Dynamic trend: Turned up
Background: W1 – very weak; D1 – weak
Point 1: We can observe “Shakeout” with very large volume and a wide range, on a weak congestion zone. This movement alone indicates absorption of supply, but the subsequent down-bar indicates that the supply is still high, and the market is not ready to grow.
Point 2: “Test” with a low volume and an average range. Follow up-bar indicates the success of the maneuver.
Point 3: There was a breakout of the congestion zone with a high volume and wide range. In TF M15, a successful test occurred and then continued to grow.
Strategy 1: Consider buying if:
- The price breaks out the resistance level 1.079 and
- «No supply» occurs.
Strategy 2: Consider to buy if:
- The price pulls back to the support level 1.066;
- «No Supply» appears (down-bar with a narrow range and a low volume);
- And the price reverses up.
Strategy 3: Consider going to sell if:
- The price breaks down the support level 1.066 and;
- «No Demand» appears (up-bar with a narrow range and a low volume).
You can search «No Demand» and «No Supply» on a lower TF.
Know more about CONGESTION ZONES
I decided to prepare long term analysis for EURUSD before Federal Reserve System will announce its decision on September, 17 for the issue of raising interest rates. A rate hike would likely lead to a stronger dollar, and entice global investors to park more of their money in the United States instead of emerging markets. That could ultimately affect developing nations’ currencies, exports, and even employment levels. Also it will influence further development of EURUSD exchange rate. Right after the announcement there will be high volatility in the market, so it is better to avoid opening trades in short timeframes.
- This was a weak signal on the top of the market (no-demand bar) which marked the beginning of downward trend. Low volume on the top of the market shows that professional buying has withdrawn from the market. The market is unlikely to go up without interest in this move from the smart money.
- Here we see a very weak signal – up-thrust. The price is marked up and premature short traders are liable to panic and cover with buy orders. Traders looking for breakouts will buy, but their stop-loss orders are usually triggered as the price plummets back down. All those traders who are not in the market may feel they are missing out the move and start buying. An up-thrust is usually indicates lower prices. This action brings weakness to the market, but it is important to look at the overall picture – in this case wait confirmation of this effort and further weak signals.