(Part 2) EUR/USD Top-Down analysis: PnF and Target setting
Hi Traders and welcome to Part 2 of my in-depth analysis of EUR Price Action (PA) against the USD.
Before we begin I wanted to thank you all for your support in the comments section and your thumbs-ups!
This really helps me to continue making quality content! So thank you again :)
In this article, we continue to study EURUSD using both Wyckoffian and Eliott Wave analysis. If you haven't yet,
you can get caught up with part 1 below:
I was originally planning to create a quick PnF segment and focus this article on the short-term price action,
but I made some really cool observations along the way that will help solidify our understanding of the recent PA
and if I were to put everything in one post, it would've been too long to take in!
As a result, this post will focus on PnF and target setting, and I will make one last part discussing different scenarios in the immediate PA to come!
Point and Figure Charting (PnF) is one of the oldest methods used for understanding PA. Instead of time, it uses volatility to characterize the market movement in boxes.
In other words, it is time-INdependent. The price data in Wyckoffian PnF is taken from daily bars, and the box sizes and reversal counts are controlled by the tape reader.
This is a time tested targeting strategy actively used by Wyckoffians to date! I find it to be on par with Fibonacci in terms of validity, but it is A LOT more reliable
when it comes to long-term price moves and campaign building.
Now without further ado, let's get to our analysis
Continuing where we left off, we're going to focus first on the PA in the corrective channel that started with the 2008 market depression:
This is a (0.01x3) chart. Meaning, each box represents the price move increment of 0.01 points, and each reversal is created by 3 consecutive boxes
Starting from the left, we can see multiple trading range segments (the orange and green ribbons) forming the larger corrective channel.
Each ribbon or trading range creates targets, and we see that almost all those targets were satisfied all the way since 2007! (hence, the reliability and validity!)
It is also obvious that the price has at least created a short-term base.
The price targets for the bases are at 1.33 (the top boundary of the trading range - a logical target) and at around 1.87 level
Make sure to read all the annotations since we're going to get in-depth in the next two charts:
I took a step further back here and created a tighter filter by increasing the box size to 0.02 (roughly 2% of the current EUR price)
This again shows a clear impulse and correction relationship as we have discussed in Part 1,
what this chart is adding, is Fibbonacci based targeting and an alternative for the larger Wave count that would still match the PA.
What's amazing here, is the confluence of our Fib target with our Pnf target at around 1.85 - 1.87! This is going to be my swing target as a result!
Our next chart is looking at the 2% PnF again, but this time we'll be doing supply and demand analysis.
To better validate my ideas, ideally I want to try and dispute it by showing that opposing scenarios match (hypothesis - null hypothesis)
And that's what we'll do next: (this is the title chart)
Originally I started to think of price action as a distribution that is set to resolve to a lower level. In the white box, I've outlined
what a typical distribution would look like. You can start with #1 on the chart to understand the PA and my validation method.
Bottom line is that we seem to be moving further away from a distribution view and forming a spring in a larger accumulation range
You can see in number 5 that we have still not fully confirmed the spring.
A test and reversal from around 1.15 or break and holding of the 1.24 resistance would be the confirmation we're looking for
On the bearish side, as long as we're not able to come back to the larger trading range, a failure and resolution to the downside is still possible
but given the analysis above, I find that to have a low probability. In any case, please use the schematic in the above chart to
stay alert for a downturn!
This larger trading range, gives us really amazing targeting prospects going all the way up to $3,
but momentum is built by achieving targets one by one and it's too soon to look that far!
Make sure to follow my analysis in order to stay up to date with market moves!
Based on the above analysis, I'm setting 2 main targets and one auxiliary for entires.
Auxillary / Short term target - $1.33 - break, close, and confirmation above the corrective channel acts a new entry
Target 1 - $1.60 - PnF target + logical target
Target 2 - 1.85 - PnF target + Fib target
That's it for taday folks! I hope you liked this analysis and it is beneficial to you! Let me know what you'd like to see more of in the comments section below!
Good luck and till next time!
If you liked my analysis or are following through, please give it a thumbs up! I put a lot of work in my analysis and your support will let TradingView know my articles are helpful!
Before we begin I wanted to thank you all for your support in the comments section and your thumbs-ups!
This really helps me to continue making quality content! So thank you again :)
In this article, we continue to study EURUSD using both Wyckoffian and Eliott Wave analysis. If you haven't yet,
you can get caught up with part 1 below:
I was originally planning to create a quick PnF segment and focus this article on the short-term price action,
but I made some really cool observations along the way that will help solidify our understanding of the recent PA
and if I were to put everything in one post, it would've been too long to take in!
As a result, this post will focus on PnF and target setting, and I will make one last part discussing different scenarios in the immediate PA to come!
Point and Figure Charting (PnF) is one of the oldest methods used for understanding PA. Instead of time, it uses volatility to characterize the market movement in boxes.
In other words, it is time-INdependent. The price data in Wyckoffian PnF is taken from daily bars, and the box sizes and reversal counts are controlled by the tape reader.
This is a time tested targeting strategy actively used by Wyckoffians to date! I find it to be on par with Fibonacci in terms of validity, but it is A LOT more reliable
when it comes to long-term price moves and campaign building.
Now without further ado, let's get to our analysis
Continuing where we left off, we're going to focus first on the PA in the corrective channel that started with the 2008 market depression:
This is a (0.01x3) chart. Meaning, each box represents the price move increment of 0.01 points, and each reversal is created by 3 consecutive boxes
Starting from the left, we can see multiple trading range segments (the orange and green ribbons) forming the larger corrective channel.
Each ribbon or trading range creates targets, and we see that almost all those targets were satisfied all the way since 2007! (hence, the reliability and validity!)
It is also obvious that the price has at least created a short-term base.
The price targets for the bases are at 1.33 (the top boundary of the trading range - a logical target) and at around 1.87 level
Make sure to read all the annotations since we're going to get in-depth in the next two charts:
I took a step further back here and created a tighter filter by increasing the box size to 0.02 (roughly 2% of the current EUR price)
This again shows a clear impulse and correction relationship as we have discussed in Part 1,
what this chart is adding, is Fibbonacci based targeting and an alternative for the larger Wave count that would still match the PA.
What's amazing here, is the confluence of our Fib target with our Pnf target at around 1.85 - 1.87! This is going to be my swing target as a result!
Our next chart is looking at the 2% PnF again, but this time we'll be doing supply and demand analysis.
To better validate my ideas, ideally I want to try and dispute it by showing that opposing scenarios match (hypothesis - null hypothesis)
And that's what we'll do next: (this is the title chart)
Originally I started to think of price action as a distribution that is set to resolve to a lower level. In the white box, I've outlined
what a typical distribution would look like. You can start with #1 on the chart to understand the PA and my validation method.
Bottom line is that we seem to be moving further away from a distribution view and forming a spring in a larger accumulation range
You can see in number 5 that we have still not fully confirmed the spring.
A test and reversal from around 1.15 or break and holding of the 1.24 resistance would be the confirmation we're looking for
On the bearish side, as long as we're not able to come back to the larger trading range, a failure and resolution to the downside is still possible
but given the analysis above, I find that to have a low probability. In any case, please use the schematic in the above chart to
stay alert for a downturn!
This larger trading range, gives us really amazing targeting prospects going all the way up to $3,
but momentum is built by achieving targets one by one and it's too soon to look that far!
Make sure to follow my analysis in order to stay up to date with market moves!
Based on the above analysis, I'm setting 2 main targets and one auxiliary for entires.
Auxillary / Short term target - $1.33 - break, close, and confirmation above the corrective channel acts a new entry
Target 1 - $1.60 - PnF target + logical target
Target 2 - 1.85 - PnF target + Fib target
That's it for taday folks! I hope you liked this analysis and it is beneficial to you! Let me know what you'd like to see more of in the comments section below!
Good luck and till next time!
If you liked my analysis or are following through, please give it a thumbs up! I put a lot of work in my analysis and your support will let TradingView know my articles are helpful!
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