Bad Assed Trader: It's Sunday evening so I'm looking through the charts to see what opportunities may be coming up this week and thought I'd share one with you, in case you're interested.
The Euro against the pound (EURGBP) is generally in an uptrend as shown on the chart below:
As you can see, in the past week it's headed up strongly - due to the Euro having a good week against the dollar despite the Greek shannanigans.
When will this rally end? Well, the end could be nigh imminently...as indicated by price hitting the top of the uptrending channel where we might find resistance kicking in.
When we look closely at Friday's bar (the last one before the red dot on the left chart) we see it is a doji bar - like a cross - with a high test (top section much longer than the bottom of the cross).
The doji indicates indecision - sellers equals buyers - and the high test means that although price made a strong move up in during the day it made a strong move back down again. Together these signs indicate a turning point and coupled with the fact that the bar is at the top of the channel it is a strong signal that price will retrace back down.
As the trend is up then to trade this would be counter trend - where might price drop to with so many Moving Averages in the way to interfere with price action?
A look at how price has reacted previously on the first peak of this uptrend (see below)
This one basically careered through the 20MA barely only to acknowledge its existence before hitting the 50MA and chopping about for a while prior to the last part of the down move to the 200MA in green.
Given this previous form, might we then expect a couple of strong down days on Monday and Tuesday this week?
I had a little look at the Euro against the US Dollar (EURUSD) and interestingly enough Friday was a doji day again which suggests reversal of the previous price action which was up.
So this suggests the Euro might turn downwards against the dollar at least.
I also had a quick look at the pound against the dollar which is heading downwards generally but has been retracing the last few days. It is possible this retracement upwards may continue.
This all compounds the evidence in favour of a move down for EURGBP. So, having done this general scan of the context as I'm an intraday trader I hone in on the hourly chart to see what this might have in store to back up the overall picture I've gathered.
I like what I see here...why? I'm particularly interested in the MACD indicator at the bottom of the chart where I've drawn in a nice pink trendline showing a downward slope. As MACD is heading down and the hourly trend is heading up this means we have "MACD divergence". When MACD disagrees with the price trend then it may indicate a turning of sentiment shortly. So MACD is telling us that a down move is heading our way.
It may be counter trend on daily price action to trade the EURGBP but I will be watching for an opportunity to short the pair on an intraday basis. I'll need to wait for some confirmation of the turn on the hourly and four hourly chart before I do and I'll let you know how I get on.
The Euro against the pound (EURGBP) is generally in an uptrend as shown on the chart below:
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| EURGBP now |
When will this rally end? Well, the end could be nigh imminently...as indicated by price hitting the top of the uptrending channel where we might find resistance kicking in.
 |
| EURGBP: The last few weeks |
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| The Doji High Test Bar |
The doji indicates indecision - sellers equals buyers - and the high test means that although price made a strong move up in during the day it made a strong move back down again. Together these signs indicate a turning point and coupled with the fact that the bar is at the top of the channel it is a strong signal that price will retrace back down.
As the trend is up then to trade this would be counter trend - where might price drop to with so many Moving Averages in the way to interfere with price action?
A look at how price has reacted previously on the first peak of this uptrend (see below)
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| EURGBP: The first peak of the uptrend |
shows another high test doji (or as good as) bar at the peak followed by a steep drop to the 20 Moving Average (the blue line) before chopping and bouncing up to recover about half the move down and then more downward move to the 50MA (red) and beyond. The second peak of the uptrend showed a not dissimilar pattern (see below) with another high test doji followed by another strong move down
This one basically careered through the 20MA barely only to acknowledge its existence before hitting the 50MA and chopping about for a while prior to the last part of the down move to the 200MA in green.
Given this previous form, might we then expect a couple of strong down days on Monday and Tuesday this week?
I had a little look at the Euro against the US Dollar (EURUSD) and interestingly enough Friday was a doji day again which suggests reversal of the previous price action which was up.
 |
| The EUR USD now |
I also had a quick look at the pound against the dollar which is heading downwards generally but has been retracing the last few days. It is possible this retracement upwards may continue.
This all compounds the evidence in favour of a move down for EURGBP. So, having done this general scan of the context as I'm an intraday trader I hone in on the hourly chart to see what this might have in store to back up the overall picture I've gathered.
It may be counter trend on daily price action to trade the EURGBP but I will be watching for an opportunity to short the pair on an intraday basis. I'll need to wait for some confirmation of the turn on the hourly and four hourly chart before I do and I'll let you know how I get on.
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