Are we seeing continuation of downtrend in Euro !

Are we seeing "Trend continuation to the downside Rally", Are we really seeing another attempt to downside for the Euro, And if I am correct, Then soon we will see the test of correctional bottom.

The idea I post earlier was that We have seen rapid liquidation after strong trend which means at-least one attempt to test the high and Very often price gravitates to the upside.

when we see such attempts, But all the attempts have been faded out and Now we will soon see another low in the trend.

In order to invalidate this Rally, we will have to break above 1.3695 and see an attempt to rise once again. But current rally and attempt to rise have been failed so far and the outcome is test of lows and possibly new low.

How much importance does context have In GOld Rally

Gold rally from lows is very strong and It has stalled and spent so much time near these areas, In order to point that strong holders are in dominance one should look to spent time near highs but breakout and shift in momenutum has nothing to do this time.

May be strong holders left the rally around this areas and recent breakout has been done by weak or small position traders and IF that is correct, we should soon see strong liquidation today or days to come.

I would bet on that sell-off today because of lot of high Impact News, First ECB rate decision and then "Non Farm Payrolls".

In the chart below I have pointed whether the recent breakout has been hold by "Strong holders", and if that the case they won't let sellers to get hold and will keep moving the price higher immediately after the Momentum fades out by price again breaking below the upper boundary of "Blue rectangle".

Gold Chart Possible false breakout followed by reversal

Simple rules when price spent so much time near highs then it works as double edge swords that whether strong holders are no longer interested, then it is overtaken by small holders and they continue to buy on dips and make a breakout but then immediately strong holders make their presence and create massive liquidation and that could be the case here as well in Gold chart.

Support resistance Trade Locations and Then Final Auction

As clear from title, I am talking about "Support resistance" (short term barriers as there are no terms associated with S/R In my trading)"Trade Locations" and "Final Auctions". These Terms are know to every Forex trader but How Important role they play in developing a successful trading career.

Nobody knows this answer, As these terms are incomplete without each other and When you trade any strong supply and demand market you will have to take them all together and then think about making consistent money.

I mean to say when a trend is maintained throughout and became an elongated trend and you find some sideways movement and then downside take momentum but it is faded out immediately, That means that imbalance is still there in the market and It will offer entry at good price.

Take a look at the follow chart of gbp/chf

Pair is in strong elongated trend, amid strong "Great Britain Pound" Across the board.

gbp/chf FInal push Break the equilibrium and all the barriers.

AS I have stated in my posts, there are strong convictions that when you approach that type of trading methods , the chances are that you might fail to understand the momentum when it hits the market, But the truth fact is that trend is often part of imbalance and till the time, price does not break the floor with strong downside candles, the chances are very big that trend will continue after "accumulation" end and distribution phase started.

New Updates based on recent price activity.

I have scanned the market activity of recent week (as I never rely on price action too historic) And I have seen some missed and some good opportunities.

Trends often occur when there are not enough traders involved and market has to advertise more and more to attract liquidity. So, big market participants are often not interested in trends, they would rather prefer balanced state of market to have opportunity to slowly accumulate their positions. It’s tough job – to accumulate position on the rising market.

But as we have seen most of the time they accumulate the price before finally advertising it higher, and gbp/cad recent example I have sighted on the chart and Entry and exit are mentioned on the charts given below

Take a look at update chart, Bit complicate to understand but not for those who have regularly visit my blog for updates

There is strong trade location building, which tells us that another spike and trading opportunity can arrive anytime soon, and We should not use higher stops to trade that opportunity and that is what smaller risk and strong rewards is known for.

Concept of Final Auction

Take a look at the updated chart of gbp/usd

I mention in my Friday posts that strong bias is building up in the cross, and stops are placed at 1.7003 area, price went to test the stops but spike two pips away from the protection area, and finally breaks the equilibrium barrier, and reached 1.7150 in no time.

Here is the updated chart of Sterling

gbp/usd New money flows.

Here We have seen the strong violation of rotation center, where price spend a neutral days and tells us that that breakout from 1.6972 to high of 1.7040 was the activity of strong buyers and give us hint, that they took the stops both way before marking the price up and usually not every level of price is important for market, But the levels which are important for market, they will protect those areas and strong reason to accept when price broke the psychological barrier of 1.7050 with ease.

Now, that price rallied to new multi year high, exposing another opportunity to see if new fund inflows to get it through 1.7200 barrier.

Value Shifts Immediately higher for Final Auction

Let’s first think about this: every trader has his idea of value, some traders recognize it, some don’t, but we all have idea of value, if we haven’t had it, we would not be able to make a trade. If you go short, you should think that current prices are unfair and market will return to lower prices, if you go long, you also should be aware that value will be built somewhere higher than current price levels. If you sit on your hands, you should think that value is located somewhere near current prices – in other words, opportunity hasn’t appeared yet.

Conventional and straightforward way for capturing value is to build moving average and derivative of moving average – Bollinger-Bands indicator. Moving average is considered to represent value, borders of Bollinger Bands are considered to represent 1 standard deviation from average:

if we take moving average as a substitute for value, we are risking to get many misleading signals.

Why?

It occurs because of what I call «Inequality principle»

It claims: «Different price levels are not equally important for the market».

Do you feel what I’m talking about? Moving average can’t distinguish what price levels are more important for the market – it’s responsibility of a trader. Missing piece is market logic.

But period in the red circle was a final auction, overall trend was rising and market was no longer able to stay inside of a trading range. When market lacks selling liquidity, when nobody is going to sell, it start advertising higher searching for sellers.

We often see that price is leaning to higher extremes and holds on higher prices.

Concepts of Protection Area

I have mentioned the concept of "Protection Area", As there are so many traders wonders that whether a particular breakout will succeed or will faded away, In this extended post I would like to mention the concept of "Imbalance" and "protection area", in one example. Price built up momentum early and when there are market run away from those prices, then market reject the prices from level below and that is why there are strong chances, that those areas are protected by Intra-day traders.

As, In any cases it become difficult to look for entry specially when price went back and forth on a neutral day after breakouts, so I always look for rejection point rather than momentum candles, Because momentum candles do carry wider stops, but rejection candles really don't have to risk too much and reward is always "hotspot area" or upper boundary of price action.

Gbp/usd technical update with low risk reward entry

gbp/usd protection area Intraday update

IN this chart, I have cleared most of the doubts that happens to be in mind of an intra-day trader,with above mentioned example as there price was protecting levels and then we saw strong momentum coming off from that area and we had to use wider stops but then we have rejection candles off that 1.7003 (Low was 1.7005) as the entry came in at 1.7019 and the risk was 16 pips and that risk was covered with the reward at the end of the day which was 19-20 pips.

As a technical trader, we should look to wind up the positions at the weekend and look to enter at the start of the week again if price offers such entry levels again.