Riding it down

To quote it from the "A-Team" movie, I like it when the plan comes together. It is great to be bearish at the right time. All the signs of weakness in FX and equity markets were there. We took our cue from it and are benefitting immensely. Shorts are still on.

GBPUSD: 4h H&S width is approximately 175 pip. From 1.58, minimum target is 1.5625. Short intraday bounce to 1.5734. Initial profit target is 1.5655/62 area. This swing low presents a strong support.

EURUSD: uptrendline is broken. Short any bounce to 1.3157 and 1.3167 in particular. The most obvious initial target is 1.3023/30

USDCAD: may fall to 0.9995 to test the broken downtrendline where longs can be established

AUDUSD: this gal is real weak. China signalling low growth (7.5%, low that is) means Ozzie and commodities will have a hard time. The pair is below the bull flag and the uptrendline. Short any bounce to 1.0595. Next target is 1.0450

Monday update

The EURUSD trade i suggested worked well but short from 1.3230 stalled at 1.32. If this pair breaks out of 1.3240, then possible reversal area is 1.3275/90. Keep in mind that we may be looking at a possible "three day method" candlestick formation or my 2 in 1 candlestick formation because Friday was a long down day and today is a small bodied up day. Who knows, tomorrow may be another small up day? If that is the case, then expect a downmove to 1.32 and an upmove to 1.3240 or above. Altrenatively, 1.3225 holds and the Euro sells off tomorrow. Ultimately, EURUSD is a short candidate for me and I will play for the break of the uptrendline I mentioned in my yesterday's blog post.

GBPUSD: for now 1.58 held and this pair looks to be forming mini H&S in my 4h charts. There is an uptrendline at 1.5763 moving 3 pips up a day. I do not expect it to hold. 1.5886/1.59 is a great range to put out the shorts qith stops at 1.5910/15. Additional shorts can be put at 1.5833.

AUDUSD. Break out of the bullish flag was a fake and the pair is now back inside. I think we are looking at a possible pattern failure and I enjoy trading them as the move to the opposite direction is fast and furious. There is a strong support at 1.0650 and an uptrendline comes at 1.0625 (currently). Short levels are 1.07 and 1.0725. Sell the bounces is the policy here.

USDCAD: in my previous posts I mentioned the 0.9906 and 1.0055 range in this pair. It is back in the range with a vengeance....the sort of re-break one would like to see following a headfake. 4h close above 0.9970 is a harbinger of more upside to come including the break of the downtrendline based on Jan 12 and Feb 26 swing highs. currently at 1.0011 and is moving down 8 pips a day.

Major equity indices are testing their uptrendlines. FTSE100 and DAX30 daily futures charts downtrendlines are actually broken. I am watching to short DAX on a daily close below 6800. There appears a symmetrical triangle with an ascending tendency on 4h chart. I would have called it a bullish pennant (must be no more than 3 weeks) but I think it has now or just about to extend past 3 weeks. Same triangle in FTSE100. Triangle bottom breaks at 5860 and a daily close below 5850 will add fire to the oil.

Good luck

Week of March 5: EURUSD

EURUSD

You must have heard of the "Falling Three Method" candlestick formation. See also Bulkowski's page. Now, think of the 2 candles within one long candle. It is exactly the same as above, but two candles only. Since I could not find "Falling Two Method" anywhere, I guess I can claim to be the first one to bring this formation to trading public's attention :) I simply call it 2 in 1 candlestick formation.

Thus, December was a long red (down) candle followed by 2 (Jan & Feb) small bodied candles within Dec candle. Probable month end targets are a) 1.30, b) 1.29 and possibly c) 1.2623 (Jan low). This trade idea will be invalidated if monthly candles close above Dec open.

The trading plan:  marginal lower low, bounce and then renewed selling pressure

Last Fib support of 61.8% comes in at 1.3169 and 200MA (not shown) on this 4h chart comes in right below 1.3169 as well. This is also the area of 19 Feb gap which will finally be closed. Just below at 1.3140 & moving 3 pips a day is the uptrendline connecting Jan/Feb 16 swing lows. I expect 1.3169 level to hold for a bounce to 1.3225/40 area where Fib 50% and a daily resistance reside. I do not expect the pair to go higher than 1.3260. Finally, the pair should then breach the Fib 61.8% and the uptrendline.

To summarise, with EURUSD reversing at Fib50% resistance, it very much appears that the top with a big V (see the chart) is in place. All we need is a break of the trendline to confirm it. On fundamental side, the ECB is doing all it can to debase the Euro, a clear invitation to sell.

Good luck

P.S. Cycle watchers and a couple of newsletters I am subscribed to are calling for a top in March. A couple bloggers say the top was on Feb 28 but it appears it may stretch into mid March, important Bradley turn date. Uptrendlines on major indices are nearby and a break of them will give us the "short" signal. Note that Russell2000 (considered to be a leading indicator) is lagging already, not a good sign.