Waiting for lower timeframe confirmation is our main tool to confirm strength within higher timeframe zones, and has really been the key to our trading success. It takes a little time to understand the subtle nuances, however, as each trade is never the same, but once you master the rhythm so to speak, you will be saved from countless unnecessary losing trades. The following is a list of what we look for:
- A break/retest of supply or demand dependent on which way you’re trading.
- A trendline break/retest.
- Buying/selling tails/wicks – essentially we look for a cluster of very obvious spikes off of lower timeframe support and resistance levels within the higher timeframe zone.
- Candlestick patterns. We tend to stick with pin bars and engulfing bars as these have proven to be the most effective.
We typically search for lower-timeframe confirmation between the M15 and H1 timeframes, since most of our higher-timeframe areas begin with the H4. Stops are usually placed 3-5 pips beyond confirming structures.
EUR/USD:
In the early hours of yesterday’s segment, the pair, as you can see, began to fade around the 1.0735 region. This consequently persuaded the shared currency to retest the 1.07 handle as support. In view of the somewhat compressed approach (little active demand – see H4 wicks) to this psychological band and the fact that daily candles are seen retesting a support area formed at 1.0714-1.0683, this may encourage buyers into the market today. Despite this, the main interest here remains around 1.0773-1.0751: a H4 supply zone that sits in between a H4 mid-level resistance at 1.0750/161.8% H4 Fib extension at 1.0743 (drawn from the low 1.0569) and a H4 61.8% Fib resistance at 1.0777 (taken from the high 1.0905). Also noteworthy is the daily resistance seen at 1.0772 located within the upper limits of the said H4 supply base.
Our suggestions: The above points all suggest that the single currency may find resistance within our green area drawn on the H4 chart at 1.0777/1.0743. Seeing as how the area is rather large and the weekly chart shows room to appreciate beyond the H4 sell zone, we’ll wait for a reasonably sized H4 bearish candle to print within before looking to sell.
Data points to consider: US Philly Fed manufacturing survey report and US weekly unemployment claims at 1.30pm, US Treasury Sec Steven Mnuchin speaks at 6.15pm GMT+1.
Levels to watch/live orders:
- Buys: Flat (stop loss: N/A).
- Sells: 1.0777/1.0743 ([waiting for a reasonably sized H4 bear candle to form before pulling the trigger is advised] stop loss: ideally beyond the candle’s wick).
GBP/USD:
During the course of yesterday’s sessions, we saw the pair trim part of Tuesday’s gains as price extended its downside move from the 1.29 handle. Bolstered by a daily resistance coming in at 1.2876 cable eventually managed to close below the 1.28 hurdle, and is now seen poised to test the H4 broken Quasimodo line penciled in at 1.2744. What Wednesday’s move also accomplished was bringing weekly price back below resistance at 1.2789.
Although we believe a bounce is likely to be seen from the H4 broken Quasimodo line, trading long from here when both weekly and daily price are trading from structure is chancy, even with additional confirmation. Therefore, the best we feel we can do here is wait and see if the H4 candles retest the 1.28 line as resistance.
Our suggestions: In the event that H4 price retests 1.28 and manages to form a lower-timeframe sell signal (see the top of this report), a short from here is likely to achieve 1.2744, and quite possibly beyond should higher-timeframe sellers get involved.
Data points to consider: BoE Gov. Carney is scheduled to speak at 4.30pm and also 5.30pm in Washington DC. US Philly Fed manufacturing survey report and US weekly unemployment claims at 1.30pm, US Treasury Sec Steven Mnuchin speaks at 6.15pm GMT+1.
Levels to watch/live orders:
- Buys: Flat (stop loss: N/A).
- Sells: 1.28 region ([waiting for additional lower-timeframe confirming price action is advised] stop loss: dependent on where one confirms this area).
AUD/USD:
The value of the Aussie weakened in aggressive fashion on Wednesday, ultimately clearing out bids around the 0.75 handle, which is currently being retested as resistance. Consequent to this, weekly price shows that the majority of last week’s gains have been erased and the unit is now seen trading within the lower limits of a support area at 0.7524-0.7446. What’s more, daily action is also now seen trading within the walls of a support area formed at 0.7449-0.7506, which happens to bolster the H4 demand at 0.7449-0.7475: the next downside target on the H4 scale.
Our suggestions: Given that the H4 demand is placed within both the said weekly and daily support areas, a long from here is a possibility. However, seeing as this would be considered the areas second time back, we would not feel comfortable pulling the trigger without additional confirmation in the form of a reasonably sized H4 bullish candle.
Data points to consider: US Philly Fed manufacturing survey report and US weekly unemployment claims at 1.30pm, US Treasury Sec Steven Mnuchin speaks at 6.15pm GMT+1.
Levels to watch/live orders:
- Buys: 0.7449-0.7475 ([waiting for a reasonably sized H4 bull candle to form before pulling the trigger is advised] stop loss: ideally beyond the candle’s tail).
- Sells: Flat (stop loss: N/A).
USD/JPY:
Beginning with a look at the weekly timeframe this morning, we can see that candle action is hovering between a resistance area at 111.44-110.10 and a support area drawn from 105.19-107.54. Overall, the bears look to have control at the moment, and therefore a test of the said support zone is possible. The story on the daily chart, however, shows price to be trading within the walls of a demand base at 108.55-109.17. Technically speaking though, the bulls look drained here which could eventually spark further selling down to the support area lodged at 107.15-107.90.
Swinging across to the H4 candles, upside remains capped by the 109 handle following Monday’s bounce from demand at 107.77-108.21. In view of the current H4 demand being bolstered by the said daily support area, which itself is supported by the aforementioned weekly support area, the 109 handle could be consumed today.
Our suggestions: In the event that a decisive H4 close is seen beyond 1.09 and price retests the boundary as support, we would, assuming that the retest is followed up with a lower-timeframe buy signal (see the top of the report), look to buy, targeting the H4 mid-level resistance at 109.50 and the 110 handle (represents the lower edge of the weekly resistance area mentioned above at 111.44-110.10).
Data points to consider: US Philly Fed manufacturing survey report and US weekly unemployment claims at 1.30pm, US Treasury Sec Steven Mnuchin speaks at 6.15pm GMT+1.
Levels to watch/live orders:
- Buys: Watch for H4 price to engulf 109 and then look to trade any retest seen thereafter ([waiting for additional lower-timeframe confirming price action to form following the retest is advised] stop loss: dependent on where one confirms this number).
- Sells: Flat (stop loss: N/A).
USD/CAD:
The USD/CAD surged north for a third consecutive day on Wednesday, as oil prices took a hit to the mid-section. After running through multiple H4 resistances, the pair is now seen testing the underside of a supply zone at 1.3495-1.3485 that is positioned directly below the 1.35 handle.
Over on the daily picture, the buyers and sellers are seen battling for position within supply coming in at 1.3494-1.3439. Weekly price on the other hand, has recently crossed back above the 2017 yearly opening base line at 1.3434. Under normal circumstances, this would be considered a rather important bullish cue. However, since we know that there is a somewhat strong-looking double-top formation located nearby around the 1.3530 neighborhood (see green circle), the bulls could very well struggle here.
Our suggestions: Personally, shorting at the current H4 supply is risky given the round number 1.35 lurking just above. It has ‘fakeout’ written all over it! As such, should price happen to print a H4 selling wick that pierces above the current H4 supply and taps 1.35, we would look to short this candle, targeting the support area seen at 1.3450-1.3437.
Data points to consider: US Philly Fed manufacturing survey report and US weekly unemployment claims at 1.30pm, US Treasury Sec Steven Mnuchin speaks at 6.15pm GMT+1.
Levels to watch/live orders:
- Buys: Flat (stop loss: N/A).
- Sells: Look for price to print a H4 selling wick that pierces above the current H4 supply and taps 1.35 – this is a cue to sell (stop loss: beyond the selling wick).
USD/CHF:
With weekly price seen trading below the 2016 yearly opening level at 1.0029, the bears could potentially continue pumping the pair down to support penciled in at 0.9861. On the other side of the coin, however, we have fresh bids coming in on the daily chart from within the lower limits of a support zone drawn in at 1.0001-0.9957. Given the difference of opinion being seen on the bigger picture right now, let’s see what we can wrinkle out of the H4 chart…
As you can see, the H4 candles are currently loitering between parity (1.0000) and a H4 mid-level support at 0.9950. Notable features on this scale is the nearby April opening level at 1.0016 plotted just above 1.0000, and the H4 demand seen located below 0.9950 at 0.9913-0.9927.
Our suggestions: A retest of 1.0016/1.0000 (green zone) would, if a reasonably sized H4 bearish candle took shape, be a relatively nice place to short from given weekly flow. The reason for requiring a confirming bearish candle prior to entry is simply due to the fact that daily buyers could push this market higher.
Data points to consider: US Philly Fed manufacturing survey report and US weekly unemployment claims at 1.30pm, US Treasury Sec Steven Mnuchin speaks at 6.15pm GMT+1.
Levels to watch/live orders:
- Buys: Flat (stop loss: N/A).
- Sells: 1.0016/1.0000 ([waiting for a reasonably sized H4 bear candle to form before pulling the trigger is advised] stop loss: ideally beyond the candle’s wick).
DOW 30:
Although the index clocked fresh lows yesterday, the structure of this market remains unchanged. Weekly flow still looks poised to extend the pullback seen from record highs of 21170 down to 19675-19964: a demand area that’s bolstered by the 2017 yearly opening level at 19769. Alongside this, daily bears are currently in a strong position right now. Assuming that the sellers remain in the driving seat here, the next downside target can be seen around demand at 20003-20091, which happens to sit directly above the said weekly demand.
As highlighted in Wednesday’s report, before one looks to go about shorting this market it might be worth noting that there’s a H4 demand area at 20381-20425 to contend with first. Once this area is cleared, the daily demand will likely be brought into the picture. As you can see, the H4 candles are seen testing this H4 demand base as we write. The bulls are showing some interest, but given the higher-timeframe picture it’s unlikely going to amount to anything notable.
Our suggestions: Sit on your hands and wait for the H4 demand to be taken out (a H4 close). Once/if this comes to fruition, one can then look at shorting any retest seen to the underside of this zone (a reasonably sized H4 bear candle is required prior to pulling the trigger), targeting the daily demand mentioned above.
Data points to consider: US Philly Fed manufacturing survey report and US weekly unemployment claims at 1.30pm, US Treasury Sec Steven Mnuchin speaks at 6.15pm GMT+1.
Levels to watch/live orders:
- Buys: Flat (stop loss: N/A).
- Sells: Watch for the H4 demand at 20381-20425 to be engulfed and then look to trade any retest seen thereafter ([waiting for a reasonably sized H4 bear candle to form following the retest is advised] stop loss: ideally beyond the candle’s wick).
GOLD:
In recent sessions, the yellow metal continued to drive lower after touching base with a H4 supply zone seen at 1292.5-1289.2. The move, as you can see, completed at a H4 AB=CD 127.2% ext. at 1274.2, which happens to be housed within a H4 demand area at 1271.8-1275.2. Although this zone has already done a fine job of supporting the bulls, both weekly and daily structure show that the bears could remain in control.
Weekly flow shows price trading nicely from two Fibonacci extensions 161.8/127.2% at 1313.7/1285.2 taken from the low 1188.1 (green zone), while daily action has room to stretch down to a support area marked at 1265.2-1252.1 (a weekly support line at 1263.7 is seen housed within this daily area – the next downside target on this scale).
Our suggestions: We do not see a lot to hang our hat on at the moment. Here’s why:
- A long would, of course, place one against potential weekly and daily sellers.
- A short, although supported by higher-timeframe flow, is risky given the current H4 demand and nearby H4 support at 1270.7. Even with a H4 close seen beyond these two areas, price would then be too close to the top edge of the daily support area to consider a sell!
Maybe we’re missing something here, but it seems like we’re trapped at both ends!
Levels to watch/live orders:
- Buys: Flat (stop loss: N/A).
- Sells: Flat (stop loss: N/A).
