UPDATE TO 4-17-2007 EURODOLLAR
In the 1st post for today I gave you a daily analysis with a short bias. Now let's look at how we use the intra-day chart to flow with the market and confirm or amend our bias. The first chart I offered you today was the daily chart. Now let's look at the next most significant level which is the 4hr chart. The daily chart is the wave. The 4hr is the wave within the wave.
The first thing we notice on the chart is that price touched the 23% Fib level and is currently bouncing up off this level. This is typical price action. When price is working through Fib levels it will typically go something like this...
A. Touch 23% and bounce up to test prior pivot, then fall back down through 23% and...
B. Touch 38% and bounce up off that to test 23%, then fall back down through 38% and...
C. Touch 50% and bounce up off that to test 38%, then fall back down through 50% and...
D. touch 61% and bounce up off that to test 50%, then fall back down through 61%.
When there is a bounce back up off of a level and price should close above the next level on the intra-day 30min or greater time frame, that is a signal that the
pullback is over and the market is ready to resume the up move.
If you get a close below 61% the odds are high that the market will bounce back up to test 61% or even higher before continuing down to complete a 100% retracement.
This is not a rule but a guideline as far as tendencies. At this moment we are in phase A of this cycle.
Now when we look at this chart the prior bar (red line through it) closed up on low volume. This tells you that selling pressure has subsided for the moment. So you should look for a bullish pivot and for price to go up to at least 3560. I say 3560 because that is 3 bar equilibrium. Yeah I know. For those who have the system the full explanation of that is coming.
So, based on the intraday flow we know to adjust our short entry to 3560. This is good because if we enter and the trade goes against us this lowers our risk by 6 pips. Then consider we still are not going to enter short just because price touches 3560. It must touch and pivot. I like 30min and 1hr pivots, but many times 15 min will work.
But the main thing is this...we are flowing with the market. This is important when considering a counter trend trade.
Now consider the volume trendlines I have drawn on the chart. Notice how the down move has declining volume as opposed to the prior up move that had rising volume. Also consider the magnitude of the two volumes. The up move has dramatically more volume in totality than the down move. This is another reason we want to wait for an intraday short pivot before we enter short.
Remember, the only reason we are considering this short trade is because the market is due for a pullback on the daily and is exhibiting early signs that it wants to do so. In any event, I suspect that the real deal will be disclosed at the U.S. trade data this morning but I want you to get the idea of how I am mentally processing trades as I flow.
And by the way, yes, I do use indicators like moving averages, stochastics, and Macd. But these are icing on the cake and are used to confirm these other things I'm telling you about. I'll get into how I use those as we go along but they are secondary not primary and I only put them in play if the other analysis is not clear. See, operators know that many traders use these averages and easily manipulate price action to make these levels appear real. And differant charting systems will show the same moving average or other indicator, and you can use the same input values and these indicators will look differant for every differant data provider.
You're probably thinking, Jerry if you said yesterday that you don't like the way the Eurodollar is moving, why are you focusing on this pair. It is because, if you can get it with the toughest pair, then the rest will be easy.
If you find this blog helpful you should check back every 4 to 8 hours for continuing update. Take care...
Jerry
Email me! click here
The first thing we notice on the chart is that price touched the 23% Fib level and is currently bouncing up off this level. This is typical price action. When price is working through Fib levels it will typically go something like this...
A. Touch 23% and bounce up to test prior pivot, then fall back down through 23% and...
B. Touch 38% and bounce up off that to test 23%, then fall back down through 38% and...
C. Touch 50% and bounce up off that to test 38%, then fall back down through 50% and...
D. touch 61% and bounce up off that to test 50%, then fall back down through 61%.
When there is a bounce back up off of a level and price should close above the next level on the intra-day 30min or greater time frame, that is a signal that the
pullback is over and the market is ready to resume the up move.
If you get a close below 61% the odds are high that the market will bounce back up to test 61% or even higher before continuing down to complete a 100% retracement.
This is not a rule but a guideline as far as tendencies. At this moment we are in phase A of this cycle.
Now when we look at this chart the prior bar (red line through it) closed up on low volume. This tells you that selling pressure has subsided for the moment. So you should look for a bullish pivot and for price to go up to at least 3560. I say 3560 because that is 3 bar equilibrium. Yeah I know. For those who have the system the full explanation of that is coming.
So, based on the intraday flow we know to adjust our short entry to 3560. This is good because if we enter and the trade goes against us this lowers our risk by 6 pips. Then consider we still are not going to enter short just because price touches 3560. It must touch and pivot. I like 30min and 1hr pivots, but many times 15 min will work.
But the main thing is this...we are flowing with the market. This is important when considering a counter trend trade.
Now consider the volume trendlines I have drawn on the chart. Notice how the down move has declining volume as opposed to the prior up move that had rising volume. Also consider the magnitude of the two volumes. The up move has dramatically more volume in totality than the down move. This is another reason we want to wait for an intraday short pivot before we enter short.
Remember, the only reason we are considering this short trade is because the market is due for a pullback on the daily and is exhibiting early signs that it wants to do so. In any event, I suspect that the real deal will be disclosed at the U.S. trade data this morning but I want you to get the idea of how I am mentally processing trades as I flow.
And by the way, yes, I do use indicators like moving averages, stochastics, and Macd. But these are icing on the cake and are used to confirm these other things I'm telling you about. I'll get into how I use those as we go along but they are secondary not primary and I only put them in play if the other analysis is not clear. See, operators know that many traders use these averages and easily manipulate price action to make these levels appear real. And differant charting systems will show the same moving average or other indicator, and you can use the same input values and these indicators will look differant for every differant data provider.
You're probably thinking, Jerry if you said yesterday that you don't like the way the Eurodollar is moving, why are you focusing on this pair. It is because, if you can get it with the toughest pair, then the rest will be easy.
If you find this blog helpful you should check back every 4 to 8 hours for continuing update. Take care...
Jerry
Email me! click here
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