eur/usd 1-30-2009 4hr 08:08 gmt

Yesterdays trade went as expected and was profitable. The 4hr chart above has 4hr support and resistance levels. We are currently below support 1 but you should wait for a close below support 1 before you take any short trades.

I would really be suprised if we go below support 2. This is because yesterday's down move on the daily chart was a strong down day. We are testing daily bottom support after a strong down bar. Today the market may want to turn up to surprise the herd and trap the shorts in positions over the weekend The nice down move was not supported by volume which means we should look for strong up moves coming up off of intraday support.

But in the meantime, look for support 2 to be tested. Now, just because you have the locations doesnt mean you have an entry signal. What we have if we close below support 1 is a trade signal that tells us the market will most likely go to support 2.

But, when do we enter...why do we enter...where do we place our stop...where do we place our target...who is in control of the current move, professionals/operators or retail/herd...

I know your system already tells you all of that so I don't have to...

But for my LCM'ers, wait for a higher volume close below support 1. If that should happen, place your limit order to enter short at support 1, with your stop above the high of this current bar. Take profit at support 2. Note. If support 2 is hit first, then you would nullify the trade signal because the target is hit. It sometimes occurs that the breakout/down bar blows through and hits the target all in one bar. When that happens it is a trap.

Cheers, Jerry