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30m

AUDUSD: a Bullish Bat in a Bullish ChannelDue to time restrictions, no fundamental analysis on this pair. It has been trading in a 134 pip wide bullish parallel channel for almost 10 days on the 30m timeframe. We can now see a bullish Bat pattern having developed. Price is already testing the full potential reversal zone (PRZ). With this, the set up qualifies as a trade candidate and it goes on my watch list. When defining the potential reversal zone (PRZ) for a Bat pattern, we look at the projection of three harmonic levels. I: the 886 retracement of XA, II: an extended AB = CD pattern (in this case 1272 AB = CD) and III: a BC expansion (in this case 2000 BC). This defines a tight zone, just 10 pips wide, represented by the orange lines in the chart. Should price action reverse convincingly, I would enter long. SL goes 15 pips behind X. TP1 = 382 retracement of AD and TP2 = 618 retracement of AD. In terms of trade management, when TP1 is hit I would take profit on 1 position and roll my stop loss to breakeven, enjoying a risk free trade hunting for TP2. There are 60 pips to be made (if this pair follows the script) and the trade has a reward – risk ratio of 2.1! UPDATE 1: TP1 hit for 30 pips. Stop loss moved to break even and currently enjoying a risk free trade going for TP2. UPDATE 2: After the release of poor Chinese trade balance data, this pair took a huge fall, even dropping below 0.7600. I got stopped out on my hunt for TP2, but since it was a risk free trade, no harm done. Overall this trade was a winner with TP1 cashed.
Long
by JazzForex
5
AUDUSD: Potential 2618 Play on the Aussie DollarThe less dovish than expected tone from the RBA last week, stating the exchange rate was still overvalued but failing to give any mention of a time scale for further rate cuts, made me less bearish than I was on this pair. On top of that, the FOMC minutes highlighted concerns about hiking interest rates too soon, creating some buying pressure. Last week was therefore a net gainer and all in all I would say that for now, the steep downtrend has started to fatigue; with the last five months seeing it lose a staggering 1.580 pips. This does not mean I have gone bullish on the Aussie Dollar, far from it. Price is currently sitting at a level (784-ish) where all buying interest has ebbed away for the last two weeks straight and the latest attempt to break it failed again last Friday. As a result, we may now have a basic reversal price pattern developing on the 30M timeframe: a double top. This trade idea is about the possibility of trading that pattern. I am describing the most conservative play here (known as the 2618 trade), with the most conformation possible. The scenario is depended on a number of steps happening before entering the trade and as such its a true “if… then… scenario”. A double top is a double top if the wick of the second meets at least the candle close of the first, while the candle close of the second does not exceed the wick of the first. In other words, PA tried to make a higher high, but failed. This retest of resistance with less strength also follows from the regular bearish RSI divergence at the second top. We need the following steps to occur before entering a trade: (1) price breaks below and closes below the neckline, (2) price retraces back up, until 618 retracement of the prior leg down and (3) price stalls, stops and reverses at this retracement level. In that case, SL goes behind swings high of the tops. TP1 = structure level where the retracement started, TP2 = 1272 extension of prior leg down. In terms of trade management, when TP1 is hit I would take profit on 1 position and roll my stop loss to breakeven, enjoying a risk free trade hunting for TP2. There are 42 pips to be made (if this pair follows all the steps in the script) and the trade has a reward – risk ratio of 2.0! UPDATE: There is good news and bad news on this one. The good news: most of the analysis was correct. We did have a double top, a reversal did happen and price did break the neckline and hit both profit targets. The bad news: my conservative entry technique kept me from profiting of the first leg down, since the drop happened too fast to enter and there was no retracement before the profit targets were hit. I did go short, after PA finally made a 500 retracement that aligned perfectly with the neckline (that served as resistance) and made 49 pips on the second leg down (which was a 1272 extension of the prior leg down). Since then we had a third leg down, which I did not trade. I left some money on the table, but the trade was profitable.
Short
by JazzForex
27
USDCAD: a Bullish Bat in a Bullish Price ChannelThis pair has been ranging in a 145 pip wide bullish parallel channel on the 30M for the last 9 days. Both the upper and the lower channel line have been tested 4 times and have proven their strength. It pushed up 100 pips last Friday, on the back of downbeat Canadian retail sales data (the largest one-month decline since April 2010) and a favourable US manufacturing pmi. The pair finally printed a net gain for the whole day. Chances are that price will slowly find its way towards the lower channel line, at which point we would have a completed bullish Bat pattern. PA so far only traveled 20% from C towards the potential reversal zone and has yet to pass the B point, so we are nowhere near completion but I like to look ahead and be prepared just in case, since I can only profit from that which I anticipate. I am not making the case here that completion will happen; I am merely saying that if it happens, I will buy this pair upon reversal. So this trade candidate goes on my watch list for next week. When defining the PRZ for a Bat pattern, we look at the projection of three harmonic levels. I: the 886 retracement of XA, II: an extended AB = CD pattern (in this case 1618 AB = CD) and III: a BC expansion (in this case 2240 BC). This defines a very tight zone, 7 pips wide, represented by the orange lines in the chart. The confluence with the lower trend line of the channel increases the chance of reversal upon completion of the harmonic price pattern. Should the price drop enough to eventually test the PRZ, stabilise and reverse convincingly, I would enter long, basically buying the low in a bullish channel. SL goes 10 pips behind X. TP1 = 382 retracement of AD and TP2 = 618 retracement of AD. There are 80 pips to be made (if this pair follows the script) and the trade has a reward – risk ratio of 2.9! UPDATE: Price never completed the pattern, so there was no entry signal for this trade. No problem, nothing was risked and nothing was lost. On to the next trade!
Long
by JazzForex
3
AUDUSD: Head & Shoulders Reversal PlayI remain fundamentally bearish on this pair, given the rate divergence with the FED (RBA cut its rate recently and might cut again this year while FED is expected to hike it around the summer). The RBA price target for this pair is 0,7500 (some 250 pips lower than the current price). Recent commentary by governor Stevens was less dovish than expected which led to a small rally during the last Asian session. Zooming out a bit, the last two weeks price action has been more or less in consolidation, which gave us a couple of interesting and profitable opportunities. Linked under “Related Ideas”, you will find the last two trade candidates for his pair (one on an ascending triangle, one on a harmonic price pattern) both of which played out profitably. We now have a new price pattern in development that might lead to a concrete trade setup. A potential head & shoulders (H&S) is forming on the 30M timeframe and PA already travelled 60% from the top of the right shoulder towards the neckline. The market tried three times to go higher and failed, so chances are it will now head lower. There are several ways to trade an H&S pattern, from more aggressive to more conservative. I enter trades conservatively, with additional confirmation, so before I would enter the trade, the following steps would have to play out first: (1) completion of this reversal pattern (2) break of the neckline to the downside, (3) retracement back into the neckline and (4) a clear sign of reversal upon testing the neckline (which should then be resistance). If these four steps play out as described I would enter a short. SL would go 10 pips behind the neckline. TP1 = support level at about 50% towards TP2 and TP2 is derived by extending the distance between head – neckline in the direction of the breakout. I should mention the additional risk that Monday is a US bank holiday, reducing the volume of transactions. There are 72 pips to be made (if this pair follows the script) and the trade has an excellent reward – risk ratio of 7.1! UPDATE: Price never completed the pattern or broke the neckline, so there was no entry signal for this trade. No problem, nothing was risked and nothing was lost. On to the next trade!
Short
by JazzForex
10
USDCAD: Converging Bats and ButterfliesThe USD gained in strength last Friday after a favourable jobs report. The CAD data has also been good the last few days and they sure beat expectations Friday with their employment data. But appreciation of the USD on the back of their jobs report proved too strong for the CAD and this pair gained 165 pips before giving 35 back before market close. The Canadian economy is struggling with the low oil prices and there is rate divergence (given the recent rate cut by the BoC and the possibility of a summer rate hike by the FED) so I remain overall bullish on this pair. On the technical side, we saw some consolidation the last week after this pair had been rallying the 2 weeks prior. Consolidation breads advanced price patterns and we now have the contours of no less than three bearish harmonics on the 30M timeframe, each with a distinct X-A as the anker leg of the pattern. The two Bats and the Butterfly have potential reversal zones that converge nicely and in the chart I merged them into one 47 pips wide zone marked PRZ. The profit targets of the individual harmonics converge nicely as well and I merged them into two separate profit zones. Price has travelled only about 35% on the way from C to the PRZ, so patience is key and I am not jumping the gun. However, should the price continue to rise next week and eventually test the PRZ, I would observe it closely for a potential reversal. In that case I would enter a short, aiming to take profit in both profit zones. SL would go 10 pips behind the resistance. There are 255 pips to be made (if this pair follows the script) and the trade has a reward – risk ratio of 3.9! UPDATE: Price is still messing around between the C and D points of these patterns I published 21 days ago. I have now deleted them from my watch list. The patterns did not complete, there was no entry signal and I did not enter any trade here, so nothing was risked and nothing was lost. On to the next trade!
Short
by JazzForex
2
USDCAD: a Bearish Bat Close to CompletionIn a surprise move, the Bank of Canada cut their interest rate last week. This pair immediately rallied upon the release of that news. Tonight, the FOMC stated the timeline of any rate increase would depend on economic data. This statement seems to have given another boost to this pair, bringing the price close to the potential reversal zone (PRZ) of a bearish Bat on the 30M. When defining the PRZ for a Bat pattern, we look at the projection of three harmonic levels. I: the 886 retracement of XA, II: an extended AB = CD pattern (in this case 1272 AB = CD) and III: a BC expansion (in this case 2272 BC). This defines a very tight zone, about 5 pips wide, represented by the orange lines in the chart. There is also some structure near this zone, which increases the edge of a reversal. Should price action test the PRZ and reverse convincingly, I would enter short. SL goes 10 pips behind the next resistance level. TP1 = 382 retracement of AD and TP2 = 618 retracement of AD. There are 66 pips to be made (if this pair follows the script) and the trade has a reward – risk ratio of 2.9! UPDATE: Price action did not reverse in or near PRZ and broke and closed above X. According to my rules, this Bat was invalidated. No problem, there was no entry signal so nothing was lost. On to the next trade!
Short
by JazzForex
11
AUDUSD: a Bearish Bat on the Aussie DollarThe Australian dollar rose strongly after a report showed the nation’s underlying inflation accelerated. This moved the price of this pair above the B point of a potential bearish bat on the 30M (where its helped further by a daily support level) so this set up qualifies as a trade candidate and it goes on my watch list. Price has travelled only about 40% on the way from C to D, so patience is key and I am not jumping the gun. Also, be aware we will have the FOMC statement coming out today in about 11 hours, which will impact USD strength. When defining the potential reversal zone (PRZ) for a Bat pattern, we look at the projection of three harmonic levels. I: the 886 retracement of XA, II: an extended AB = CD pattern (in this case 1618 AB = CD) and III: a BC expansion (in this case 2618 BC). This defines a very tight zone, about 10 pips wide, represented by the orange lines in the chart. There is also some structure near this zone, which increases the edge of a reversal. Should price action test the PRZ and reverse convincingly, I would enter short. SL goes 10 pips behind the next resistance level. TP1 = 382 retracement of AD and TP2 = 618 retracement of AD. There are 155 pips to be made (if this pair follows the script) and the trade has a reward – risk ratio of 4.0! UPDATE: This pattern never completed, so I did not enter any trade here.
Short
by JazzForex
1
AUDUSD: a Bullish Bat with an oversold RSIWe have a Bat pattern finishing on the 30M chart. Price already tested the PRZ (and overshot it a little, but could still stabilise and reverse nicely) and the RSI is clearly oversold. When defining the PRZ for a Bat pattern, we look at the projection of three harmonic levels. I: the 886 retracement of XA, II: an extended AB = CD pattern (in this case 1272 AB = CD) and III: the BC expansion (in this case 2000 BC). It is common for these harmonic levels to converge closely, defining a precise range. In this case, the three numbers define a clear zone of harmonic support, represented by the orange lines in the chart. If this pair follows “the script”, price action (PA) will stabilize and reverse. Once we see PA reverse convincingly, we will enter the trade. SL goes 10 pips behind the next relevant support level (X). TP1 = 382 retracement of AD and TP2 = 618 retracement of AD. There are potentially 120 pips to be made and the reward – risk ratio of this trade is 3.0.
Long
by JazzForex
USDJPY: a Bullish Crab in a Bearish ChannelThis pair has been ranging in a 230 pip wide bearish channel on the 30M for the last 18 days. It sharply dropped 100 pips last Friday, on the back of US hourly earnings data being reported at -0.2%, raising warning flags regarding the economy. On top of that, FED members expressed there will be no hurry to do a rate hike this year. Despite all this, on the daily this pair is still printing higher lows, so I am not ready to call the overall trend bearish yet. The divergent policies between the BoJ and the FED are the main driver of the overall trend, although more factors come into play like low oil prices and volatility in the equity markets, both of which favour the Yen. And off course the FED needs to follow through with an actual rate hike, or the trend may shift. On the technical side, we can now see the contour of a 5-point extension structure: a Crab pattern taking shape on the 30M chart. The price comfortably passed the B point on its way towards the potential reversal zone (PRZ). When defining the PRZ for a Crab pattern, we look at the projection of three harmonic levels. I: the 1618 expansion of XA, II: an extended AB = CD pattern (in this case 1618 AB = CD) and III: an extreme BC expansion (in this case 3142 BC). For Crab patterns, the XA and BC expansions are the most critical levels of the PRZ and are closest together, so in this scenario I assume the reversal of price might happen near these levels (as represented by the two lowest orange lines in the chart). Reversals for Crab patterns can be dramatic after briefly testing the PRZ and extreme price action as it approaches the completion point is not uncommon. However, this should not make us trigger-happy. Control your risk. Those who know me, know I enter trades conservatively so I will at least wait for the XA expansion to be tested and for subsequent signs of decisive reversal of price action before entering this trade. SL goes 10 pips behind the next support level. TP1 = 382 retracement of AD and TP2 = 618 retracement of AD. There are 130 pips on the line and the trade has an excellent reward – risk ratio of 7.0! UPDATE 1: Reversal got triggered smack in the middle of the PRZ this morning. PA went up dramatically by 100 pips, passed TP1 and is now on its way to TP2. UPDATE 2: Price just touched and passed TP2.
Long
by JazzForex
6