USDJPY, EURJPY all rivers flowing south, EURUSD in headwater. Trend lines define a potential continuation pattern although boundaries will dictate final direction.
Trendlines define boundaries
On March 4, 2010, In Technical Studies, By Soh Tiong Hum
On March 3, 2010, In Technical Studies, Trading Technique and Strategy Discussion, By David Yew
This morning on H4 chart of EURUSD, it seems like there are 3 valleys (V or U letter shaped pattern), which is the classic triple bottom chart pattern. The triple bottoms, which spans over 3 weeks, could be a hint of a Bullish Reversal move underway.
How to trade the triple bottom?
As with double bottom formation, the bullish view is only confirmed when Price Action breaks out of the neckline. The additional criteria for the validity is that Price Action should not make a new lows beyond the triple bottom.
If there is a new Low formed in the coming days, then the triple bottom is invalid. Instead, it can be a possible rectangle pattern, which is a consolidation of the Bearish Trend move.
On February 4, 2010, In Technical Studies, By Soh Tiong Hum
Pennant in upward channel
Pattern requires break of short blue trendline to confirm.
On January 29, 2010, In Technical Studies, By Soh Tiong Hum
The USDJPY is printing a potential wedge on the day chart as well as inverted head and shoulder in the 4-hour. It is critical to confirm with break of neckline or breakout of wedge.
Potential reversal patterns for USDJPY
On January 27, 2010, In Technical Studies, By David Yew
Today, we shall excite ourselves by looking at one of the most volatile currency pairs, GBP/JPY, which has a daily average fluctuation of about 300 pips.
In addition, we shall see how 3 chart patterns that is very evident on GBP/JPY for trend reversal and trend continuation – namely, rising wedge pattern, pennant and symmetrical triangle pattern.
GBPJPY Weekly Chart with Chart Patterns
As shown on the chart above, the Bearish Trend Reversal started with the rising wedge formation, which later evolves into the famous Head and Shoulder pattern hinting towards a big bearish reversal move underway.
Afterwhich, every subsequent retracement of the downtrend has either a rising wedge pattern or a bear pennant pattern.
Thus, it goes to show that there is a high reliability of trend continuation when either patterns had formed.
As we observed the recent months, that there is a big rising wedge formation which seems to be forming since 2009, and a symmetrical triangle forming shortly.
As price draws nearer to the apex of the symmetrical triangle, a breakout is inevitable. Yet, will it be a another trend continuation or a bullish reversal?
Should it break out of the pattern to the bullish side, then more bullish sentiment will be added to the equation as many traders will be eyeing for trading the breakout.
Likewise for the breakout to the bearish side, whereby more shorts will be added too.
Whichever the breakout is to be, it will likely to be a big move, so it is worth keeping tabs with this volatile pair in the coming future.
On January 21, 2010, In Technical Studies, By David Yew
Chart patterns are commonly found for almost any price charts. It is more visual when view using a line chart than candlesticks or price bar chart.
As each price bar forms, it may give the chartist a perspective in relation to the formations showed by the historical bars.
Today, we shall dissect a 4 Hourly chart of CHFJPY to understand how patterns can form and perhaps to take advantage of the formations for trading.
As shown above, it is evident that CHFJPY has finished a Head and Shoulders Pattern which is a Bearish Reversal of the previous Up trend. The Up trend happens to be at the ‘armpit’ of the Left Shoulder and Price break down the trendline, indicating the Head is formed. With the falling price, buyers wanted for an entry and attempted to push the price higher, thus forming a pullback.
But it goes to show that more are keen to sell than buy, and after several attempts to break above the up trend line, there is a sharp plunge which is forming the Right Shoulder.
On the same chart with the Head and Shoulders pattern, the keener eye might find more patterns within the Head and Shoulders!
- Left Shoulder was a Double Top formation and Price found a support line to bounce off and overcome the top of the Left Shoulder to form a Higher High (Head).
- After the attempt to make the Higher High, a bearish engulfing candlestick pattern formed resulting a possible price fall as seen on the chart.
- A support / resistance line provide another bounce back with price forming a rising wedge pattern, it also an attempt to test the up trendline and to break it to the bullish side. Along with the evening star candlestick formation, the bearish reversal was like a quick runaway to sell down CHFJPY.
- After a break below the support line, it seem to consolidate and wanted to move up above the support line, yet, the failed attempt results another dive for CHFJPY.
It is easy when we analysis charts in hindsight, when the formations were already there. It is a challenge for us to make sense of the charts as the days goes by. But after knowing a possible formation is underway, you can be sure many chartists who see it will want to ride it.
What we see for CHFJPY is on a 4 Hourly chart, which the above patterns were forming as the weeks goes by. It also shows that when the bullish sentiments of the Big Boys faded, the bearish reversal can last for a long time before another big move comes.
On January 20, 2010, In Technical Studies, By David Yew
Yesterday, we saw big moves for all Majors Currencies. Looking at yesterday’s post on USDCHF throwback in day chart; hourly chart expansion gains, there seems to be a correlation of the Dollar Index, commonly known as USDX, with all cross-pairs of the USD.
Let’s have a look at the COT Report posted last Friday, 15 Jan, to see if there is any signs that the big players have left trails.
It can be seen that there was a support for USDX at 74.12, and a Big falling wedge pattern formed since Mar 09 till now.
The breakout from the wedge following with the breakout to above 50 day moving average, suggest that a bullish trend reversal is intact, thus, USDX is likely to trend upwards.
From the COT Indicators, our interest is to look at the Net Position of the Commercial Traders and the Total Open Interest. Commercial Trader are the Big Boys and the Smart Money as discussed in my previous post and thus the Total Open Interest will also reflect largely on their open positions. We see that the Net Position of the Commercials were on the extreme short position seen at the previous week, and they were unwinding their shorts position slowly as from last week. It is the similar pattern last seen in 3rd quarter of 2008, and causing a bull rally on the USDX.
The USDX is an index of Major Currencies and therefore the chart pattern seen on USDX is similar with those pairs with USD as its base currency, eg. USD/CHF, USD/JPY and USD/CAD.
So which will move first? The USDX or the cross pairs in the spot market? I might find an answer to this when somebody can tell me which come first: ‘The chicken or the egg’?
At the end of day, we should be traders first, investor second, and ride on the trend as long as possible.
On January 19, 2010, In Technical Studies, By Soh Tiong Hum
The Swissy did a throwback on the day chart. From the hourly chart, it is clearly expanding after base building. Are dollar gains here to stay? DX chart from Ino.com. The USDJPY is making similar move.
Throwback in Swissy after breakout from downtrend
Beautiful base building in hourly chart
Dollar gains visible in DX
Throwback move is also mirrored in USDJPY while a wedge formation reinforces the view of a possible continuation move.
Throwback and wedge reinforces USDJPY continuation
On January 15, 2010, In Technical Studies, By Soh Tiong Hum
In previous postings, we discussed the elements of a good signal. This week we see such a combination unfold before us in the EURYEN. Lets recall.
A good signal has the following:
1. Resistance level provides a ‘hard’ place for price to reverse
2. A chart pattern hints at reversal
3. At the critical point, a candlestick pattern can be seen
4. All of the above come together in a confluence ultimately confirmed with trend line break
Let’s good at the EURYEN chart.
Firstly, the daily chart provides the ‘hard’ place to start looking for a reversal.
Daily resistance hints at reversal
At the 4-hour chart, we can other elements fall in place.
- The violation of the first trend line shows the end of the predominant trend
- A price pullback after the first trend line break hints now a head and shoulder pattern
- A second (shorter) trend line can be drawn to indicate the trend of the pull back
- A big evening doji look-alike bar that violates the second trend line shows the breakdown of the pullback
- Finally the violation of the neckline confirms the head and shoulder formation
Head and shoulder in EURYEN at resistance
Some previous postings
Elements of a trade signal
Reversal signal also shown in Loonie
On January 13, 2010, In Technical Studies, By David Yew
The Aussie has been on a bull rally since late December 2009 till now and coming nearer to 2009 year resistance level at 0. 9404. Recent resistance may be largely due to a reaction at 0.9323 which occurred also in end November and early December.
The current bearish move could be another consolidation for another bull run or a possible follow thru after a Rounding Top formation.
On the other hand, the bulls has never give up on Aussie. In fact, since pre-Christmas, they pushed from a low of 0.8733 to the recent high of 0.9323, amounting to 590pips or 6.8% in less than a month! And the past retracements had formed continuation patterns such as bull flag or pennant to pursue a Higher High.
Who shall overcome and emerge victoriously? We’ll shall see… in the coming days.
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