AUDUSD Weekly Musings

The bulls clearly remained in charge last week and price was pushed to .9600

Price is currently at the top of a weekly channel up and is in a prime zone for the beginning of a retracement. Possible triggers for retracement will be price reaching .9800 as well as 1hr, 4hr and daily closes below the upper weekly channel trend line also continued resistance at .9600. Bears will be watching for any weakness and likely will be targeting the lower weekly channel trendline for profit taking (.9200?).

Short term sentiment - bearish

Long term sentiment - bullish

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This is not a recommendation to trade.

AUDUSD Weekly Musings

 After another open gap last week's price action spent most of it's time bouncing around .9400

The week ended with a sizable retracement leaving last weeks candle forming a bearish candle. 

This week I've included a monthly chart. A look at the monthly shows that we are at an area of strong resistance. Resistance to this level can be seen at the high of 2007, also at the start of the big crash in 2008, at the beginning of the current ranging period in 2009 and most recently April 2010. Indeed there is a strong case for the bears after last weeks candle. Support and resistance traders will be looking to go short around this price level using target levels of .9200 to .9000 for profit taking levels.

Now let's look at the other side of the coin - the trend traders looking for price to resume the longer term bullish trend which started early 2009. Price closed this week above any close seen for many weeks even months. Indeed price has closed above any other close in the range that began late last year putting alot of resistance between current price and any substantial move down. Also we are still 500 pips or so away from the all time high seen in 2008 of .9848 leaving plenty of room for price to move higher before S/R traders with an eye on larger time frames will be likely be rallying to short the pair again.

Where does all this leave me? Well I guess I could sum up my sentiment on this pair as short term bearish and long term bullish.

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This is not a recommendation to trade.

Using price action as an entry guide

This week I want to show how I might interpret price action for entry signals.

We'll have a look at the price action on the 4hr chart during last week and interptet signals for both bulls and bears. This is a great exercise for anyone and can help you to find signals when the market is open.

In the above chart I have marked some areas that would be of interest to me. First lets look at bearish signals.

Red candle number one - this is a 'bounce' off the weekly trend line. It would be reasonable to take a short position from this candle (bearish engulphing) or the next candle (pin candle) if you are bearish.

Red candle number 2 (bearish engulphing candle) - Not a good signal because of the support level shown in the rectangle. Plus notice the two pinbar candles that 'bounce' up from .9100 just preceeding it.

Red candle number 3 (bearish engulping candle) - reasonable short signal. Because it was generated in a breakout zone and price is near 'historic' highs of .9400 or so. Indeed this bearish signal could be still in play depending on placement of the stoploss. Also, aggresive bears might still take this bar short because price has not yet broke to the upside and current price offers a tight stoploss if placed just above that bar. Next weeks open will come into play on this signal too.

On the bullish side there are two bullish engulping candles early in the week which are not marked and occur before the first bearish signal candle 1. They are not great signals because of the looming weekly trend line previously discussed. However, either one could have been taken and if your stop was just below them they would have closed because of bearish candle number one. If your stop was below the rectangle of support the signals would still be in play. In my opinion only one of these signals would be taken as they are too close together to take both.

Green candle number 1 (bullish breakout) This candle is the first to close above any last bearish candle. Also recent price action suggests that given the respect for support in the rectangle and the recent bounces off .9100 that a long signal might be a good one. However, remember that weekly trend line is still above so it would be wise to keep a tight stoploss. This entry could still be in play. In fact I took an entry around this candle and exited using a manually placed trailing stop that was placed under the bearish signal candle #3.

Green candle number 2 (bullish trend line break) This candle is the first to close above the trendline and turned out to be another strong signal for bulls. Note how the candle just before this candle bounced down from the weekly trendline but now we have closed above it regardless of that bounce down. This suggests that the trendline is not being respected as resistance any longer. A stoploss placed just under this candle means this entry could still be in play. An exit could have been taken using the same technique described above in green candle 1 OR one could simply haved moved the stoploss to break even in attempted to gain even more.

Three candles later is another bullish signal that I haven't marked but which should be noticed. It is the first to close above the last red candle also it closed above .9200 after the three preceding candles bounce UP off that weekly trendline which now appears to be giving support rather than resistance. An entry here could still be in play.

Green candle number 3 (bullish engulping) Closed above the previous red candle which was a pinbar bounce up from .9200 or so. An entry here might be still in play but many traders will not take an entry so close the the weeks end. Why? Well as you can see from my last few weeks posts opening price often gaps one way or the other and a large gap to the downside could easily take out any open long positions - even below your stoploss! So entry here may include risk that you have not and cannot calculate. Indeed some traders will never keep positions open over the weekend.

I hope this exercise proves useful to you. I believe I have gained some insight myself just by presenting it here. Remember that no signal will be good 100% of the time. Key in being successful will be keeping your losses small and letting winners run. That way you may even have more losses than winners and still be profitable.

Dan

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This is not a recommendation to trade.

AUDUSD Weekly Musings

Hi Again!

What a week - Price took a nice dive down from the weekly trend line observed last week before bouncing up off .9100 to finish the week at highs.

This weeks candle has finished bullish.

Some things to note this week - strong bullish channel on weekly, daily and 4hr charts.

Important to remember that price is still very near .9400 which has proven to be strong resistance.

This week I will be doing an extra post to discuss possible market entry signals, both for the bulls and the bears.

Thanks for visiting!

This is not a recommendation to trade!!!

AUSUSD Weekly Musings

Last weeks candle ended with a nice move to the upside.

NFP numbers gave price a boost on Friday but it looks like alot of the move higher was already in place earlier in the week.

The end result is a strong looking bullish candle.

Interesting to note that price ended the week right a weekly chart trendline.

The strong weekly channel up is still in place but once again price is at resistance levels mentioned a couple of posts ago in addition to the aforementioned trendline.

Thanks for visiting!

This is not a recommendation to trade!