EURUSD THUR JUL 7 5:30 PM EST

QUESTION:   

Hey Jerry,

I'm short form 1.4479. so fare 128pip
profit. it was already 260pips but I over slept..should I take profit now.
and then go short at 4409 again.

Thanks for the update.

ANSWER

Hi

Great question and I will give a detailed answer and place it on the blog because I don't know how available I will be tomorrow due to some outside obligations...

Yes, I would take profit now and look to reenter because of the 4 hr bullish reversal bar that we closed at 1:00 pm eastern standard time on my charts.  However, don't just reenter at 4409.  wait for a bearish reversal signal back down off of 4409 on your intraday charts. This is because we are closing the trading day( 5:00 pm est ) with a bullish turning bar.  Today's action is finishing with higher volume and no real commitment from the retail traders. That's a red flag to the current direction ( down ) on a heavy news day.
Yesterday the professionals were buying into weakness as they normally do and today was a follow through on that.

Currently there is no downward pressure on the market and that shows strength to the upside.  When a market is moving down we want to see higher volume.  When we don't that means selling pressure is easing.  when the current direction weakens it automatically means strength to the opposite direction.
  It's like pushing a basketball down underwater.  the deeper you go the harder you have to push down to keep the ball down ( increasing gravity pressure ).  If you release the downward force on the ball, the force of buoyancy will automatically push the ball back up to the surface. Right now there is an absent of Hi Sven

Yes, I would take profit now and look to reenter because of the 4 hr bullish reversal bar that we closed at 1:00 pm eastern standard time on my charts.  However, don't just reenter at 4409.  wait for a bearish reversal signal back down off of 4409 on your intraday charts. This is because we are closing the trading day( 5:00 pm est ) with a bullish turning bar.  Today's action is finishing with lighter volume and no real commitment from the retail traders. That's a red flag to the current direction on a heavy news day.
Yesterday the professionals were buying into weakness.

Currently there is no downward pressure on the market and that shows strength to the upside.  When a market is moving down we want to see higher volume.  When we don't that means selling pressure is easing.  when the current direction weakens it automatically means strength to the opposite direction.
  It's like pushing a basketball down underwater.  the deeper you go the harder you have to push down to keep the ball down ( increasing gravity pressure ).  If you release the downward force on the ball, the force of buoyancy will automatically push the ball back up to the surface. Right now gravity pressure is absent so the market will have a tendency to rise until reacted upon by a new force of gravity.  That may sound long winded but Lcm is based upon the principle of natural laws and understanding the natural laws behind price action causes the market terminology to make sense.

Then there is the psychological component caused intentionally by the market professionals. If there are too many retail orders sitting at major support/resistance waiting to take profits they will cut that level to cause confusion and panic to ( in this case the short holders ), by rushing price back up when price gets close to the take profit level.  We must understand that they are not all powerful but take advantage of opportunities.

In this case, the opportunity is this.  A market moves from swing bar to swing bar.  when price is anywhere inside the range of a prior swing bar a market has the potential to turn around. The swing bar is the balance point of any move.  The last bullish swing bar was on 6-27-2011  and that bar had a range off  4102 to 4293.   That is the prior swing range or range of the balance point.  Support/resistance in not a specific number it is a range ( the depth of the water ). We went as deep as 4221.

At that point my bull/bear indicator flipped from 62% retail longs to 57% retail shorts.  As soon as there were more retail traders short than there was long, the market turned around as it usually does to fade the retail trader.

To complete the analysis, the original bear pivot point was never tested from back up at 4494.  the risk has now shifted to this level especially since today was the 3rd bar in the down move.  In my course I talk about the rule of 3s and fibonacci bar count retracement which, is related to but not the same as fibonacci price levels.  I expect a pullback to the 4315 area tonight and for the market to challenge the 4409 area.  If that resistance level should hold then we should continue back down. 

However we need a catalyst and the first energy will be injected at 7:50 pm eastern standard time with the Jpy data coming out. Tomorrows new calender is full of major news releases from the major pairs and that means professionals can whipsaw the markets as they like in order to shake out stops above as well as below.  I expect a wild ride tomorrow and no support/resistance level is too far away on days like tomorrow.  Especially on a Friday.  Nothing like kicking some retail but on Friday to lock in the holders over the weekend, then gap open on Sunday to really get the herd into a stampede of confusion.

Summary: Right now the market is set up to more easily rise than fall so, shorts are more risky than longs at this stage.  For this reason I will exit my small 1/3 position if we pull back to 4315 today's open and take the small 30 pip loss and/or exit on a break of todays's high as that will create a new bull pivot point in process and increase any short risk exponentially.  It is not about absolutes it is about probability and at the moment of this writing the probabilities favor longs, especially since a higher close tomorrow will also create a new higher bottom which means up-trend.

This type of setup is typical for the first week of the trading month to get retail traders to start the month off with confusion to get the herd moving.  I have canceled my pending shorts at 4409 and need to wait for tomorrows daily close or a break below today's low to tell me more.

If you trade intraday only take signals that reverse or breakout of the levels I've drawn for you on the charts and use your intraday support/resistance for your stops.

Cheers, Jerry
 JERRYJSTEW@YAHOO.COM
JERRY@FOREXTRADINGMAJIC.COM