POTENTIAL UPSIDE MOVE FOR THE EURO. EURUSD LONG 1.075?
NOTE: I am NOT a technical analyst. I do not trade using conventional technical analysis. This is for the purposes of sharing with the TV community. I solely trade supply and demand.
With that being said, it is safe to assume that everyone is scared to go long on the Euro at this point. The Greece issue caused a major sell off within what was essentially a range. But now, there is breakthrough. This is also coupled with the fact that the US Dollar (DXY) is rallying strongly, gapping up into some supply. This is where I should be looking bearish towards the dollar. At least short-term. Purely based off the charts. The fundamentals might either aid this move or drag it down. Either way, there is some reason (in my mind) to believe the US Dollar is going to be bearish.
Solely from a supply and demand perspective, this is an area where I'd be looking to buy. It goes against popular trading analysis and convention, but the point of any auction based market is to buy low and sell high, right? And even if I am wrong on this, my loss is limited. Prices have been falling hard and fast with the rising dollar for the last three days so it is safe to say that they will fall into the 1.08/1.06 region (unless something miraculous happens to the Euro).
From a technical analysis perspective, we have price making the first upside move from 13.04.2015 to 15.05.2015, followed by a fall. This fall was a 62% retracement of the initial swing to the upside (just shy of the weekly demand zone, suggesting ample demand at 1.08). The market reversed to the upside but failed to break the previous swing high (a freshly formed supply area). Once prices broke the 1.10 barrier, the drop began and is headed back to the weekly demand zone. If price continues tp decline to 76% of the original swing and then reverse, The Gartley has formed.
While there are lesser supply zones along the way that may slow this break to the upside, the potential target is the supply zone in red. Fibonacci traders know that a swing retracement to the 76% area should extend to the 127% area. This happens to be just beyond the first red box.
Again, this is purely speculation, obviously. This is neither pure science, or pure art. It is an amalgamation of the two.
Entry Point: anywhere between 1.0800 and 1.0750
Stop Loss: anywhere below 1.0655 (Be comfortable with the risk you are taking. Never risk a substantial amount of your account on one trade, a catastrophic event will wipe you out. 1-5% of your account size is a number that is touted around. It is better to build your account slowly than to wipe out aiming for quick gains. The trader who minimises risk, lives to trade another day)
Profit Target: anywhere between 1.1600 and 1.1650 depending on your patience
Reward: Varying. Of course, feel free to lock in profits if this starts to move well in your favour. Take your capital off the market when at a substantial gain level. You could enter multiple orders and have different targets. When those targets are hit, move your stop loss to break-even for the rest.
If I am correct, I am risking <1% of a $100,000 account (calculate your risk and reward on thetraderstation.com/profit-calculator.html). The returns are $390 (Target 1 at 1.10, R/R: 1.7:1), $860 (Target 2 at 1.13, R/R: 3.7:1) and $1330(Target 3 at 1.16, R/R: 5.7:1). This is a total of $2590 profit risking only $700 for the trades (averaging a reward/risk ratio of 3.7:1). Nearly +3%. That is more than my bank offers me on my current account. Substantially more. And if you lose $700 of a $100,000 account, you write it off. It is the cost of doing business!
With that being said, it is safe to assume that everyone is scared to go long on the Euro at this point. The Greece issue caused a major sell off within what was essentially a range. But now, there is breakthrough. This is also coupled with the fact that the US Dollar (DXY) is rallying strongly, gapping up into some supply. This is where I should be looking bearish towards the dollar. At least short-term. Purely based off the charts. The fundamentals might either aid this move or drag it down. Either way, there is some reason (in my mind) to believe the US Dollar is going to be bearish.
Solely from a supply and demand perspective, this is an area where I'd be looking to buy. It goes against popular trading analysis and convention, but the point of any auction based market is to buy low and sell high, right? And even if I am wrong on this, my loss is limited. Prices have been falling hard and fast with the rising dollar for the last three days so it is safe to say that they will fall into the 1.08/1.06 region (unless something miraculous happens to the Euro).
From a technical analysis perspective, we have price making the first upside move from 13.04.2015 to 15.05.2015, followed by a fall. This fall was a 62% retracement of the initial swing to the upside (just shy of the weekly demand zone, suggesting ample demand at 1.08). The market reversed to the upside but failed to break the previous swing high (a freshly formed supply area). Once prices broke the 1.10 barrier, the drop began and is headed back to the weekly demand zone. If price continues tp decline to 76% of the original swing and then reverse, The Gartley has formed.
While there are lesser supply zones along the way that may slow this break to the upside, the potential target is the supply zone in red. Fibonacci traders know that a swing retracement to the 76% area should extend to the 127% area. This happens to be just beyond the first red box.
Again, this is purely speculation, obviously. This is neither pure science, or pure art. It is an amalgamation of the two.
Entry Point: anywhere between 1.0800 and 1.0750
Stop Loss: anywhere below 1.0655 (Be comfortable with the risk you are taking. Never risk a substantial amount of your account on one trade, a catastrophic event will wipe you out. 1-5% of your account size is a number that is touted around. It is better to build your account slowly than to wipe out aiming for quick gains. The trader who minimises risk, lives to trade another day)
Profit Target: anywhere between 1.1600 and 1.1650 depending on your patience
Reward: Varying. Of course, feel free to lock in profits if this starts to move well in your favour. Take your capital off the market when at a substantial gain level. You could enter multiple orders and have different targets. When those targets are hit, move your stop loss to break-even for the rest.
If I am correct, I am risking <1% of a $100,000 account (calculate your risk and reward on thetraderstation.com/profit-calculator.html). The returns are $390 (Target 1 at 1.10, R/R: 1.7:1), $860 (Target 2 at 1.13, R/R: 3.7:1) and $1330(Target 3 at 1.16, R/R: 5.7:1). This is a total of $2590 profit risking only $700 for the trades (averaging a reward/risk ratio of 3.7:1). Nearly +3%. That is more than my bank offers me on my current account. Substantially more. And if you lose $700 of a $100,000 account, you write it off. It is the cost of doing business!
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.