Chief Journal - 21 May 2013
Tuesday
Overview of the market before TwC Began (Hourly Chart)
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Overview of the market before TwC Began (Hourly Chart)
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On the hourly chart, prices have been trending down
The market found strong support at 1.2800 to reverse back up in a bullish channel,
trading back within the range of 1.2840-50 to 1.2900.
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Overview of the market before TwC Began (10-Min Chart)
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Overview of the market before TwC Began (10-Min Chart)
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Before the TwC session began, price was moving in an up channel and tested the
resistance at 1.2900 three times.
After failing to break through, the market formed a lower high and started moving in a
smaller down channel.
Price bounced off the key support level of 1.2840-50 to trade back into the down
channel right before TwC began.
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Final overview of the market (Zoomed-out 10-Sec Chart)
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Final overview of the market (Zoomed-out 10-Sec Chart)
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The market can be divided into 6 segments.
At the start of the TWC session, the market traded up in a bull channel but could not
break through the resistance of 1.2875.
Price retraced downwards but found support at the Fibonacci 50% retracement level.
From there, the market made another attempt to break through 1.2875 but failed
again. This time, prices corrected further down before eventually finding support at
1.2840-50.
Again, prices moved up in a bull channel to test 1.2875 for the third time. This time,
the market broke through, and prices spiked up 40 pips to end the TwC session at a
high.
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We will now go into deeper detail
and analyze each section of the
Final 10-sec Chart.
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Segment 1 (12:00-12:45 GMT) - Zoomed-out 10-Sec Chart
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Segment 1 (12:00-12:45 GMT) - Zoomed-in 10-Sec Chart
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Segment 1 (12:00-12:45 GMT)
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The TWC session began with the market moving upwards steadily in an uptrend
channel, after it found support at 1.2840-50.
Prices accelerated upwards over 3 legs (1, 2 & 3) to test the resistance level of
1.2875, which also coincides with the down trendline of the bigger down channel.
Buying opportunities were potentially present as the market formed higher lows at (2
& 3).
After failing to break through the top, the market fell and started consolidating in a
triangle (4). As prices were still above the up trendline and the low at (3), the
chances favored a breakout on the upside. As prices squeezed tighter, the breakout
eventually came and this presented a trading opportunity.
Prices could not reach the level of the previous high, and quickly came back down.
The market started consolidating sideways, and as the sentiment is getting
increasingly two-sided, it is better to sit out the market and wait for clearer price
action.
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Segment 2 (12:45-13:20 GMT) - Zoomed-out 10-Sec Chart
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Segment 2 (12:45-13:20 GMT) - Zoomed-in 10-Sec Chart
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Segment 2 (12:45-13:20 GMT)
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The market continues to try for the upside, but the sentiment is clearly getting
increasingly two-sided, with many overlapping candles.
After 3 failed attempts to break through on the upside (4, 5 & 6), the market started
drifting down in a tight channel, and broke through the bottom of the range,
presenting a selling opportunity (7).
Earlier on, there was an acceleration with 3 legs of buying (1, 2 & 3), and the level of
(3) will be the first support to be tested. As expected, prices stopped at that level (8).
Prices consolidated in a small expanding triangle, and found a second leg at (9) to
break below the previous low at (8).
The level of (2) was the next level to be tested, and sure enough, prices stopped
there (10).
Prices started consolidating in a small expanding triangle again. The lacklustre
followthrough and two-sided trading suggested that the bearish sentiment was
perhaps not so strong.
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Segment 3 (13:20-13:50 GMT) - Zoomed-out 10-Sec Chart
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Segment 3 (13:20-13:50 GMT) - Zoomed-in 10-Sec Chart
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Segment 3 (13:20-13:50 GMT)
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With the market well-supported at (2), prices turn up to test the top of the bear
channel. If the bears wish to keep the downwards momentum, now is the best
chance to create the third leg down.
However, they could only bring prices down to (3), which the bulls managed to
defend. This created an inverted head and shoulders, and the next move up was a
tradable opportunity, as prices had broken out of the down trendline and was
holding above (3).
Sell orders were waiting at the top, so prices quickly came back down in a V-shape
reversal. But again, prices were holding well at the same level (4). As the sentiment
is still bullish, prices traded up again, though in a more two-sided manner this time.
Failing to reach a new high, prices started consolidated in a 5-pip range with many
overlapping candles (5). Although the base of the consolidation was holding well, it
is no longer certain that the sentiment is still bullish enough. Furthermore, there was
a lengthy period of two-sided congestion on the left of the chart, which would pose
considerable resistance for the market to go higher and breakout of the down
channel on the 1-minute chart. Thus it would be more prudent to sit out and wait for
clearer price action.
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Segment 4 (13:50-14:30 GMT) - Zoomed-out 10-Sec Chart
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Segment 4 (13:50-14:30 GMT) - Zoomed-in 10-Sec Chart
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Segment 4 (13:50-14:30 GMT)
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With the market two-sided, we are on the lookout for clearer price action. The
potential for a downmove is there, as we are at the edge of a bear channel on the 1minute chart, and market has previously found significant trouble breaking higher.
When lower highs start forming, and prices broke below the base of the
consolidation, there was a sharp downwards spike that was potentially tradable.
The market found support at the significant level of the previous bottom. Prices
became increasingly two-sided, forming an expanding triangle with higher highs and
lower lows (2). The direction of the breakout is unclear, as both bulls and bears are
convinced they are correct. In fact, false breakouts are likely, and the expanding
triangle should be traded like other ranges, i.e. sell at the top and buy at the bottom.
When prices found lower highs instead of continuing the higher highs of an
expanding triangle, it was a clue that the formation may continue the previous
downtrend. Prices broke through (3), which was a key level where an earlier
inverted head and shoulders found support.
Prices went all the way to the bottom of the channel (5), where it formed a potential
inverted head and shoulders (4, 5 & 6). The chart pattern is forming at a key support
on the higher timeframe charts, which gives it more possibility to reverse the down
trend.
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Segment 5 (14:30-15:15 GMT) - Zoomed-out 10-Sec Chart
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Segment 5 (14:30-15:15 GMT) - Zoomed-in 10-Sec Chart
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Segment 5 (14:30-15:15 GMT)
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With the market forming an inverted head and shoulders (1, 2 & 3) and a higher low
(4) at a key support, we should be on the lookout for a change in sentiment. That
bullish sentiment was confirmed when prices broke above the neckline, presenting a
buying opportunity.
The right shoulder at (3) was significant as it broke the series of lower lows. It could
be counted as the first leg up, with (5 & 6) forming the second and third legs. All
three legs had similar measuring objectives in terms of the pips moved.
The third leg at (6) was especially interesting, as there was no pullback there.
Instead, prices first consolidated in a tight range, before drifting up slowly. The bulls
were confident as they had a reversal pattern at a key support, while the bears felt
that the expanding triangle on the right would provide significant resistance, at least
for a scalp down. The bulls were slightly stronger though, thus prices drifted up. The
speed of the move accelerated as more and more bears realized they are on the
wrong side, culminating in a parabolic move up to the breakout level of the previous
down move.
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Segment 5 (14:30-15:15 GMT)
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The previous breakout level will usually provide significant resistance, especially
when it is tested for the first time. Furthermore, prices had already moved three legs
up, with the third leg being a parabolic buy climax, thus prices first retraced back
downwards.
Further consolidation is needed to break above this level, and the breakout
happened only on the third time trying (7, 8 & 9), with slightly higher lows in the
range.
The move happened with three legs, and ended below the significant resistance at
1.2875. From there, prices retraced back to the bullish trendline.
As prices consolidated sideways, they started forming higher lows again (10). The
bullish sentiment is still strong, as prices are holding above the previous breakout
level (9), even though prices have now consolidated sideways out of the original
trendline.
As the price action built up, the market shot up to test the previous top again, and
we adjust the trendline slightly to the right.
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Segment 6 (15:15-15:30 GMT) - Zoomed-out 10-Sec Chart
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Segment 6 (15:15-15:30 GMT) - Zoomed-in 10-Sec Chart
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Segment 6 (15:15-15:30 GMT)
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After finding support at 1.2840-50, the market had been working its way up to test
the resistance at 1.2875 again. This level had been tested twice previously (1 & 2)
during the TwC session, and now is the third attempt.
The third attempt itself consists of 3 small attempts (3, 5 & 7). After finding support
at (4), the market went up again to test the resistance, but could not break through
(5).
The market retraced back down and consolidated sideways, breaking out of the
bullish trendline. However, market sentiment is still bullish, as prices are holding
above the previous breakout level at (4), and the market is anticipating a potential
third attempt to break through the resistance. As the market built up higher lows
from (6), we can adjust the trendline, and trade the breakout when it eventually
happens.
The move is sharp as this is a breakout from a consolidation of the entire TwC
session. Moreover, it is a breakout of a double bottom on the 10-minute chart.
Prices decelerated from the spike into a steep bullish channel (8).
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Segment 6 (15:15-15:30 GMT)
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Prices were able to stay near the top of the channel, indicating that the sentiment
was still bullish. A breakout on the upside then happened (9), with prices moving
sharply up again. This was also a potential tradable opportunity.
The entire move from (7) to (10) can be seen as 3 legs. (7) to (8) was the first leg,
(8) to (9) was the second leg, and (9) to (10) was the third leg, with the three legs
having approximately equal heights.
The market then consolidated sideways as we ended the TwC session.
Conclusion – Zoomed Out 5-Min Chart
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Conclusion
The market traded in a small down channel, but found a double bottom at 1.2840-50.
This was the level of strong support on the higher timeframe charts, and was also the
bottom of the bullish channel and the 61.8% Fibonacci Retracement of the previous
up move.
From there, the market went all the way up to the top of the bullish channel, where it
then consolidated sideways as the TwC session ended.
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