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There’s a significant number of sharp and fairly relentless transitions in many trends that are driving the pairs I trade haywire. The forex-futures connection cannot be ignored and it’s been dominating the psychology of the $USDCAD, $EURUSD, and $AUDUSD in major ways. The $CL_F (crude oil) has been most interesting from the forex perspective while the $SLV $S)_F (silver) move has been lighting up the StockTwits stream.
The fact that the Directional Bias on the daily charts of these markets have been solidly trending makes my first reaction to the pullbacks a swing trade. I am more interesting in following the trend – when there is a trend! In the case of the uptrends in the $EURUSD $AUDUSD $SLV $SI_F $CL_F I want to position myself at support levels which the expectation that the bulls while step in with the dominant market psychology being up.
The $EURUSD testing the limits of the daily uptrend.
Handling transitions in a trend are usually best done on intraday time frames since the initial entry will be counter-trend. So for example, the
$EURUSD or
$CL_F short entries were best taken on the five, 15, or 30-minute time frames. I however have still be focused on the larger, trend-following entry on the daily chart while taking smaller, shorter-term shorts.
Notice that the daily
$EURUSD is sinking towards the psychological, moving average support of the popular 50 period SMA.
Another option is to set up a trend reversal entry using the 34EMA Wave and the 20 period CCI (Commodity Channel Index). Here’s an example on the
$CL_F.
A Wave Reversal short entry on the daily $CL_F using the CCI as confirmation.
As prices slices through the support of a trending 34EMA Wave – in this case a “twelve to two o’clock” angle – the entry triggers with the break of the 34 period EMA low when it is accompanied by a -100 or greater CCI reading. This occurred on April 5. At this point not only is the trend broken but the bullish Directional Bias is no longer dominant. This would validate not only shorter-term intraday short entries but also short entries on the 60 and 240-minute charts which I would not consider when the Directional Bias is still up.
Stepping out to a bigger picture (and a time frame I set up only with options) on the WEEKLY chart, notice that the correction has found buying support with the weekly chart’s 34EMA Wave.
Weekly 34EMA support in $CL_F make call options very tempting in this near-term bearish psychology.
A swing buy correction is also visible on the weekly chart of
$SLV. In this case it has reached my “aggro” level at the 20 period (weekly) SMA which is the upper level of my swing buy zone.
A weekly chart pullback to the 20 period SMA on $SLV.
While the short-term, intraday time frames can set up short entries, do not neglect the bigger picture reversal and corrections to make sure you know the degree to which you are trading counter-trend and where support may be found within the uptrend and longer-term bullish psychology.
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The $EURUSD testing the limits of the daily uptrend.
A Wave Reversal short entry on the daily $CL_F using the CCI as confirmation.
A weekly chart pullback to the 20 period SMA on $SLV.
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