Sunday, May 6, 2012

Euro Trade Update: Taking Profits on Big Gap Down


Friday I said that the EUR/USD would attack the 1.3000 and take it out soon, and it wasted little time launching its assault.  The EUR/USD gapped down big at the open today and broke solidly through 1.3000, and then had follow-through to the downside after that.  It is now trading near the low.  Gaps are usually filled so this is a great trading opportunity since I held short over the weekend and can take some profits and get back in short at a better price.  Also note on the hourly chart above that the momentum indicators like stochastics and the RSI are deeply oversold.  In preparation for the EUR/USD filling its gap, and relieving its oversold condition, I covered 25% of my short position.  I will re-enter that same short position if it rises to 1.3070, about 100 pips away from where it's currently trading.  If the euro is so bearish that it just continues lower without filling the gap, then oh well, I still have 75% of my position intact to profit from that decline and I reduced risk with a high probability trade.  That's the game, playing the probabilities and reducing risk. 

To sum up: the EUR/USD gap will probably be filled soon, meaning a rally to 1.3070 is likely within a few days, if not a few hours.  So I took off 25% of my short position and will reshort that same amount when the gap fills around 1.3070.

Refer to my my previous post below for a little more context on this trade, as well as some stock market commments.  It's also worth noting that the euro is not tanking on its own, stock futures are down 17 points (S&P), so risk aversion is hitting the markets again.  Tomorrow morning will be interesting.

Learn Elliott Wave Principle (EWP)

PLEASE NOTE: THIS IS JUST AN ANALYSIS BLOG AND IN NO WAY GUARANTEES OR IMPLIES ANY PROFIT OR GAIN. THE DATA HERE IS MERELY AN EXPRESSED OPINION. TRADE AT YOUR OWN RISK.

Friday, May 4, 2012

Euro/S&P Short Trade Still on


Below I list my projections and stop levels.  As long as the stop levels remain intact and nothing significant develops, this post will stand as guidance for the foreseeable future.

Just a quick note on the setup and count I put in last post.  I gave two options for wave (ii) and it's clear now that the latter count that had wave (ii) extending was correct.  The main point here is that my key level of 1422.38 in the S&P cash remained intact, keeping the short bias alive.  The downside turn from the wave (ii) high is just the beginning of a larger decline that should get to at least the 1300 level.   If I were to want to reduce risk I think that lowering my stop down to 1415.32 would be a wise choice for now.  But once 5 waves down complete for wave ((i)), I'll have to re-evaluate that stop and possibly take some profits.  But for now, my stop is 1415.32 for the risk averse.

Learn Elliott Wave Principle (EWP)



The euro has held my key level of 1.3384, and as you can see from the above daily candlestick chart, rallies have come hard faught while declines have been sharp and easy.  This suggests the larger trend is down.  The euro fell hard this week.  You see a set of reversal candles from a few days ago at the high which has been followed by some big red downside candles at the end of the week.  And today's close occurred on the low for the day.  That's all very bearish.  You can see that 1.3000 has been a solid line of support since February of this year, but the more it's tested the more the support is eroded.  I expect 1.3000 to be targeted and taken out next week.  I'm bearish with a stop just above 1.3384.

The Manic-Depressive Stock Market: What to Make of It

PLEASE NOTE: THIS IS JUST AN ANALYSIS BLOG AND IN NO WAY GUARANTEES OR IMPLIES ANY PROFIT OR GAIN. THE DATA HERE IS MERELY AN EXPRESSED OPINION. TRADE AT YOUR OWN RISK.

StatCounter