PRICE ACTION Analysis Defined

Insight through the Eyes of Sir Alexander @megatrade101 (Brief excerpt)

Price Action Analysis is a vital key trading discipline, interpreting a simple price chart based on the price changes in the market. The chart could either be the Asian  Candlestick bar or a Western Bar format that should have no lagging technical indicators included on it. Probably, with a few exceptions of drawing trend lines that reflects  support & resistance levels thereafter.

The simplest form of a price chart describe herein has no technical indicators on it. The consistency of a mere Candlestick Bar formation to reflect price action by itself would be considered a practical method of reading through price movement without having to develop a bias market opinion at first glance. This could be done either with the Candlesticks or the Western bar chart method of analysis.

MegaTrade101 - Process of 'Price Action Analysis'

Behavioral Trading Insight: AUD JPY AUDJPY

A relief recovery where market conditions for equities in Asia followed suit as continued optimism over an impending US budget resolution may actually take place and avert a possible debt default. On the other hand, is it just a quick fix-patch for an extension that would buy more time to come up with a real working agreement that would have a real serious effect for a slow-growth US economic recovery?

Weighing these news have provided investors a timely easing from tension, fear and uncertainty clouding the market place coming from all directions. However it maybe, the initial talks would probably be acceptable for both parties simply to reach the end of the year's quarter ending of 2013 would be perceived as a near-term USD positive.

With that said, how does one prepare or create an effective trade strategy in the Foreign exchange market for any eventuality of a default or a resolution in the making given a limited time period? Obviously, there would be a lot of in case-scenarios that can be conceptualize before then. And the most common for a doom & gloom market reaction is a decline of the USD and the global catastrophic effects of a US debt default that could ripple in the entire financial markets. And that is where almost all investors and traders alike would come in together to sell-off the US Dollar.

MegaTrade101.com - Behavioral Trading Insight:

Understanding Forex Price Action: 4 Majors & 4 Cross Rates - LIVE 6.12

Perception Vs. Deception: USDOLLAR-FXCM

At times what is seen and reflected onscreen from candlestick bar formation are quite deceiving. And provide some premature / false signals especially during major Trend markets such as the US Dollar in this typical set-up.

As we have indicted in our previous market view analysis; that the makings of a bull trap can be identified whenever a market squeeze occurs. Price action moves in both directions giving at least two contrary outlooks that would confuse both market participants if not careful enough with their trades. The two candlestick bar formation as shown on this figure chart reflects as "Dark Cloud" bearish signal provided just that. Prices thereafter resumed higher setting newer prices heading North of the chart. There are times during uncertainty that this occurs. Stick with the Major Trend as this is typical of a sentiment based market rather than a technically driven one. Click to continue

Summary Guidelines:

For Currency Trading by MegaTrade101.com:

◦Choosing the right CCY Pair to trade
◦Establish Major / Mid-term Trend & Trade Position
◦Appropriate funds to accomodate trade strategies & contingencies
◦Amount willing to expose within a certain time frame for period to cover
◦Tolerable Stop-loss in pips and / or equivalent amount
◦Realistic & Flexible Profit Objective to maximize Market potential

Advance Alternative strategies available for hedging:

EURGBP Counter-trade Strategies

Market Sentiments & Trade Position:

by MegaTrade101
The general consensus of a thinly traded market can only be viewed by the tightly-price action among the currency majors while waiting for a some reason that would dominate the market place. This is where traders obvious take is simply to stay on the sideline. Likewise for some, but not for institutional players that can simply position themselves before any market action takes place. Through a strategic process of deduction positions taken on the following has been initiated by MegaTrade101.com:

AUDUSD LONG @1.05229 executed based from a 4 hour chart formation with a double bottom price @1.0515/15 levels on the way up within a 4hour trade session interval. Trend continuation moving forward with initial objective set above the 1.0580. Meanwhile the support levels is set @1.0500 even which is a good level to place a tolerable stop in case the market turns around to the other direction.
A daily close above the 1.0580 would signify a continuation of the trend higher. Volumes/OI have indicated some relatively new speculative trades from institutional players from the interbank market. Speculative retail trades have gotten some attention but with only a limited time frame for scalping a few pips from the price swings.

For a complete analysis of the trade, please click on the link.

GBPUSD long @1.6153 Position 1

Technical Perspective: GBPJPY Cross

As we have mentioned in our Market view analysis, the GBPJPY cross being an isolated case has followed the the USDJPY appreciation for the past few days trading activity in line with the USD recovery. The 77.65-77.90 price range support has held well as the USDJPY accelerates to its current levels at 79.31.

A clear breakout from the consolidation range of 77.90-78.90 for the past couple of weeks. This has led the cross GBPJPY to keep pace while the GBPUSD have maintained a steadier-to-lower session-to-session bias price and after the UK slightly better unemployment report that came out. The current rally of the GBPJPY is seen at the current price of 124.27 after breaking its trendline resistance at the 122.50 as shown in the chart and maintained above the above 21Day moving average of 123.08 levels.The primary extensions to 125.50 is critical for the week if and whenever the USDJPY continues to rally above the 79.65-80.10

FX Trade Analysis: Series 3

CCY in Focus: USDX - USDCHF & EURGBP continuing Trade Analysis
Classic Cross Trade Strategy based on Price behavior and action.

Trend Following : Classic Bull Run for USD/CHF & EURGBP General Outlook
Applied Analysis: Long Position through mid-term with variable trailing adjustments on prices for the USDx, EURGBP cross rate and the USDCHF against any adverse fundamental price action affecting the correlated currency pairs. For now, price action and behavioral patterns reflect price swings to whipsaw in both directions on a daily basis. No visible set-ups that identifies the next probable trade except to follow the price trend and reversal whether they be on a short temporary basis.

On Fundamentals: Watch List on the EU Zone crisis, UK, Spain and Italy particularly the G7 meeting. Although, pessimism prevails with investors until some renewed confidence can be resolved over in the Euro Zone. Most reports would be limited to price action justifying the movement in the market. Relative Reports to consider are Oil & the Precious metals Market

On Technicals: A stronger emphasis on the Candlestick Chart/ Bar formation, Daily Opening Gaps, mid-week price action, changes in relative strength index with the Stochastics. But more importantly daily price trading range between HI/LO that makes up the session to session net changes for the day.And the overall behavior of the major pairs relatively in comparison with the Volume and Open Interest on the Financial and commodity Futures including oil and gold prices. Please continue on our website Market View

Technical Perspective - EURJPY 4.20

The EURJPY cross indeed made more headway into its recovery from a low of 104.60 and currently at the 107.30. The price range is within a down channel & Trend from the previous high of 111.12 and the recent low of 104.60. With volume declining from previous report were due to profit taking / settlement rather than short covering. As most traders were net-short of the EURO vs. the Japanese Yen from most of the week's past.

A 50% Fib retracement back to the 108.30 is the next objective as the corrective move higher remains to be favored after the USDx declined to a low of 79.39. The Stochastics and momentum slowly building in a session to session would spill over to the US session as we head towards the end of the weeks closing. Please refer to the weekly chart formation as probable extensions higher can be placed at the 108.05/30 range that will provide a near term correction that may well extend until the last trading week of the month of April. Meanwhile, the comparison chart with the GBPJPY on the next tab have provided the positive tone influencing the European majors to set-aside the negative news surrounding the crisis on Spain.

Pivotal Price & Trend

USDx - EUR & GBP

True enough just right after the corrective move lower from the USDx registered "Higher Low" at the 78.09/10-78.80 trading range the expected recovery rally for the USD is on its way.

This was in line with our time frame / period market outlook / analysis dated the 12th of March "USDx 1st quarter to April Analysis" where a turn around would re-establish a USD recovery back to its original trend. A follow-through is likewise expected from hereunto with daily temporary pullbacks. Thus the next probable high would be made with the next trading weeks ahead. Extensions as previously described from the video from the support price of 78.80 basis point would initially target its high at the 80.40 - 81.80 before a retest above the 81.85-82.05 price point resistance levels.

This would correspond with the Pivotal price reversal of the USDX last marked in our CCY Price page indicator for the week ending March 2nd and followed by the European Majors thereafter. The high of 1.3485 for the EURUSD was first marked, likewise on the same week ending March 2nd. However, the GBPUSD did made a higher extension at 1.6036 on the last week of trading for the 1st Quarter which came in only second & keeping pace with the Euro. The last trading for the week of April 06 have showed some unwinding of positions due to a mix report but more favorable for the USDx to rally ending slightly below the 80.00 important level closing at 78.85 basis point. On the technical Perspective; the Daily three(3) rising method bar configuration with the fourth candle bar closing at the 79.85 is a bullish signal. Please continue at http://megatrade101.com/

Case Study: EURO 3.23

AVOID A GOOD FOREX TRADE - TURN THE OTHER WAY AROUND!

We came across a particular review and analysis report with one of the prominent broker's currency analyst on the Internet. Understanding that these market outlooks, analysis and reports across the wire is meant for traders specially for main street investors / traders to have a glimpse of what the FX market is actually doing.

With all due respect to the broker's currency analyst we are not going to mention the name of both as everyone maintains their opinions of the market and we respect that. However, we were compelled to use this as a case study not to criticize or claim otherwise, but merely to highlight market conditions where strategies are carefully considered to have at least an edge of knowledge and experience to achieve better trades along the way.

LINK: http://megatrade101.com/megatrade101/fxminar

Technical Perspective: GBPJPY Cross

Daily GBPJPY cross as of March 19 '12

The market potential of both cross rates have been significant after last Friday's sudden move after the news reports. The GBPUSD rally was likewise the catalyst for the GBPJPY cross to rally behind the EURJPY and have touched 132.42 high. The 130.75 Moving average would also serve as the initial support. Other technicians are looking for a continued pressure if risk appetite would remain on hold for the USD to move lower as it did last Friday's closing price. The weekly and monthly longer term outlook have been significantly bullish and remains to be tolerable for any drawback movement for the USDJPY relationship. Keep track of the closing prices above the previous day's closing and opening price levels.

And this was even contrary to its technical candle formation of a two consecutive weekly spinning top / doji especially located at the higher segment of its price range. And this was where other traders saw a possible correction but turned otherwise. The extension prices at the 132.40-133.00 will be its temporary topping out if and whenever a consolidation would be made. However, the GBPJPY would outpace the EURJPY by this coming week's trading since the USD may gain some lost ground on a daily correction.

Techncial Perspective: EURJPY Cross

Daily EURJPY cross as of March 19 '12

 The earlier price reaction of the EURJPY form the previous week was more influenced by the USDJPY continuing price higher reaching the 84.16 high. While the late reaction came form the USD pulling back to the 79.67 low. The correlation of the Euro & the Sterling Pound vs. the USD would be directly affected more than that of the cross rates.

However, the daily market reaction after the fall would have a relative mix sentiments as contrary movements are being set-up for a temporary correction for the EURJPY heading south in line with the USD gaining lost ground and would affect the Japanese Yen including the GBPJPY cross rates respectively. The price movement heading lower on a daily basis would be within the week's trading towards the end of the quarter before the next high would be attempted. The support price level of 108.10 would serve as the crucial price and a probable retest on a lower candle wick would be nearer to the 108.62 daily Moving average. A slower volume build-up can be gauge with the momentum and volatility index during the mid-week as we draw closer to the end of the month.

FOREX: USDx 1st Qtr- April Analysis by MegaTrade101

Technical Perspective: EURO vs. USDx

The EURUSD continued its decline due to the uncertainty of the global market and the recovery of the USDx from last week's trading activity. On the technical perspective, a retest of the previous low of 1.3025 is currently open for assault as long as the rally for the USDx would continue with its current pace working at the 79.80 basis point nearing its 1st resistance level of 80.05.

The closing price for the week is critical now with the USDx registering a higher low at the 78.09/10 support area. This USD rally was triggered by the testimony of FED Chairman Ben Bernanke's quiet stance on QE3, US consumer confidence and renewed interest for USD flight to quality investor shifting from the previous metals dramatic plunge to its current low levels. Daily price corrective moves are expected but the overall market sentiments are still bearish. The 2nd level of support would be at the 1.2950/80 levels that may well meet some bids and long liquidation for most position traders still has a bullish GBPUSD outlook.

Market Analysis SRO -3.05

The USD have manage to gain grounds overall in spite of the mix reports especially coming from the weaker than expected ISM figures, Fed Chairman Ben Bernanke's testimony and some renewed interest after Gold plunged to its lowest price for the opening for the new month of March.

Position adjustments have gained pace as the USD rallied to its 79.50 basis point resistance level after easily penetrating the 78.85 within the closing day of Friday's trading. This however, was expected on the technical side after the USDx have touched its objective at the 78.09 support and finally supported the rally with some good reports from the market.

With that said, the USD would have to continue and close for this week above the range of 79.50-80.05 levels to have a healthier confirmation that the higher bottom for the USDx have been established. Although, it already looks to be the case, yet the the rapid increase and volatility it provided were simply to fast and attained it within a two day trading period. A gradual increase higher would make it steadier and not susceptible to run out of steam after profit taking activities at the closing of Friday the 2 of March. The Commitment of Traders Report (COT) would provide a clearer perspective in actual figures that would include the VOI for the USDx alongside the financial futures. Anticipating some renewed interest may prove the rally to be stronger both on the fundamental and well supported by the technical indicators. Although, any price above the the USDx closing for the week of March 09 would be actual signal to be watching for.

The day-to-day activity would be limited to the trading range below the resistance of 79.50  with some probable extensions nearing the 80.00 basis point. This would have a wider effect on price fluctuation on both directions for the majors likewise the cross rates during the first three days of the opening trade.
Continue on link: http://megatrade101.com/megatrade101/market-view

In Focus: US Dollar Index (78.09 low)



USDX as of FEB 29, 2012



The USD Index has obtained its objective with an opening price of 78.10 today the 29th trading day of February. There has been a mixture of reports from the US. On the technical perspective, the price gap from Thursdays closing of 78.22 would make the trade for a temporary recovery as a relief from its recent declines.

This most recent price of 78.09 low may well be still a signal that further declines can be expected for the USDx in the trading range of 77.90 - 78.85 basis point. The adjusted and nearest resistance is now at 78.85. Failure for the USD to recover and try to seek a price consolidation near these bottom ranges would still be vulnerable for declines unless certain fundamental reports to support the USD would state otherwise. FED Chairman Ben Bernanke's testimony would be carefully watched for market direction in the next couple of days.

Technical Perspective: EURJPY Cross Rate

EURJPY as of FEB 14, 2012

The EURJPY has recovered from it daily corrective move and is currently back at the highs of 102.75. The corrective low at 101.80 was well supported and in line with the EURUSD 1.3144 correction dated the 13th of February and is working at the 1.3200 recovery levels. while the daily directional move of the USDx has helped the USDJPY to gain some ground and is moving back higher above the 78.00 1st resistance levels that has prompted to support the EURJPY cross currently above the 103.00 levels. The price adjustments likewise helped some traders to regain back some trade footing with fresh momentum and volumes have emerged while volumes are slowly increasing towards the mid-week's trading activity.

The daily candle bars as shown on the chart depicts the spread between bulls and bears are just about even while waiting for other fundamentals in the news wires regarding the Euro. For now the similar drawbacks are only expected on a day to day and trading session to session basis while the directional trend for the EURJPY cross is still within its upward trend. Suport1 levels are seen at 101.60 while it stays above the 21 day MA of 101.20. This justifies maintaining our position of Feb 2, 2012 as prices would continue to move gradually at a better pace while building momentum after the 2 day correction along side with the corrective move of the EURUSD. Otherwise, the USDJPY may well bid the prices higher in line with the corrective move higher of the USDx currently working at the 79.20 basis point levels. Any price above the 79.50-80.10 USDx resistance would trigger the cross rate to further its advance.

Technical Perspective: AUDUSD

The daily technical outlook for the Aussie dollar indicates a daily 'Harami' candle formation signifying a bullish pattern which was supported with the recent upward move towards the 1.0777 level, after the correction to the 1.0638. Although, the recent high of the Aussie Dollar at the 1.0843 was an extension price above our objective dated the 26th of January Market view report; considered a new high defining an uptrend has been established.

The contradiction would be a weekly formation that defines a spinning top signaling a probable correction is in sight. As some of the analyst have stated that the AUDUSD is a step away from a possible reversal. price wise could be a probability but trend wise its not.Of course, again otherwise proven to be wrong. An indecision could have been seen as the market in itself has been quiet for the opening trading day. The market behavior for the Aussie may well be simply a pause with a tight daily range before a resumption would be made towards the upward direction. Currently its slightly above the 21day MA of 1.0635 and otherwise the direction changes lower the support would be at 1.0540/50 levels within another rising channel still intact.

GUIDE FOR CANDLESTICK INTERPRETATION

Spinning Tops are depicted with small bodies relative to the shadows. This demonstrates some indecision on the part of the bulls and the bears. They are considered neutral when trading in a sideways market. However, in a trending or oscillating market, a relatively good rule of thumb is that the next days trading will probably move in the direction of the opening price. The size of the shadow is not as important as the size of the body for forming a Spinning Top.



A Harami candle chart pattern in which a large candlestick is followed by a smaller candlestick whose body is located within the vertical range of the larger body. In terms of candlestick colors, the bullish harami is a downtrend of negative-colored (black) candlesticks engulfing a small positive (white) candlestick, giving a sign of a reversal of the downward trend.