While the NZDUSD has been stuck in a range for the last two days, I have been playing the consolidation range which has held up nicely.  Being that the Kiwi tends to be a little slow at times moving at a tortuga pace, I noticed a few price action setups in Silver (XAGUSD) and took a couple of intraday plays.  It is these two trades I am going to be dissecting for you from a price action perspective.  I am also going to be sharing how I used quantitative price action data on the intraday volatility for Silver to aid my trades.

Taking a look at the chart below (3min on silver), following the grey vertical line which represents the London open, we can see price starts out a little choppy.  For the first hour, price action stays within a $.20 range which is actually less than the normal volatility for this pair of $.30 for the first hour of the London session.  This communicates to me there is actually very little directional dominance being a 33% lower range of volatility.  If this continues, then I will look for a reversion to the mean play.

Why?  Since no one dominant player is directing the market, there is still a tug of war going on with both sides being relatively equal.  This means price will continue to revert back to the mean until someone takes control.  Thus, I will look for reversal plays.  As you can see by the price action, the small swing down was about the same strength as the small swing up.

At about the 2.30 mark (2.3hrs into London session), I got a pinbar formation.  This is a reversal signal and definitely leaves me the chance to make my reversal play.  However, I hold on the trade for two reasons;
1) If I took the trade on the open of the next candle, my stop would have needed to be about $.10 and my target to the last swing high would have only been about $.15 for a 1.5:1 Reward to Risk ratio.  

2) The market structure has not given me a HL (higher low) which would have confirmed to me the market structure was changing and that I had a reversal buy in play.

These two things combined told me to put the trade on hold so I passed.  Look at the chart below to see the resulting price action.

Initially, when the price action hit the prior SH (swing high), it sold off at a steady pace.  But noticed how it picked up with a very large red bar toward the end, making a quick rejection low. This increase in the size of the bar communicated stronger selling participation.  But it also had a small rejection to the downside followed by a gentle pullback (perhaps exhaustion).  This was a small clue there might be orders close to the lows of the prior pinbar, so I watched for the price action to give me a lower low.

As you can see at the very end of the chart, it did, forming a double-pinbar.  This double-pinbar formation communicated to me from a price action perspective two things;
1) not only was the first pinbar rejection a likely higher low offering me a good R:R play, but…

2) the second rejection was telling me after price made the first pinbar rejection, the market tried a second attempt to make a new low and failed.  It failed at exactly the same price yet this time closed up on the bar.

Combine this with the fact price was still staying below its normal intraday volatility levels, and I had all the ingredients for a nice reversal play.  All these together suggested a high-probability buy on the open of the next candle with a tight stop of less than $.10 while targeting the major swing high for the day at $33.85 (over $.33 away for a +3:1 Reward to Risk ratio).

Below is how the trade played out.  It broke the prior swing highs, made a HL (higher low) and then shortly after went on to its target at $33.85.  Keep in mind my entry was $33.51 with a target of $33.85 ($.34) and a stop of less than $.10 so over 3.4:1 R:R ratio.

After hitting the first play on silver, it started to go on a run as it broke the SH (swing high).  After breaking the $33.85 swing high, the market climbed over $.50 in less than an hour.  Using my quantitative data on intraday volatility, this was approximately 20+% higher than the normal volatility ranges for this hour of trading.  I’ll confess, I did not catch this upmove, but looking at it, I had two choices:

1) look for a market structure change to reverse the pair short as it may revert to the mean after the larger than normal surge in volatility, or…

2) look for a pullback to a prior value/support area and look for an entry to get back long.

I honestly didn’t know which of the two was a better play, so I watched the price action for clues.  I want you to take a look at the next chart which shows the rise and fall of the shiny metal and take a look at the key difference between the two moves.  See if you can spot the two subtle clues which communicated to me what I wanted to play.

First, notice how the angle of the two moves and the subtle difference.  The buy up was a pretty sharp angle, while the sell-off, although impulsive in nature, had a flatter angle.  This flatter angle communicated to me there was less strength in the selling then there was in the buying.

Secondly, look at the nature of the buying and selling.  The buying was almost straight up with very small pullbacks telling me the buyers were quite dominant.  While in the pullback, there was a see-saw type action, telling me the sellers were a) less dominant, and b) there was a fight going on between the buyers and the sellers unlike in the upmove. This all communicated to me via price action the market was likely going to reverse back up so I should look for a long after seeing a market structure change.

On the next chart below, shortly after the bottom, I got my market structure change.  After bouncing off the low, the price actually bounced back into the prior range of the last pullback suggesting the buyers were starting to wrestle control from the sellers.  Looking at the major swing low at $33.94 in the downtrend, if you look at the last two bars in the chart, you can see there was a rejection to the downside, followed by buying on the open of the next candle which went up to this key $33.94 level.

This rejection + the buying from the open was communicating to me the buyers were likely making their move.  When I see that, I am going to buy that.  I took a buy 1pip above this swing point at $33.95 with my stop below the low of the rejection candle prior, while targeting the SH for the day.  This gave me a $.35 target and a $.15 stop for 2.33:1 R:R which was fine with me.

The market then climbed for the next 5 out of 6 candles suggesting the buyers had come in just before my move and I was riding the momentum of their buying.  After a small rejection, the market went sideways, so since the bulls were still in control and had not conceded it, I stayed in.

Shortly, after a little further buying and small pullback, the target was achieved taking out the Swing High for the day as you can see in the chart below.

This is exactly how I took each trade, found my entry, stop, and limits – all using pure price action analysis, combined with favorable R:R ratios.  This should give you an insight of how you can trade price action.  By learning to read the market structure, looking for changes and subtle clues, then taking the most favorable plays that present themselves.

I would like to add that even though I am trading on a smaller time frame, I am not necessarily looking to be significantly more active.  I am exploiting the same price action setups I see on the 1hr, 4hr and daily time frames.  In fact, my methodology is really the same – wherein I am looking for a couple really high quality setups with very favorable R:R’s.  These can be found every day, whether you are trading the 3min time frame, or the 1hr, 4hr and dailies.  Your ability to read price action and all the clues will help you to spot the best opportunities, where the big players are driving the market, and how to find high quality setups.

For those of you looking to trade price action, visit our Advanced Price Action Course where we teach rule-based systems for trading Price Action.

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As we wrote about yesterday, discussing how the dynamic support for the cable was holding on the 4hr 20ema, this played out to perfection as price touched the 20ema, formed a pinbar, then launched up over 100pips in the next 4hrs to break the key resistance just sub 1.5800.

In fact, we wrote that price will likely pullback just shy of the 1.5700 level.  Well, price touched a low of 1.5706 and then proceeded to climb over 150+pips to close the day at 1.5831.  Many of our price action traders got into this trade ahead of time so hopefully you got to take advantage of this.

Since then, looking at the 1hr chart below, price has been relatively stable with a decent rejection above 1.5850.  If you take a look at the breakout bar, you will notice it has some key characteristics of a healthy breakout, such as;
1) large body suggesting strong buying during the candle and likely stops taken out on the sustained break
2) close not too far off the highs suggesting little profit taking
3) good clearing distance from the prior resistance level

All of these suggest a healthy breakout so we would be open to the price action breakout-pullback setup looking for longs at this level.  Considering how price has been ‘floating’ above this level, it is possible it may not reach our pullback level so aggressive and impatient day traders who believe price has put in a short term base, can either take a long at 1.5857 with tight stops below, as this is a key support level which you can also see in the daily chart below.

In addition to this short term play, aggressive day traders can have another order waiting at 1.5800.  We suspect though the 1.5800 figure will hold short term and offer a move back to 1.5850/67 where it will test the sellers parked there holding the upside for now.  Should yesterday’s highs get cleared, expect a decent fight till price passes 1.5910.  After this, we expect the big figure at 1.6000 to be touched if the price action remains impulsive and consistent.

For those of you looking to trade price action, visit our Advanced Price Action Course where we teach rule-based systems for trading Price Action.

If you appreciate our price action commentary and insights, please make sure to click the ‘Like’ button at the top of the page. 

Quietly under the radar while daily ranges continue to contract in the Cable, the GBPUSD has been mounting an impressive run, albeit at a tortuga pace.  Part of the reason it has been deceptive is because intraday volatility levels have shrunk in half since the start of the year as the Sterling is now reaching its lowest ATR levels in over 3+ years.

But regardless, the pair has posted an impressive 9 bull closes out of the last 11 days.  This consistent buying while intraday ranges have shrunk suggest either timidity on the part of the bulls, or a quiet accumulation as the ATR (5 periods) has actually been falling when the bull run started.  It’s three strongest candles (on an open to close basis) were in the beginning of this run so with the shrinking candles as price has approached the key 1.5778 resistance level, it suggests the bulls in this move have been taking profits, but not closing shop yet.

Today’s false break is not a fierce rejection off the key level which could mean the bulls are going to take another stab at the highs.  Looking at the 4hr chart below, we can see how the 20ema has acted as dynamic support all along the way offering several good with-trend entries for traders, including a recent pinbar signal.

If the bull run is to continue, we suspect a likely intraday pullback to the 1.5700 level (perhaps a few pips above) from both a price action and the 20em acting consistently as dynamic support.  Watch for price action triggers off these aforementioned levels for possible longs targeting sub 1.5800 levels.  If a 4hr candle closes above the figure, we suspect a slow march up to 1.5850/70 before running into any new sellers.

Bears will want to see either another rejection off of 1.5800 (which they can play with tight stops), a false break with rejection above but close back in the range, or impulsive selling below 1.5800, producing a LH (lower high) followed by a close below the 20ema.

EURUSD – Two-Bar Trading Range Plays Out As Planned

As we talked about yesterday in our daily post, we suggested the most likely path for the EURUSD was to re-challenge the previous days high but making a failure just shy of it with a good sell around 1.3200.  This played out to perfection as the pair barely eclipsed the 1.3200 highs by 11pips, then sold off to our 1.3084 target.  Many of our price action traders did well on this catching the short side for over +115pips using a less than 40pip stop for an almost 3:1 R:R play.

Based on the fact price rejected just shy of yesterday’s high, while producing a LL (lower low) suggests to us it will likely form another LH (lower High) in the process before making another push to the downside.  Some bears may be trapped on the false break below 1.3075 which may cause another rally, but it seems unlikely to take out the 1.3230 (day before) and yesterday’s high at 1.3211.

Taking a look at the intraday charts, we can see the structure has broken down a bit with the last move being a LH (lower high).  We would be impressed if price tomorrow takes out yesterdays highs.  In fact, we suspect any rallies into the upper levels of yesterdays price action will be sold aggressively (unless today’s aggressive selling was a one-off which we do not take credence in).  Thus, traders can thus look for price action clues up at these loftier levels but we suspect a pullback to 1.3000 is on the cards in the next few days.  Any major break and hold below 1.3045 will likely inspire fresh intraday shorts to challenge 1.3000 in a jiffy.

If you appreciate our price action commentary and insights, please make sure to click the ‘Like’ button at the top of the page.

For those of you looking to trade price action, visit our Advanced Price Action Course where we teach rule-based systems for trading Price Action.

As we talked about last week for the Euro, the key resistance level was around the 1.3200 area.  Price closed last week right on this key level which was a prior swing low for Nov. last year which you can see in the chart below.

For this week, it started the week off selling on the open suggesting there are willing sellers here as the market pretty much sold off from the open.

However, taking a closer look at the price action for today, we can see today’s candle sold off to yesterday’s low while only breaking it by one pip.  It then rejected to close 60pips off the lows.  This failure to break the lows of the prior candle by more than 1pip means its unlikely to have trapped any traders short on the break.

Thus in effect, it has created a two-bar trading range so while price stays in the middle, its unlikely day traders will take heavy sides buying or selling this pair.  They will more than likely wait for the two-bar trading range to be broken before taking any new positions.  However, there are still two intraday plays.

If you are a preferred seller and think the bears have control or will take control, then you have a clear line in the sand to sell either just above 1.3200 with stops above yesterday’s high, or a possible sell around 1.3181 with stops tightly above 1.3224 targeting 1.3084 just above yesterday’s low.  If the price action is corrective and timid, then this may give sellers confidence to add onto their positions or take new ones.  You can watch the 1hr and 4hr for clues on this.

If you are a preferred buyer, then you can play off the intraday dynamic support on the 20ema for the 4hr time frame which also produced a pinbar.  Stops would ideally placed tightly below yesterdays low so this gives you plays on both sides.

For those of you looking to trade price action, visit our Advanced Price Action Course where we teach rule-based systems for trading Price Action.

Read our latest article on Building a Successful Trading Mentality.

Going two for two on the Euro this week, on our report just two days ago, we mentioned how traders should watch for the touch off the Kumo to sell this rally.  True to form, the pair literally got 1pip from it, then rejected to virtually close right where it opened.  Although its a bull close on the day, this is the first strong rejection to the upside in all the bull closes and we suspect this pinbar signal along with the thick Kumo may hold.

It should be noted the Tenkan has crossed the Kijun sharply suggesting strong momentum in the move so bears should be cautious here and look for a move closer to the Kumo if they want to short.  Bulls meanwhile should wait for a pullback to the 20ema which played out great the last time giving over 200+pips to our Ichimoku Traders so hopefully you got to profit from that play.

For those of you looking to trade the Ichimoku Cloud and learn Ichimoku Systems, make sure to check out our Advanced Ichimoku Course where we teach rule-based systems for trading the Ichimoku Cloud.

Also make sure to read our latest article called Building a Successful Trading Mentality While Removing Limiting Beliefs.

Remembering Back

In the beginning of our trading ventures, we become aware of the new possibilities that await us:

Working for ourselves
Working from home
Not having to go to a Job
Not dressing the way someone else tells us
Not getting paid what someone else thinks we should or when they want to
Working when we want to
and of course the big one that gets almost everyone – being financially abundant

These are all real possibilities that become available to us through the market.  This new found awareness of other possibilities for our life and starting fresh energizes us.  Our enthusiasm is strong, determination high and focus is penetrating.  We feel a sense of purpose in an activity which is both engaging, challenging and rewarding.

But, something happens.  Either we hit a losing streak, a big loss, an obstacle, or an inability to read the market.  Something happens, and if we lose concentration while engaging emotional reactions, or stories to what is happening, our awareness begins to weaken.  This causes concentration to dim, enthusiasm lessens, and we tend to lose energy by becoming involved in emotional or negative mental patterns.

This reduces our ability to trade successfully and will directly interfere with our desire and goals to trade successfully.  It is this moment where we begin to hand over the keys, allowing our mind to manipulate us from being successful and getting past our hurdles.

This may manifest into the following scenarios:
-Trying to ‘get’ our wins back
-Over-leveraging beyond our normal limits
-Not following our trading plan and taking trades we normally wouldn’t
-Doubting our ability to make a good trade
-Hesitating to pull the trigger when our system gives us an entry
-Becoming unsure we can become a successful trader
-Unwilling to fill out our trade journal or review our trade performance
-Gotten impatient with the market or irritated by how it is playing
-Had fear about taking a trade
-Blamed your broker, or the market or the ‘gameplay’ going on
-Made excuses for why we lost on a trade or didn’t do things correctly

Has any of these things happened to you?  Have you ever slipped into these mental stories or negative beliefs?

If so, it is likely you have developed a negative habit or limiting belief around trading.  Nothing could be more dis-empowering to your trading to have these beliefs.  It is possible these beliefs already existed in your sub or unconscious mind and are just playing themselves out through your trading experience.

Whether you know it or not, the markets are like a mirror that reflects your mind.  It does this without bias or care of who you are.  It reflects back to you beliefs about yourself, about being successful, about having lots of money or none at all, about being confident or having a lack thereof.   Like a mirror, it has no attachment to what it reflects, it just does it automatically.

When you engage these limiting beliefs, perhaps such as (i’m not good enough, smart enough, don’t have a degree in finance, don’t have enough money, am not mathematically inclined, am not good with numbers, i’ll never be rich or successful, or whatever…) you are letting the mind deceive you into forgetting your natural state.

This is to be clear, vibrant, energetic and healthy.  Engaging these energies will lead you to trading successfully.  But accepting any limiting beliefs robs you of your natural intelligence and separates you from your inner strengths.  They are not the path to successful trading, or being successful at anything.  It is in the vice grip of these mental patterns we take away the chance to be a successful trader.

Regardless of this reflection the markets offer us, it is highly likely you came to the world of trading with some of these limiting beliefs.  If so, they will be there, like a bugaboo hiding in the forest of your mind. Only until you recognize and transform them will they go away.  This is when your trading take flight.

In fact, those obstacles which may be confronting you now will become mechanisms for your growth and success in trading.  Ironically, that which inhibits you now will become your fuel for growth.  It is our past mistakes and missed opportunities that become an invitation to a new way to trade.

What Breaks Through These Limiting Beliefs?

Awareness and recognition.  By taking moments to build our awareness, then applying it to our trading experience, we can see how these limiting beliefs have played out in our trading.  It is this recognition which will point us to how unhelpful they have been, and how we need to turn our compass in another direction.

Trading is like riding a horse – it can be bumpy and we may feel like we are riding a powerful beast (the markets).  If you learn to stay in the saddle and apply your knowledge, then the markets become a riding ground for your own enjoyment and success.

It is through awareness and concentration we can learn from our trading experiences.  These two together applied to our daily trading  routine build up an inner strength as we witness our progress.  This leads to an increase in our trading skills, whether in reading price action, having less hesitation to take a trade, finding good opportunities or challenging ourselves by being really disciplined.

Methods for Eliminating Negative Habits and Building a Successful Trading Mentality

These are methods I do every day and have been for over a decade which can help raise your clarity, energy and awareness, which ultimately, enhance your trading experience.

1) Posture Check

First thing before trading, along with several points throughout the trading day, take a moment to check your physical posture.  Are you sitting upright with a straight spine, or are you slouching with your neck bent forward (or backward)?  Your posture affects not only your breathing, but your thinking as well.  A straight spine allows the energy to move freely up and down from head to heart and keeps your thinking more clear.  Also a neck bent forward (or backward) cuts off the free flow of energy down your spine while trapping it in your head.  This can literally keep you ‘stuck in your head‘ so make sure to keep your posture and neck upright.

2) Increasing Focus

For the next few weeks, try and be more focused while trading.  Perhaps meditating before you start your day, turn off the TV, close your internet browser, turn off your cell phone and stop checking email.  Just focus on the markets and what you are wanting to trade for that day.  After you have tried this out for a few days, check to see how much more focus you had and if this changed your trading experience.

3) Energy Check

Along those lines, ask yourself before you sit down for trading, or at several points in the day, what is your overall energy level?  I am constantly feeling this to see if its strong and vibrant or sluggish and weak.  I try to rate it on a scale between 1 and 10 with 10 being optimal, and 1 being, well…dead.

If your energy is weak, the cause could be physical or mental, so I quickly shift my posture and feel into my body to see if anything is going on.  If it’s mental, then I apply awareness to see if I am engaging in any negative patterns of thought.  If so, I take a moment to clear my head via a short meditation technique, then get back to trading.

This can be done not only at several key moments throughout your trading day, but also be a constant monitor.  Ever notice your energy drops when eating?  It’s likely you ate too much, or something that does not agree with you.  That drop in energy is your body telling you it’s needing to use other resources just to digest your food or compensate for how it’s not feeding you properly.

As a general rule I use, anything below an 8 or 8.5 and I do not trade.  Why trade when I have a lesser edge or ability to make good decisions?  Why would I want to trade on any other state then feeling energetic, clear and sharp?  Give yourself every advantage you can when trading.

4) Choosing Positive Thoughts

The moment we see how we’ve been interfering with our success, it is time to apply the remedy. Choosing positive actions will inspire you and build confidence in your experience.  This will make your vision more panoramic, create stability in your trading experience, enhance your determination, and deepen your understanding of the markets.  This positive energy will build from a puddle into a reservoir which will manifest in an increased confidence to trade successfully day in day out, month in month out. You will refuse to engage in excuses, emotions, or procrastinate doing what you need to.  You will plug all the leaks and settle into the saddle.

Trading and the markets are the proving ground for our actions and our positive attitudes. So to build these, pick a time each day, ideally before you start trading.  Tell yourself mentally, ‘I will not submit to laziness, hesitation, emotionality’ and will turn towards the positive.  Begin saying mentally to yourself, ‘I can trade successfully, I can be financially wealthy, I can make great trading decisions every day’.  Do this for the next two weeks and see how your focus and concentration changes.

5) The 5% Rule

For the next day, or week, resolve to give just 5% more energy to your trading.  Ask yourself what areas you need to develop in most, and dedicate an extra 5% to strengthening that.  As you do this for several days or a couple of weeks, see if you notice any difference in your trading, mindset or results.  As soon as you feel stable in this new effort, bring it up a notch and add another 5%.

Evaluation and Closing Thoughts

By evaluating the results of these new habits above you have applied, notice what you have done differently, what you have achieved, how your trading experience felt different.  Take notice of what you have accomplished and then use that experience as motivation to continue developing your skill set.  This will become a self-reinforcing process which allows you to become your own teacher.  It is that moment you will have turned the trend sharply upwards in terms of your trading growth.

I want to end by providing a list of different patterns of thinking which can either inhibit or help your trading. Take a look at the list below and see which you engage in.  I will list them side by side so you can see the unhealthy and healthy side of such mental experiences.

Look at this, study it well, and see which of these you engage in.  Then apply the 5 methods I have listed above and see how you transform these experiences and how your trading changes.

I look forward to hearing your comments and reflections on this.

If you enjoyed this article or what we do, please make sure to click the ‘Like‘ button for 2ndSkiesForex at the top of this article.

Feel free to check out the companion article to this on Awareness, Negative Habits and Concentration in Trading.

Gold – Ahhh, My Precious….

After starting the day looking like Gollum, the shiny metal touched the daily 20ema and then bounced about $12 before waiting for Big Ben’s less than optimistic comments.  After the words left his mouth, the metal virtually surged almost $50 in less than an hour.  Why?

Well, with Ben basically telling everyone policy rates will be kept low, real rates will remain negative and thus the USD will get hammered. Combine this with a global de-leveraging process and you get increase geo-political risk.  These factors combined all are a boon for Gold so expect precious metals to be the big winner on this.  In fact, Gold and Silver were the big winners gaining 3+% each on the day while AUDUSD and the NZDUSD only gained 1.6 and 2% on the day.  Thus, the market is telling you via price action where people put their money.

Enough of the Fundamental Talk…How Do We Trade It and Make Money?

Glad you asked.  I will point you to exhibit A and B (the daily and the 3min chart).

Exhibit A
Looking at the big picture daily chart, after taking out the $1700 level by a nose, we suspect pullbacks will be bought anywhere from $1655 up (doubt it will get that low though) gunning for the eventual $1748/50 touch which we expect by the first or second week of Feb.  After that, the market will then take aim at $1800 but this ‘event’ definitely gives new steam to the bull market in Gold.  Although in support of the bull market which was already healthy for gold, it should be noted the shiny metal only sold off 5 days this entire year (out of 17 trading days or 29% of the time) so the market was already consistently buying up gold.

For holders of physical, investors and medium term swingers, anywhere between $1655 and $1681 will suffice for an entry with stops below the 20ema and targeting the $1748 and $1790 levels.

Exhibit B
For your shorter term intraday players, we defer to the 3min chart which is showing some clear intraday levels.  Taking a look at the chart below which shows the price action on the 3min time frame from the London Open (grey vertical line).  The two levels to watch from an intraday perspective are the $1704.15 level (where market topped and pulled back after initial spike) and the $1693.33 level (where the market pulled back to during the spike + held price for 12mins before price climbed higher – aka – breakout-retest level).  It should be noted today was an extreme day in terms of volatility, but the market created a history at those levels, so intraday traders can watch for pullbacks to those prices with stops below $1690 targeting an eventual move to $1748 which we believe is the next upside target.

For now, it seems silly to play the short side as everyone is piling into gold and even the pullback from the highs is both timid and corrective in nature, suggesting the next impulsive leg is up.  We would also like to note the pinbar at the day’s low which was also the rejection off the 20ema.

NZDUSD – High Flying

After forming a LH (lower high) while starting to break down, the pair held at the .8045 level and climbed almost 150pips within 4hrs.  In doing so, it took out the previous days high and key swing high in this most recent uptrend which would definitely inspire new bulls to enter the market while giving new bulls added confidence.  We expect the USD to get hammered in the wake of Ben’s announcement and suspect the NZDUSD will be one of the bigger winners.

Taking a look at the price action on the 5min chart below, we can see how the market found short term resistance at .8147 and pulled back directly to the 20ema offering a good pullback entry.  On a side note, notice how price action was carried up by the 20ema for the next 12 candles and then made a new run. The highs at .8188 saw the market make its biggest pullback of the session (post spike) and pulled back where to???

The .8147 prior spike high.  Notice the intraday pinbar signal off this level where price has bounced since then.  We expect the .8147 and .8117 levels to hold intraday offering bulls a couple of plays to get back long, targeting .8215 and possibly .8300 in the near future.

Other Notables:
Silver (Buys Only)
AUDUSD (Buys Only)

For those of you looking to trade price action, visit our Advanced Price Action Course where we teach rule-based systems for trading Price Action.

Also make sure to view out latest article Reading Price Action – Key Price Action Elements to Breakouts Part 1.

Also, I will be spending a little more time breaking down each trade to give you more price action insights into the market so let me know if you like the new format.

AUDUSD – Timid But Holding

After failing 3x to break the key 1.0384 resistance level, the Aussie broke through to higher ground, albeit stutter step style.  The first punch through actually resulted in a false break, but then played off the aforementioned level in a typical breakout-retest style.  We gave price action triggers to watch out for which played out perfectly so hopefully you made some money on that.

What we are noticing is how the pair broke through the big figure at 1.0500.  Look to the large candle at the top of the move.  This is the largest 4hr candle from an open to close basis (bull candle that is) for the entire year and came on the heels of clearing out 1.0500.

But how did the market respond since then?   It sold off over 140pips  before finding any buyers.  This could represent a buying climax which could suggest a lower high followed by another pullback.

Although buyers found support at the price action breakout-retest level of 1.0432, we think bulls should be weary as the market is unlikely to attract a significant amount of new bulls between here and yesterday’s highs at 1.0572.  Bears may want to watch the 1hr or 4hr for price action clues as to a short term play to the downside.  Bulls in the meantime can either wait for a timid pullback to the 1.0432 level, or possibly the 20ema before getting back in as the upside is looking a little strained at the moment.

Also keep in mind, over the last 12 day run, every red candle was followed by a bull candle, so a 2nd bear candle would suggest a little deeper pullback.

EURUSD – Below the Kumo, Above the Kijun

After forming a nice TKx Sell Signal  back at 1.3500 that went over 800+pips south, the Euro has remained below the 20ema and the Kijun the entire time communicating the consistency of the downtrend since it broke below the Kumo.  What is interesting to note is how price has just broken the Kijun for the first time since November of last year.  It should be noted it has done this on the heels of an impressive 5 out of 6 day climb.  Although the candles are getting smaller suggesting the rally may be running out of steam, the Chikou Span is close to forming a ‘favorable cross‘ of the price action.  It would still need to clear the Tenkan and Kijun to complete this, but its making progress.

But the bottom line is, from an ichimoku perspective, the pair still has a giant Kumo to clear while the Tenkan and Kijun are totally flat, suggesting moment is sideways at the moment.  This could either be because of a) they (tenkan and kijun) are trying to catch up to the price action bounce or b) they are reading a waning momentum in the pair.

Either way, the EURUSD has its work cut out before we can say we have reversed the last downtrend.  All these clues point to a likely rally which is fading, thus offering another attempt to get short before another leg down to the sub 1.2700 region and yearly lows.  Watch for this rally to possibly fade towards the end of this week.  Key levels to watch would be the lower edge of the Kumo near the 1.3200 level while ambitious bulls can take plays off the 1.2900 level for now.

For those of you looking to trade Advanced price action, or our Ichimoku Systems, make sure to check out our Advanced Price Action or Advanced Ichimoku Courses where we teach rule-based systems for trading Price Action and Ichimoku Cloud Trading.

Also make sure to read our latest article called Reading Price Action – Key Price Action Elements of a Breakout Part 1.

After finally exiting the termination wedge we talked about in our previous post, the Aussie has finally broken the top of the formation.  However, the initial break was a false break, likely trapping bulls who took the break and are either a) still in the position, or b) shaken out.

This type of price action and false breakouts generally create two scenarios;

1) The shaking out of the initial bulls via the false break could have prompted traders to take fresh shorts – which would actually be good for the bulls still in (or wanting to get in) since the institutional players may want to take it higher.  By having fresh shorts in, them getting stopped out would add steam to an upside play.

The way to play this is via a price action pattern – the breakout retest setup.

2) the other scenario is the false break has trapped some new longs, so if the market fails to clear the breakout highs, then any aggressive selling back into the wedge would communicate this is what is happening, and the trapped bulls will have to exit, thus adding verve to the sell-off.  If this were to play out, expect price to drop minimally to the 20ema just under 1.0300 and then gun for 1.0250 in a jiffy.  The price action trigger to watch for here would be aggressive or impulsive selling, then price action holding under yesterdays low of 1.0358.  Traders can look to the 1hr and 4hr time frames for entries to play the short side should this play out.

For those of you looking to trade price action, make sure to visit our Advanced Price Action Course where we teach rule-based systems for trading Price Action.

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Also make sure to view out latest article Reading Price Action – Key Price Action Elements to Breakouts Part 1.

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