What’s the Right Trade
We keep getting emails from traders asking what happened to What’s the Right Trade. We apologize for not doing them recently. The holidays, travel, and a new puppy got us distracted. We are pleased to let you know we will continue doing What’s the Right Trade, starting now.
What’s the Right Trade: Intraday Currency
In this week’s What’s the Right Trade we are look at the one of the key currency futures markets. Here we are looking at a tick chart with the Weis Wave cataloging the trading volume. You will see in this What’s the Right Trade that tick charts and the Weis Wave give the trader a special edge in intraday currency futures trading.
What’s the Right Trade: Buy, Sell or Stand Aside?
Decide whether you want to be a buyer, seller or need more information at the decision point in the video. Be sure to say why this is your decision. Have fun with this, and we’ll post the answer in a few days.
What’s the Right Trade: Developing Your Technical Skills
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Hi Gary,
I would be looking for a long trade. I would be waiting to see price spring the 1.090 level one last time before going long.
My assessment is as follows:
1. We have a down trend. The last low didn’t reach the oversold line of the down trend channel indicating that selling pressure may be decreasing. ( down trend supply line drawn from the 1.099 high to the second 1.095 high and the parallel oversold line at the first 1.090 low)
2. The drive down to the 1.088 low went through the 1.090-1.091 support level.
3. Price easily reversed from the 1.088 low on good demand through the 1.090-1.091 resistance/support level to reach the supply line of the down trend channel. This is the largest up wave of the down trend and has retraced ¾ of the preceding reaction.
4. Price reacted away from the supply line of the down trend channel on almost equal volume to the preceding rally but only managed to make a 50% retracement of the preceding rally. There appears to be buying coming in at the 1.090 level.
5. There have been three attempts to break through the 1.090 level. Each attempt has failed at this level and each attempt has been on reduced volume indicating exhaustion of supply. There have been some clear signs of buying occurring at this level.
6. There was a minor spring on the 1.090 level on the second last bar which closed firm.
7. There appears to be a change in the wave structure. The last down wave is the smallest down wave since the start of the down move and the 1.088 to 1.093 rally is the largest up wave.
8. There are numerous indication of strength in the recent background but no clear sign of demand entering the market yet, more a case of supply being absorbed.
9. The last bar looks threatening and before I would consider going long I would be looking for a clearer spring of the 1.090 level. I suspect we are going to see it in the next few bars as the last bar appears to be the final try by the bears to brake this level.
I totally agree with Adrian, I would draw the supply line from the points you mentioned, instead of drawing a parallel I would draw a reverse trend line for demand line which is more useful in this case. The reverse demand line I would draw from point 1.092 low to mid point low of 1.090 – 1.091. This puts the low of 1.088 in an oversold position and good demand entered at that point as we would expect..
As Adrian has noted the down waves are diminishing with receding volume at the support of mid point 1.090 – 1..091 where good demand entered before, which could be have been preliminary demand entering the mkt.
It must be noted also that the supply line has been violated which suggests demand coming into the mkt and a potential change in the downward trend.
For all these reasons I to have a long bias, what I would need to see 1.090 holding, or a good dip below that level and a reversal and strong close above the level in order for me to take a long position.
If that level is broken it could easily test the low of 1.088 and to maintain my long bias I do not want to see and wide spread down bars with increasing volume on the way down to that level.
I would stand aside especially since the European open is about to ensue. We are in a longer term downtrend although bulls have shown some signs of life more recently in the immediate background and now it’s building a higher trading range, but if an up thrust happens right at the top , I could go short, if a spring happens at the lows of the trading range, I could go long. The three recent bars show the bulls and bears are fighting it out as the bars are overlapping and wide range relatively speaking. Also, the last swing high that caused the lowest low hasn’t been taken out, so the bulls have shown some fight, but I don’t see any demand actually coming into the market. Bears waited for the price to get up there and started defending.
Hi Gary,
1) The biggest move showing on the left of the chart was a down move. Since then it has gone sideways in a rough range between 1.0900 and 1.0950.
2) At one point the 1.0900 level was penetrated quite well but supply dried up and there was no follow through to the downside. Instead there was clustering of closes and price reversed up.
3) There was reasonable EOM up but the volume was less than seen on the previous rally.
4) Since then there have been several tests of the 1.0900 level, each subsequent one on less supply. The demand hasn’t really increased either though.
5) The last 3 price bars have wide spread but is flailing around. Maybe this is designed to scare people out of the market? The second bar in has quite a marked buying volume but then it disappears on the last bar which is a low volume down bar.
6) I would stand aside for the moment as I could make a case for it going either way!!!
Down: overall the down waves are bigger and so is the down volume. There has been reasonable bullish volume so maybe the market is trying to absorb this before moving further down. In which case, I would wait for a break down with wide spread bars and reasonable volume. Then I could go short if there were a weak rally back to the ice level on small spread, low volume bars.
Up: The break below 1.0900 ran out of steam and the retests have been on lower volume. Also if the trend was down, after a long period of sideways movement, the odds favour a change of direction against the original trend. Plus on the last 3 bars, the bulls were stronger than the bears.
If price breaks up with increasing volume and EOM, jumps across the creek around 1.0950 and pulls back to the creek on weaker bars and volume, then I could take a long trade on this.
Hi Gary,
glad to see you back with What’s the right trade?
My bias here is SHORT, but I see conflicting information that would make me STAND ASIDE at this point.
Are the sellers in control? – I see LLs and LHs with good supply in the background.
BUT – there’s little in the way of EOM down – in fact it’s showing SOT on the downside. In addition – the attempt to break lower yesterday was on the heaviest supply on the chart but failed to follow through.. Finally, supply is declining at the RHS. If I were super aggressive I may consider it a spring of YL with a low vol secondary test to go long, but I don’t see enough indications of strength in the background.
I don’t see a clear bullish COB. There is an attempt to spring yesterday’s trading range lows, but the resulting up wave didn’t do enough for me to consider it a bullish COB. In fact the strongest demand that appeared yesterday resulted in an UT and a new low. So I would conclude that it’s currently in a range with conflicting information and I’d be looking for the sellers to break the lows on strong supply and EOM, then test on ND for a short, or for the buyers to produce a strong up wave breaking the mini trading range highs producing a COB – then look for a test to go long.
Thx for the exercises,
Brian.T
Hi Gary, good to see this is back. A tough one.
In a down trend (weakness), price is unable to extend to the demand line in the channel.(strength) We can draw a reverse use of trend line. This new demand line is broken at the start of the new day, 3 bars close under yet cannot show any progress to the downside. Fourth bar then reverses and closes firm, kind of like a four bar spring. (strength).
We rally up from here and still respect the supply line, we now form a trading range, here were making lower highs (strength).
Within this range we can see a lot of effort from the down waves yet were making no progress to the downside, (strength)
There are two large up bars in this range which are the largest up bars on the chart, which is a COB, something new. These up bars show ease of movement, the pullback after the first up bar, takes 4 times as long to make the same amount of price action, this is bullish (strength).
We have now broken the supply line and making higher highs, support is sustained and resistance is rising (strength).
Every time we make a close above the supply line its immediately slammed down the next bar (weakness). The very last bar is weak, it makes a new high, then sellers come in and drive it down, making the largest down bar on the chart (weakness).
We also have a another COB the down waves are decreasing in size, and the last large up wave, made good progress. (strength). There is a lot of supply to the left, hence the churning and the erratic nature of the last few bars of the trading range. Mighty battle going on between the buyers and sellers.
Personally, wouldn’t get involved, although within this range there is supply present and were not making progress, there is just not enough demand, it hasn’t proved itself yet. Although looking at my story it looks like strength, and the very last bar is a gut check before the push on up.
edit: Were making higher lows which is strength, not lower highs 😉
From the left to the 3rd high, (HH) we can see a large down bar, every time we have tried to rally into this area, price has been rejected, this has occurred on 3 occasions with the last being the largest up wave on the chart. Since then we have been unable to test this supply area. This would be additional weakness
I would need more information.
When prices had the opportunity to go up they didn’t and vice versa, when they had the opportunity to fall they didn’t continue to fall.
With the last 3 bars, it seems traders were unsure whether to go long or short and were waiting for news before they made their decision. This can also be seen by the lack of volume.
Stand aside and wait for the break lower.