a genuine move and we can anticipate that the price will be returned to up trend.
- Overall strong background is supporting the move.
Swiss Franc is now in a bullish trend and at the moment we do not see weak signals which could tell us that this trend is over.
Like I wrote in the last post on the Yen, the trendline break was something to watch for a potential short, given the major supply signals behind (distribution). Watching the H4 timeframe for entry timing, short after there was a trendline break with good volume (red bar). There was demand at this area but this comes mostly from the prices hitting stop-losses of retail traders, which is something that also happens in most, if not all, supports break-outs.
Closed half order near the support, though could have closed it entirely due to the massive shake-out that took placed, market by a green (major demand) dot. Closed the rest of the trade on the 2nd strong signal, that together with the earlier shake-out, means there is now professional support of the market and the trend may come to an halt.
This kind of setup is all about taking advantage of the temporary imbalance of supply and demand. Market was correcting (red trend), while there was demand coming in. After the Dynamic Trend turns up, enter in a down bar, setting the suggested SL/TP by the Alerts indicator.
For some time now that I’ve been looking closely at the Yen’s daily movements. Prices are swinging around a resistance made back in 2007, and it’s interesting to note that so far there has been a rejection of new highs. Every time the prices went above it, there was supply and the prices came falling down, which is what’s happening right now. In the beginning of July there was some demand coming in near the up trendline, which sustained the prices, but it may not be enough. The market will next test the trendline, and if decisively broken, we can expect lower prices; if it’s maintained, we should trade according to the action on the resistance, and either wait for a break-out and a test for a long, or a false break-out with more supply signals for a short position.
In the H4 the recent action can be seen more clearly, with supply and really high volumes above the resistance, and where the background had already turned to weak.
Dear Blog readers,
We’ve just launched a video that explains the Dynamic Trend Setup, make sure to check it out! It’s also posted in the page of the Dynamic Trend Setup, below the charts: https://www.analyticaltrader.com/trading-setups/trend-trading/dynamic-trend-setup/
