Traders!

Just a quick update on the AUDCAD currency pair. Back on January 10th we discussed a trade to sell the pair as it was showing bearish signs on the hourly time frame. The trade continued lower and we booked a very small profit only for it to then reverse and move higher. The trade didn’t work out as we anticipated. It has since broken the top at 1.0660, and has again showed some bearish signs with yesterday’s daily candle closing below the previous day’s low.

While we’re looking at other currency pairs for other opportunities, we wanted to make sure to update you on this one and inform you that another short possibility is looming. Please see the chart below:

AUD/CAD 4 Hour Chart

We have to keep an eye on economic data on the Canadian front as GDP will be released later today and unemployment figures will be released on Friday.

We’re seeing momentum begin to wane and there signs that price is beginning to diverge from the AO indicator. Price has continued to move higher as the AO has consolidated on the daily and started to move lower on the 4 hour.

The bigger news, however, may be the intervention levels for the Bank of Japan and the Swiss National Bank. Everyone is talking about a possible intervention and we’ll send out some charts in a bit to explain how to take advantage of such an event. Stay tuned.

Traders:

Welcome back from vacation! The market is picking up steam and liquidity is back to normal, therefore, we’re back in action. We did have some profitable trades that we managed to find during the break but nothing to brag about. The trade opportunity we’ve been discussing all day is on the AUD/CAD currency pair and we think the risk/reward is amazing!

Take a look the daily chart below:

AUD/CAD Daily Chart

At this time, this is definitely a contrarian trade opportunity as the trend favors the aussie. There are several factors to consider here:

1. THE PRICE OF OIL IN THE NEAR TERM WILL REMAIN HIGH DUE TO THE UNCERTAINTIES SURROUNDING A POSSIBLE CONFLICT WITH IRAN – this is a positive for the Canadian economy as it is the United States’ largest oil supplier and the fifth-largest energy producing country in the world.
2. THE CURRENT CHART RESEMBLES A POTENTIAL HEAD AND SHOULDERS FORMATION WITH THE TOP PEAKING AT 1.0660 AND CURRENT PRESSURE ON THE 1.0520 SHOULDER, WHICH HAS ENCOUNTERED OFFERS SINCE LATE SPRING/EARLY SUMMER.
3. THE FAILURE TO STAY ABOVE THE 1.0500 LEVEL DURING LATE OCTOBER AND EARLY NOVEMBER WAS A WARNING SIGN AND A POTENTIAL SELL OFF TO 1.0160 IS MORE THAN LIKELY.

Furthermore, we look at the hourly chart to see the current rejection of 1.0500 taking place. The hourly candle is very bearish and there are other indicators pointing for continuation to the downside. If this opportunity plays out as we expect it to, the pay off will likely be 8.5x the potential loss, given the stop is placed just above yesterday’s high of 1.0525.

AUD/CAD 1 Hour Chart

There are other ways to manage this trade opportunity as markets are dynamic and we must be able to adapt to new information. We’ll look forward to updating you as this plays out.

With the current year about to end, we’d like to take this opportunity to wish everyone the best of everything for the year to come.

“The New Year is a moment of quiet reflection. Reflect on the year gone by; of the happy gains and missed opportunities. Recount the good and bad of the past year. Introspect on our personal growth, and learn from these experiences. The New Year is the time to ensure that we bring balance to our life with positive influences overriding the negative ones.” – Simran Khurana

For the New Year, we wish you joy, fulfillment, prosperity, and excellent health. May all your wishes be realized.

Our New Years resolution is to remain focused on providing our members with premier analysis, trading ideas, and managed accounts services. We are excited about the opportunities that 2012 will bring both our team and our members.

Happy 2012 everyone!

Traders:

Most of you wouldn’t have received this trade on time as it was published a minute before rumors moved the market and triggered our order.

Reports relating to the IMF providing an additional sum of $500-600 billion USD sent the pair slightly above 1.0300, triggering our order at 1.0305 just by a tick. As this report was unfounded, the technical breach of 1.0300 didn’t last long. We had to quickly adapt and we cut our position in half to minimize risk and loss. As price stabilized just under 1.0300, we waited for employment figures to be released using the rest of our open position.

AUD/USD 1 Minute Chart

Employment figures were worse than expected and the pair continued to drop to 1.0230 in the next ten minutes. Our stop was moved to 1.0280, which was the last of our AUD/USD long trade. It’s still possible that the pair may break above that level if tested again, so we may apply a similar strategy next time.

Now we look for the next opportunity.

Traders:

It’s been about a week since we last updated. This is due to the intervention that occurred on November 30th when swap lines were extended to the European banks. Governments are attempting to avoid a repeat of the 2008 financial crisis.

Well, with only several weeks of good trading left before we go away for the New Year holidays we see an opportunity for a break out on the AUD/USD currency pair. The 1.0300 level has proved as important resistance; we are now looking for a break higher. Our first target will be shallow as there are lots of offers between the 1.0370 and 1.0420 levels.

As we adapt to the market on new information, the following levels may change:

Target 1 – 1.0365 [if hit, move stop to entry level]

Target 2 ~ 1.0400 [at which point we'll stand aside and look for new information]

Stop – 1.0270 MODIFIED [we may move it higher if price fails above within first few attempts]

We are planning on offering managed accounts in the next few weeks, stay tuned for more information. Some members have requested this addition as schedules often make it difficult for traders around the world to match up with opportunities.

Traders:

When we last updated our trade plan, we discussed the possibilities of the EUR/USD breaking out of its trading range. At the time, the pair was consolidating in a triangle and we had laid out support just underneath the short term trend. We also had the descending medium term trend line. Just as the two were coming close to convergence the support gave way for a 60 pip fall within the hour. This was an important candle that highlights how vulnerable the euro is to the downside. If you didn’t take the trade there, another opportunity was coming up.

EUR/USD 1 Hour Chart

The next support level was 1.3430 which broke after several hours of continuation. This level had plenty of stops that triggered a fall to 1.3375, another 55 pips. This trend continued through the end of the week to hit a low at 1.3211 before consolidating near 1.3225 to close the week.

This is great if you actually traded the plan. Many of us were away and if you did miss the move, don’t worry, there will be more action in the weeks ahead. Most importantly, this is a great learning experience in seeing how technical levels affect price action during the holidays and how to set a trade plan around them.

Traders:

Looking at the EUR/USD currency pair over the last few hours, I wanted to come up with a plan to trade the holiday market as price can potentially cover a lot of ground if liquidity is low.

Rule #1 – Make sure your broker is open and verify hours of operations, both trading and back-office!

Rule #2 – Understand that the risk is MUCH higher compared to liquid markets during normal hours of operation.

Rule #3 – In and Out. You have to monitor the position the entire time. Walking away opens the door for a good trade to become a bad trade. 

It’s always tough predicting the market. It’s even tougher under high uncertainty and low liquidity. The problems within the European Union present an “event risk”, which means if a big news announcement is released that will cause a big change in market expectations, the price of a currency could accelerate very quickly. This can happen when human traders are not at their desks during a holiday and algorithmic trading is readily available.

So, this means you must be prepared for any outcome to occur. We’re going to be very technical during the next few days, which means if support is broken, it should continue in that specific direction. Of course we expect to trade the pair only if there is some significant changes within the EU.

EUR/USD 1 Hour Chart

We have immediate support at 1.3430, with today’s Daily S2 providing support at 1.3415. Weekly S1 is at 1.3350 and this would be our target if 1.3430/1.3415 were to be broken. Below the Weekly S1 is the Monthly S1 at 1.3250, which, with the help of the 1.3200 level, will provide strong support into the weekend.

The current range is attempting a topside break. There is a possibility the market may retrace as high as 1.3800 with the help of positive news within the European Union or negative news out of the U.S. Perhaps something to do with a failed super-committee?  A break of 1.3550 threatens the 1.3600 figure and may run as high as 1.3700 before consolidating.

EUR/USD 1 Hour Chart (zoomed out)

This hourly break may occur at anytime, so please keep in mind the full analysis in terms of where we are going to look for support or resistance. Also, trading isn’t 100% necessary during these conditions. We must remind ourselves that there will ALWAYS be another opportunity.

Don’t go chasing waterfalls.

Traders:

Happy Monday. This week will be shortened by the U.S. Thanksgiving Holiday so keep an eye out for big moves in illiquid market conditions.

GBP/USD 1 Hour Chart

I wanted to take this time to share a trade with you that we had during the London session. We took profits a little too early but the analysis behind the trade is spot on. Look at the setup in the chart above. We covered this a few days ago a the market was sliding towards the 1.5700 level. This setup can’t get any easier. These are types of trades that offer very promising risk-reward ratios as momentum usually picks up after a break of a specific support or resistance level. In this case, the support was near 1.5730 as price consolidated during Asia open.

First, we want to point out the price action on the 5 minute chart and how to accurately read it. Just as London was opening up, price moved higher to 1.5765. Five minutes later it was reversing to the downside to retest the support level. Not only does this happen often during London open, but its a very good sign that a reversal is taking place, especially because the latter 5 minute candle was much heavier than the previous bar.

GBP/USD 5 Minute Chart

Before confirming direction, price retraces to 1.5748 during the next 15 minutes – this is just a dead-cat bounce off the support, getting the last orders near the area out of the way and opening room to the downside.

Support breaks and momentum builds from 1.5730 to 1.5700 before consolidating in a triangle. The next break of 1.5700 comes a bit later and momentum builds again to 1.5650 and finally 1.5610 before settling near the Daily S2 and Weekly S1 – perfect area to close the position and wait for the next opportunity.

There are many different ways to handle trades, and this is just one example. We are looking forward to sharing a trade this week before making final modifications to the site and service for next week.

Traders:

Had a few members email us about the euro during the London session and here is the trade that was possible overnight.

The EUR/USD currency pair had been consolidating since falling from near 1.3800 levels just a few days ago. As you can see on the 1 hour chart above, there was a descending trend-line with support at 1.3430. Once we had a candle close above the descending line, we either enter on the close, or we can wait for the market to re-test the break of the trend-line, as it did in this case.

EUR/USD 1 Hour Chart

Price then moved higher to re-test previous support at 1.3610. We see several things at that level.

1. Price is just below the Daily R2 Pivot Point

2. Price is just under the previous support level of 1.3610, November 15th

3. Switching to the 4 hour chart, we can also see support on November 1st at the 1.3610 level

4. Price is just under the 55 day moving average on the 4 hour chart

EUR/USD 4 Hour Chart

These are just some of the things we look at when deciding when to enter and exit a trade. What do you look for? Indicators? Price action? Let us know and we’ll highlight a tool commonly used by you!

GBP/USD 15 Minute Chart

Traders:

Though we think the pound has further room to fall, the pair has found good support at the 1.5750 level. We’re looking for a short term retracement or bounce up to 1.5800 and possibly as high as 1.5900 before returning to its bearish trend. As you can see, the 15 minute chart shows that following the selling over the past 36 hours, demand is starting to pick up. It may be short lived, but it presents a really good risk/reward opportunity.

Our first target is 1.5800, followed by 1.5835 and 1.5890.

Depending on your overall portfolio strategy, stop may be placed between 1.5735 and 1.5750.

To the contrary, if the pound begins to slide below 1.5750, 1.5700 will be next on the radar. We would be interested in a short term trading opportunity to buy the pair between 1.5500 and 1.5650 for a move towards 1.5700.