Ichimoku Report Feb. 22nd
EURUSD – 3 Attempts and 3 failures
Tis now the third time the pair has tried to close below the Kumo bottom and third time it has failed producing a relative doji in last weeks price action. The pair tried to push up then down and went virtually nowhere. The market definitely digested the rate hike from the Fed but it seems like the pair is either consolidating its losses before another run or its really attempting to see if the bulls have the real strength to take the mantle.
For now, its under review with the overall downward structure unchanged but no new added momentum so we cannot get excited about being overly bearish. A rejection upon the 10ema is a decent short term aggressive play but until we get a weekly close below the 1.3500 figure, we are cautiously bearish and waiting for some new talent to arrive.
GBPUSD – Adding to the downside pressure
After holding in place and forming a relative inside bar, the pair sold off again closing just below the major intraday floor at 1.5550 which should act as a short term rejection area. If the last pattern holds, this week could trot in place but if the pair does not make it up above 1.6000 by late March, the falling Senkou Span B on the Kumo should exert downside pressure on the pair forcing lower ground. Should the pair close below last weeks low then a move towards 1.5000 seems in order. For now, momentum is slightly tilted down but nothing extravagant.
AUDUSD – Complex but wide channel with flat Momentum
There is not much about this picture which is pretty or consistent on either side. You have an expanding triangle which is a horrible pattern to trade, you have all three lines flat showing no momentum at all and lower lows which declined faster than the lower highs did so there is little consistency in the overall structure making only the wide levels worth playing. With that being said, there is the highs between 9400-9300 for shorts and the trendline bottom at .8700 for a potential buy. Declines are likely not to be heavy as the Kumo is thick, strong and building over time suggesting the breeze of the kumo should carry the pair up.
USDCAD – Failed above the Kijun, looking for a bottom
After closing above the Kijun for the first time in a long time, the pair failed to gain any new buyers and ultimately slammed back down below it, the 20ema and the Tenkan in less than two weeks. It the pair wanted to be tidy, it would head for 1.0200 where other buyers would likely be excited to scoop up the pair. We feel if you want to be a bull, then wait for 1.0200 or uber-strong signs of a bottom forming before going long. For bears, the 20ema is the only thing offering a play for now currently clocking in at 1.0595 with stops just above the Kijun.
NZDUSD – Showing the weakest strength against the USD
Gaining for two weeks but failing at the 20ema, the pair looks like it will use all three lines above as a test of strength to qualify the bulls desire to take control or concede it again. The pair is in a channel which is relatively stable so we have wide lines and shorter term lines for plays on both sides as the channel top and bottom offer reversal plays while the 20ema, Tenkan and Kijun offer tests for the upside and possible rejection plays. Should the pair remain in the channel till the Kumo, then it will either use it as a base for another run up or likely slam through it and head for the flat bottom.
Chris Capre is the current Fund Manager for White Knight Investments (http://whiteknightfxi.com/). He specializes in using Ichimoku, Momentum, Bollinger Band, Pivot and Price Action models to trade the markets. He has built Ichimoku Systems for Institutions and has an Advanced Ichimoku and Price Action Courses for further training. For more information about his services or his company, visit http://2ndskiesforex.com
Ichimoku Report Feb. 16th
EURUSD - holding on
The pair has had two downside rejections to break the weekly Kumo but yet upside price action has yet to become strong enough to make a case for a real reversal being attempted. This could either be some profit taking in the short term before new positions build to the downside, or the bulls not really having enough strength to overwhelm the bears.
Either case, the pair remains in the Kumo so the picture will be a bit cloudy until we exit on either side. The Tenkan suggests momentum is still down but slowed a bit and the Kijun has gone flat in the near term. If they have their way, price should bounce around the Kumo but the pressure to the downside should still remain. Watch for a weekly close below the Kumo and 1.3500 to strengthen shorts resolve. A break above the 10ema will give bulls some short term hope.
GBPUSD - mixed salad but downside favored
Posting a mild gain last week, the pair has yet to produce any meaningful upside price action. Last weeks gains were smaller than the last 11x the pair had a weekly gain so it suggests this is not due to bulls taking over by any means. Its lackluster effort will need to be doubled before the bulls can gain some steam. All the lines are relatively flat so their is no current momentum but the remaining downside inertia which will still have an effect on price. The Kumo is week for the next month or so until April so it will not provide much of a challenge for either camp. Its a mixed salad but more of the goodies appear to be towards downside plays. Need more evidence this week to see where the bulls and bears hearts are.
AUDUSD - Impressive climb and now breaking above the 20ema
Forming an almost outside reversal bar, this is one of the pairs that may challenge USD strength. Not surprising its a commodity pair and the AUD ta’ boot.
The pair held at the lows from two weeks ago and closed knocking on the 20ema’s door. Since then it has virtually climbed today and is about to surpass the Tenkan line. However, all three lines are flat so they are not offering too much of a fight for either camp and are remaining relatively neutral like Switzerland. Should the pair close above all three lines, it could make a challenge for the 9300/9400 highs from 09′ and 10′. However a close below the Kijun would challenge the previous lows just below .8600. Need to see how the DOW does this week to see if the current strength will hold up.
USDCAD - Just not ready for higher levels
Close to making a case for some higher ground, the pair faltered last week and slammed below forming an evening star pattern of sorts but more importantly, last weeks losses took out the last two weeks of gains. If the pair should continue to sell-off, we feel the next buy level will be just above 1.0200 which has held the last two attempts. There is not much reason to be bullish in the short term but the bears appear to have some sort of near term control so its the only valid play out there - just not our favorite at current levels. We’d rather be shorting closer to the 20ema so will wait for price to reach 1.0200 before we consider any real move.
NZDUSD - pulling up the rear
The underperformer for the commodity pairs, the kiwi reversed some of its losses for its first weekly gain in 4 weeks but it has yet to touch or breach the 20ema which is currently the lowest of the three lines which are currently all flat. The pair appears to be caught up in a downward sloping channel which could be part of a bull flag in the larger scheme of things. The pair has upside resistance in the three lines and the channel top so selling at the top of the channel seems the current viable option. Not our favorite scenario so we will play the channel but this week has opened bullish as if it wants to challenge the 20ema.
Chris Capre is the current Fund Manager for White Knight Investments (http://whiteknightfxi.com/). He specializes in using Ichimoku, Momentum, Bollinger Band, Pivot and Price Action models to trade the markets. He has built Ichimoku Systems for Institutions and has an Advanced Ichimoku Course for further training. For more information about his services or his company, visit http://2ndskiesforex.com
Finding Precise Entries and Exits
One of the most difficult challenges for traders is finding entries and exits. Its an important question that needs to be answered and can determine if you are;
1. getting in at the correct location
2. can have your risk defined and as minimal as possible
3. have a clear location to take profit
4. and know how to protect the position
If any of these are challenging for you, then you will want to learn how to use pivot points.
Created by floor traders decades ago, they were used as a method to mark key levels of support and resistance. It started out with the daily pivot but morphed into other pivot levels the institutions are watching constantly on a daily basis. If I told you about 70-80% of all 1hr candles will touch a pivot level from the London open to the London close and sometimes even the NY close, would you pay attention to them? I’d hope so because price action’s constant contact with them suggests their potency as something that has to be respected.
Before we go into examples of them on the charts, we will go over their basic construction.
All the pivots start with the composition of the DP or Daily Pivot. The DP is calculated by adding yesterday’s high, low and close, then dividing them all by 3. The formula looks like this:
DP = (H + L + C) /3
If you think about it, some of the most important pieces of data from a price action perspective are yesterday’s high, low and close. The high and low mark the extremes of price for that day (or how far the market was willing to go) and the close measures the acceptance of price at a particular level, along with how much strength in the buying or selling there was (determined by the closes’ position to the high or low).
The remaining pivots are calculated by various multiples of the DP. The formulas are below:
s1 = DP - (H - DP);//S1
s2 = DP - (H - L); //S2
s3 = L - (H - L); //S3
r1 = DP + (DP - L); //R1
r2 = DP + (H - L); //R2
r3 = H + (H - L); //R3
To briefly define them, the S1, S2 and S3 are what we call support pivots (S = Support) and the R1, R2 and R3 are what we call resistance pivots (R = Resistance).
The S1 Pivot is the closest of the support pivots and the R1 the closest of the resistance pivots. The farther we go out (S2, S3, R2, R3) the further the pivots are from the DP.
A chart below will show what they are and how they relate to price.
In this chart we are looking at the USDJPY on the 4hr time frame. The red lines are Resistance pivots and the blue lines are Support pivots. The yellow lines are Mid-Pivots and are simply the halfway point between any two pivots.
So how do Pivots help you with Entries and Exits?
Simple. The institutions regard pivots as one of the most important things for placing intraday entries and exits. Price actions response to them confirms this but in regards to any other indicator out there, nothing has more contact with price action than pivot points (except a really short moving average which has little meaning to price at that point).
There are actually statistics out there which show how price will make contact with pivots 70-80% of the time (on hourly chart).
Lets take a look at the GBPUSD on the 30m chart below.
The grey line represents the London open (today Feb. 11th, 2010). We can see from the recent top why price today got rejected up around 1.5650/60 because of the last top there and price’s rejection at this level.
But what about the bottom? The previous bottom was 1.5573 which the two candles to the left had touched but today, price went another 15pips past them. Why did the two candles today go past them and why did the market reject or react so sharply to those levels?
Also, after bouncing off the bottom, price climbed to 1.5610 where two wicks to the topside formed and caused a small rejection. What was there to reject price in the past?
This exact same rejection level became a support level once price had broken it.
Take a look at the chart below and you will have the answer why.
As you can see, price went past the previous support level and touched the S1 (Support 1 Pivot). Treated it as support for two candles, then rejected off of it.
Where did it go to?
The M2 Pivot (Mid2 Pivot) and rejected twice off there. Once price broke this level, it then came back to do what? Treat the Mid-2 Pivot as support.
These types of reactions/responses from the market occur all the time on an intraday basis. They give the trader a much more precise level to enter the market for intraday trading while also giving us ideas for precise exits.
If you would like to learn how to use them for precise entries and exits for your intraday trading, learn what the % chance price will break any given pivot on any given day, learn what the % chance price will touch the next pivot after breaking one pivot, or how to spot key reversal and breakout strategies using pivots, then check out the Price Action and Pivot Point Course.
Moving Average With Trend Setups pt. 2
We have gone over one method to use the 20ema for getting into trends after they have materialized and gotten underway. In this article, we will talk about another common setup trends often form giving us as traders another method to get into trends.
The EMA Failure – With Trend Setup
As mentioned before, trends will often oscillate and provide minor pullbacks before resuming another leg of the trend. These moves can pullback to the 20ema, touch it and then continue trending. Another method is the EMA failure, where the trend will pullback to the 20ema, break it briefly, and then resume the trend. We will talk about this method and gives some examples.
It stands to reason the institutions are watching how price action responds to these moving average touches because the market so often responds to them in such a clear and undeniable fashion. If a moving average has acted as support (or resistance) during a trend, then when it breaks it, the market should or could reverse. However, more often than not, the institutions will often use this as an opportunity to get back in the trend. It is often the case after breaking counter-trend the 20EMA, it will shortly after slam back above (or below) it to resume the trend. Lets look at a few examples and talk about some common characteristics when this happens.
AUDUSD 4hr Chart
Moving in a solid consistent downtrend, the pair has had several touches off the 20ema treating it as resistance and a trend continuation signal. However, look at the middle of the chart where it breaks it for 2.5candles. Usually when something is treated as resistance and gets broken, the buyers come in thinking the trend is over or reversing. However, the market never did this as the price action after it barely gained ground only to slam back below the 20EMA and start another run. It did this a total of three times with the behavioural pattern the same each time.
GBPUSD 4hr Chart
Already in a strong downtrend, the pair pong’d off the 20ema once and sold off for another 28hrs straight, dropping 300pips in the process. However, take a look at what happened when it actually broke the 20ema for the first time and closed above it.
After closing above it, some traders might have gone long and quickly gotten trapped in this move after the pair on the following candle formed an outside reversal candle and then sold off 350pips in the next 48hrs. Not all EMA breaks are created equal and its important to realize when they are the real deal and when they are with-trend setups.
2 Key Points
The market will often exhibit two key characteristics when the 20ema break is a failure or a with-trend setup.
- Time – the market spends a short period of time (3-4candles max) above the 20ema on the other side of the trend before breaking back above (or below) it in the direction of the original trend. This is the market showing with time that trend is still alive and about to start another leg
- Reversal Slam – after breaking above the 20ema counter-trend, the market comes back with a vigor slamming back below (or above) the 20ema with trend to show their renewed energy to continue the trend. The strong price action move is confirmation with a lot of money from the institutions the trend is going to resume and this move is often highlighted with a reversal pattern of sorts as in the case below (outside bar)
When you have the combination of the Time and Reversal Slam together on a counter trend 20ema break, it gives us traders a with-trend setup that is usually low risk and high reward but more importantly, a way to trade trends after missing the initial move.
To learn more advanced price action setups, check out the Price Action and Pivot Point Course.
Ichimoku Report Feb. 8th
EURUSD - Only the Bottom of the Kumo
As stated last week;
The pair fell as expected to 1.3850 just 75pips above the weekly Kumo. Although we feel the pair needs to correct a little bit, we ultimately feel any rallies are just opportunities to sell the pair higher.
Just as we wrote, the pair rallied to the big figure of 1.4000 and then dropped 350pips closed in the mid 1.36’s. Posting its 4th weekly decline in a row, the pair only has the bottom of the Kumo to take out before a large drop should manifest. Should we have a weekly close below the kumo, we are expecting a dive to the 1.2900 and longer term forecast could send the pair to 1.2400 by year end. Outlook for the bulls on the EURUSD do not look good as the last bastion of Ichimoku support is the bottom of the kumo and beyond that the atmosphere is thin.
GBPUSD - Look out below…
Posting its largest weekly decline since sept. last year, the pair did two things which added to the bearish taste for the pair; 1) closed below the kumo for the first time in 6mos and 2) crashed below the major support at 1.5700 which was the last double bottom support for this pair in the last 10mos. Ichimoku analysis suggests unless a rally happens in the next month or so, this pair could easily be headed for 1.4900 with 2nd targets at 1.4500 and possibly a full reversal of the 09′gains back to 1.3500. Look out below as there is not much to help this pair.
AUDUSD - Cuidado as we are below the Kijun
For the first time since March of last year, we had our 1st weekly close below the Kijun. We expect this along with the 20ema and Tenkan now to act as strong resistance so the line of least resistance has clearly formed to the downside and the bearish prospects have become attractive - especially with the RBA not raising rates last month and further concerns about inflation and a weakening labor market. The kumo does not come in till about 8000 so there is plenty of room for this pair to drop. Any rallies to the Kijun are likely good selling opportunities.
USDCAD - Working hard for its money
One of the few USD pairs having to work hard for its money, this pair had a doji week but nevertheless closed above the kijun and 20ema. This week it used it as support and should it have a weekly close above 1.0800, we feel the pair could likely be headed towards 1.1250 which is where the Senkou Span A comes in (kumo bottom). At that point it will have to work hard for its gains but for now, outlook is good for USDCAD bulls and as long as the dips are corrective in nature, the 20ema should hold as support for a good long base to form.
NZDUSD - Likely first to the weekly Kumo
With its 5th weekly down close and now 2nd below the Kijun, the pair is likely headed for further losses towards 6500 as it spiked up to the Kijun only to get smacked back down 300pips lower. The 20ema has now gotten below the Tenkan and Kijun so this should reject any upside plays. The line of least resistance is clearly to the downside and we would not feel good about buying this pair anytime soon.
Chris Capre is the current Fund Manager for White Knight Investments (http://whiteknightfxi.com/). He specializes in using Ichimoku, Momentum, Bollinger Band, Pivot and Price Action models to trade the markets. He has built Ichimoku Systems for Institutions and has an Advanced Ichimoku Course for further training. For more information about his services or his company, visit http://2ndskiesforex.com
Ichimoku Report Feb. 1st
EURUSD - Kumo Below, but nothing special
As stated last week;
The problem for the EURUSD is more about a lack of support combined with clear lines of resistance. This along with the Kumo now way below at 1.3770 suggests the first major attempts to support this pair will not come for another 275pips below or more.
The pair fell as expected to 1.3850 just 75pips above the weekly Kumo. Although we feel the pair needs to correct a little bit, we ultimately feel any rallies are just opportunities to sell the pair higher.
For now, the lines of least resistance are still to the downside and with the pair posting its 2nd largest weekly decline in the last 9mos, we feel this selling pressure should continue till the end of Feb.
GBPUSD - About to be…
Who really wants to be buying the pound now? We really cannot find any reason to buy it both technically or fundamentally. From an Ichimoku perspective, the pair is threatening to spill out to the downside of the Kumo and we feel with the likely USD strength to come, the pair will eventually submit. The Tenkan is diving like a shark smelling blood below and the 20ema is also resistance above so the line of least resistance is still to the downside. Should the pair remain below the Kumo till early April, the prospects for a serious dive below 1.5300 becomes more likely as time goes on with the Kumo getting thick and strong to the downside with a flat bottom below at 1.5300.
Until then, the twisted thin Kumo does not offer much for support or resistance so we feel the lines will have the most influence over the pair.
AUDUSD - Only one more to go
Selling off about 250pips last week, closing towards the lows and breaking below the 20ema, the pair now only has one more major downside support-line and price to go before a strong fall can begin. Opening off the Kijun (red line) the pair has found some strength and is checking the 20ema for legitimacy. Should it break this, the Tenkan will come under threat so the pair is in between two opposing forces. Unless the pair gets really strong this week, we feel another challenge of the Kijun will be in order this week or next. Should the pair break this and the .8733 support base (previous bottom), then we feel the pair is headed south for a while, likely towards the Kumo top before finding any support which will likely not come in till .8250-ish.
USDCAD - Doing an About-Face
After having its 2nd largest weekly gain in the last 7mos, the pair closed above the 20ema and Kijun. However, USD selling this week has brought the pair below both lines and we feel dips will likely find support at the Tenkan line. This could where the bulls re-enter to make a second skirmish towards the 20ema and Kijun. Should we have a 2nd weekly close above these lines, we feel technical buyers will come in to launch the pair up towards the Senkou Span A which should not come until after 1.1000. We are liking dips on this pair as buying opportunities.
NZDUSD - Next to the EURO…
This pair looks like its in 2nd to last place against the USD with only the EURUSD looking worse. Why? The pair has sold off for 3 straight weeks but just closed below the Kijun and 20ema for the first time in over 6mos. Now all three lines will act as resistance so the line of least resistance is clearly to the downside. Ultimately, unless the .6969 support base holds (should the pair fall further), we feel the pair is headed for a much lower value, possibly to .6500 before finding any major buyers. There have been some bullish statements by Bollard (Head of RBNZ) which may give the pair a lift but we feel it has more work finding higher ground than lower pasteurs. The only thing which would change our bearish view is a weekly close above the Tenkan.
Chris Capre is the current Fund Manager for White Knight Investments (http://whiteknightfxi.com/). He specializes in using Ichimoku, Momentum, Bollinger Band, Pivot and Price Action models to trade the markets. He has built Ichimoku Systems for Institutions and has an Advanced Ichimoku Course for further training. For more information about his services or his company, visit http://2ndskiesforex.com