Forex Trade Signals and Setups Oct. 17th

Verified Profitable Trader

EURUSD – Massive Engulfing Candle – More Losses to Follow?
In case you weren’t watching, the EURUSD got hammered today shedding 170pips with the bulk of it happening over 4hrs, losing  150 of the 170pips in one 4hr candle.  This was not only the largest losing candle on an open to close basis, but produced a massive bearish engulfing candle closing below the 20ema for the first time in 11days.  This along with the DJIA, SPX, AUDUSD and GBPUSD all triggering Bearish Engulfing Candles so further losses could be across several instruments.

It should be noted the Euro did have an impressive run (750pips over 13days) but to sell off so violently suggests below 1.3700, more losses are likely to follow while the peak at 1.3900 should hold in the short to medium term.   Traders can look for short term sell signals at the 20ema (1.3770) or 1.3820 for moves to 1.3700 and 1.3530.  Alternatively, if it breaks the prior swing highs, then 1.4000 should be the next upside target.

DJIA – Heading to the Kumo Fast
After maintaining 11 days above the 4hr Kumo, the DJIA has posted one of its sharpest reversals over a period of 16hrs.  In fact, since it has been ponging in between the 11700 and 10500 levels, the index, this is the fastest 16hr sell-off over the last 60 days.  We should note this whole rise has been somewhat interesting as it has happened over razor thin volume which is not typical of sustained bounces.

What is interesting to note from an Ichimoku perspective is the Tenkan-sen.   Notice how it was inching closer to the Kijun-sen (trend line) even as the index posted new highs, suggesting the latest move was losing momentum prior to the top.  This was a great warning signal to watch closely for a top along with trimming longs.  What is also interesting is how quickly and sharply it has touched the Kijun after being separate from it for so long.  We suspect the index is likely headed for the 11060/11000 region where it will test the Flat Kumo Bottom. Should it close below here, then we will be targeting 10500 on a Kumo Break Signal.

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