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.
In EURGBP there was a short opportunity at the start of the week, as the support was broken. In this setup, one of the important things to watch for are weak signals before the break, which there were on the last market top. This guarantees there is a ’cause’ for the prices to go down, since it means the smart money had started distributing, effectively betting on a successful break-out. From there on, the sequence for a result of +27 pips was:
1. Weak background
2. Enter in an up bar near the broken support
3. Close in the TP level the alerts indicator suggested. Right after, there was a very strong demand signal that reversed the market
EURGBP has shown some considerable supply on the same day as it broke the support. This earlier supply volumes were only matched by the apparently strong volumes near the support, at the beginning of the Asian session at 4th August. I say apparently, because we have to take into account that prices were nearby a previous support, and in these areas this can be just volume from retail traders buying simply because there’s a support nearby.
As the prices broke the support, with moderate volumes on the mid of the Asian session, there was a short opportunity. As prices rallied on low volumes to the broken support there were other possible entries.
There was later in the European session a strong demand signal, and just 2 hours later the market turned on yet more demand signals, this time even stronger. On the break-out setup, as in the nearby S/Rs setup, once you moved your stop-loss to break-even, you could also wait for it to hit TP instead of exiting on the first Demand signal, as in these setups, when the market trends, it trends strongly. This contrasts with other more scalping-oriented setups such as Dynamic Trend, where you should exit right in a strong signal.
In March and beginning of April, while there were plenty of bad news for the Euro, with some commentators even speculating the Euro-zone would break, the professional money was actually accumulating. They do this using the added liquidity of people selling in panic, which allowed them to buy Euro’s without making the prices go against them. This can be seen by the green dots (Major Demand) of AT – VSA, and the very high volumes in that area.
Since then, prices have rallied and are now near the up trendline. It could see higher prices if the current downtrend in the lower timeframe’s is broken, and so it might be useful to check how’s H4 doing.
The down trendline was recently broken, but as the prices rose above it, the volumes dried out, in a clear demonstration of no demand. The last bar finally rejected the down trendline, on very high volume (red bar). This is bearish for the moment being, and I’d like to see this trendline being broken to take a long position.
There was some buying on the recent dip shown by the three dots (Oanda), and after the dynamic trend turned up for the 2nd time, there were 2 low volume bars showing temporary lack of supply. The first target is the blue dot at 137.3, while looking out for weak supply/no-demand signals that could turn the prices to the zone of previous buying at 133.3.
