A note on lower timeframe confirming price action…
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 – 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 only stick with pin bars and engulfing bars as these have proven to be the most effective.
For us, lower timeframe confirmation starts on the M15 and finishes up on the H1, since most of our higher timeframe areas begin with the H4. Stops usually placed 5-10 pips beyond your confirming structures.
EUR/USD:
The EUR/USD pair, as you can see, declined in value for a fourth consecutive day yesterday, consequently forcing price to break below and retest the 1.1200 figure (a noted move to watch for in yesterday’s analysis) before reaching lows of 1.1159 on the day. This has, as we mentioned in our previous report (see link below), potentially opened the trapdoor for further selling this week down towards the top-side of daily demand at 1.1124. This daily barrier remains our final take-profit target for our current short position taken from 1.1273 last Friday. Prior to the break of 1.1200, our stop was at breakeven. However, upon seeing further weakness in this pair yesterday our stop has been moved into profit at 1.1225.
Additional reasoning behind us seeing further weakness in this pair comes from the higher-timeframe picture. Weekly price is currently trading from major supply coming in at 1.1533-1.1278, whilst down on the daily chart, supply at 1.1385-1.1332 (located just within the above said weekly supply area) has firmly established itself on its second retest with price now en-route to touching base with daily demand coming in at 1.1057-1.1124.
Other than a possible short trade on a second retest of 1.1200 today, we see little else being offered in this market for the time being.
http://www.icmarkets.com/blog/wednesday-23rd-march-daily-technical-outlook-and-review/
Levels to watch/live orders:
- Buys: Flat (Stop loss: N/A).
- Sells: 1.1273 [LIVE 60% of position already taken at 1.1200] (Stop loss: 1.1225). 1.1200 [Tentative – confirmation required] (Stop loss: dependent on where one confirms this level).
GBP/USD:
Another wet day for the Sterling market yesterday saw this pair take its third consecutive hit. Price took out the 1.4200 figure and went on to whipsaw through 1.4100 which came within three pips of hitting daily support at 1.4079 before snapping back to the upside. For those who read our previous report on this pair (see link below) you may recall us mentioning to watch for a retest opportunity at the underside of 1.4200. Unfortunately we missed this move – well done to any of our readers who managed to get on board before it tumbled lower!
Fundamentally, Brexit fears and Tuesday’s terror attacks in Brussels have likely helped fuel the recent sell-off. Technically, however, this pair is in a beautiful place to be looking for longs at the moment. Collectively, we see the following structures:
- Psychological support 1.4100.
- Fibonacci support at 1.4089.
- Daily support at 1.4079.
- Weekly support at 1.4051 (Broken Quasimodo line).
What is more, there is very little resistance seen on the horizon until the 1.4200 region! Therefore, the above said area from 1.4100 to 1.4051, with the backing of a lower timeframe setup (preferably on the M30/M60), is somewhere we’d look to enter long today.
Levels to watch/live orders:
- Buys: 1.4051/1.4100 [Tentative – confirmation required] (Stop loss: dependent on where one confirms this area).
- Sells: Flat (Stop loss: N/A).
AUD/USD:
It was clearly not a good day for the AUD yesterday with the pair seeing little to no buying interest! Over 100 pips were lost during the sell-off which brought this market to lows of 0.7519 by the day’s end. However, ‘good always comes out of bad’ so they say. This downward move completed the D-leg of a H4 1:1 correction (black arrows), which boasts 61.8% Fibonacci support at 0.7517 as well as the 0.7500 figure lurking just below.
Buying from this region may very well be tempting due its converging levels, but we still remain wary. The reason for why is that price is currently trading from a major weekly resistance level drawn from 0.7604, and daily action recently drew up a strong bearish engulfing candle that shows room to move lower to a daily support area at 0.7410-0.7455. To that end, we feel the converging buy zone on the H4 chart (see above) may only be good for a small intraday bounce at best.
If we’re correct in our above analysis, 0.7500 will likely be taken out today and price will head on down to connect with the top-side of the above said daily support area at 0.7410-0.7455. This leaves 45 pips of profit to be had here if we’re able to enter short on a retest of 0.7500 with a stop no bigger than twenty pips. It will be interesting to see how this day pans out!
Levels to watch/live orders:
- Buys: Flat (Stop loss: N/A).
- Sells: Watch for price to consume 0.7500 and look to trade any retest seen thereafter (lower timeframe confirmation required).
USD/JPY:
Heavy bids pushed this market higher early on in the London session yesterday, forcing price to peek above H4 supply at 112.88-112.53 by mid-morning trade. It was at this point the market reversed as U.S. traders stepped in bringing the action to lows of 112.34 – essentially closing the day with little change and into an area of H4 support at 112.15-112.42. From the H4 timeframe, there is, as you can see, little room for prices to move at the moment. Despite this, the higher-timeframe picture shows room to trade lower on the weekly chart down to support at 110.09, whilst on the daily, price is currently trading at the underside of a range edge at 112.56 (selling wick seen here).
Given the points made above, we feel the best course of action to take today is to wait for price to close below the 112.00 figure and look for confirmed shorts on any retest seen. This would not only confirm selling strength from the higher-timeframe areas mentioned above, but also likely open the runway south down to H4 demand at 111.21-111.46, followed closely by the 111.00 figure (effectively daily support at 110.96) for take-profit targets.
Levels to watch/live orders:
- Buys: Flat (Stop loss: N/A).
- Sells: Watch for price to consume 112.00 and look to trade any retest seen thereafter (lower timeframe confirmation required).
USD/CAD:
Based on the recent advance north in the USD/CAD market and the clear drop in Oil to the 37.50 region, price is currently seen trading within a H4 AB=CD bearish sell zone fixed between the 161.8%/127.2% extensions (1.3270/1.3194 Green zone). Within this base, as you can probably see, there’s also a H4 61.8% Fibonacci level seen at 1.3220 taken from the high1.3401 and a H4 mid-level barrier drawn from 1.3250.
Although the above H4 sell zone is bolstered by a daily supply area coming in at 1.3405-1.3259, we’d still prefer to wait for a lower timeframe sell signal before entering short. Reasons for why are that the sell zone itself is relatively large and would require too big of a stop for us, and secondly, there is little stopping price from ignoring the H4 area and driving higher into the daily supply zone.
Levels to watch/live orders:
- Buys: Flat (Stop loss: N/A).
- Sells: 1.3270/1.3194 [Tentative – confirmation required] (Stop loss: dependent on where one confirms this area).
USD/CHF:
Following the retest of the 0.9700 handle on Tuesday, further extension was seen yesterday pulling this market into H4 supply penciled in at 0.9749-0.9781 by the close 0.9749. With price seen attempting to push lower from here twice already, but each time finding support around the 0.9727 area, do the bears have what it takes to defend this zone successfully?
To our way of seeing things right now, with the higher-timeframe action currently testing the underside of the recently broken weekly trendline support extended from the low 0.9071, the H4 supply still remains in a good position despite H4 candle activity. In spite of this, trading this area at market is a little too risky for our liking as we generally do not like taking trades at zones when the only higher-timeframe convergence is a trendline. Not only this, there is also a chance price could fake above to the 0.9800 figure and quite possibly even to the daily resistance seen at 0.9822 before sellers step in. Therefore, in our humble opinion it would be best to wait for the lower timeframes to confirm the current H4 area before risking capital.
Levels to watch/live orders:
- Buys: Flat (Stop loss: N/A).
- Sells: 0.9749-0.9781 [Tentative – confirmation required] (Stop loss: dependent on where one confirms this area).
DOW 30:
Reporting from the weekly chart this morning, selling interest is currently being seen from supply at 17752-17552 which converges just beautifully with trendline resistance taken from the high 18365. Should the sellers continue to remain dominant here, the next downside target to keep an eyeball on is support penciled in at 17135.
Sliding across to the H4 chart, one can see that price broke down during the course of yesterday’s sessions, landing this market within the jaws of H4 demand given at 17456-17496. Now, entering long from this barrier is not really something we’d stamp high probability due to where price is positioned on the higher-timeframe picture (see above). That being the case, what we’d like to see is price CLOSE below and retest the current H4 demand as supply (green arrows). This would not only give traders the opportunity to short down to H4 support drawn from 17275, but it will also likely confirm selling strength from the weekly supply.
Levels to watch/live orders:
- Buys: Flat (Stop loss: N/A).
- Sells: Watch for price to consume 17456-17496 and look to trade any retest seen thereafter (lower timeframe confirmation required).
XAU/USD: (Gold)
Gold took a rather brutal hit to the mid-section yesterday, dropping over 28$ in one sitting due to a stronger dollar being seen across the board! As a result of this, H4 demand at 1237.2-1243.9 was annihilated (now acting supply), as was H4 demand at 1224.6-1226.8, which has just recently been retested as supply.
Consequent to the above, a break below weekly support at 1224.1 was seen, potentially clearing the path south toward weekly demand at 1205.6-1181.2. On top of this, a close below daily demand at 1224.6-1238.3 (now acting supply) also took place, possibly setting the stage for a continuation sell-off down to daily demand at 1181.4-1200.7 (sits within the extremes of the aforementioned weekly demand).
With the above in mind, what levels are on our radar today? Well, we like the look of the 26th Feb low at 1211.3 on the H4 chart, since it fuses nicely with a 1:1 Harmonic correction (black arrows) and a 78.6% Fibonacci support level (taken from the low 1190.8). However, judging from what we’ve seen on the higher timeframes (see above), a long from here is a risky play in our book and would only be possible with the backing of a lower timeframe buy setup (for confirmation techniques, please see above). In addition to this buy level, we also like the recently broken H4 demand (now supply) at 1224.6-1226.8. This area has already held ground on its first retest, so it stands a good chance if it’s tested for a second time. Therefore, as long as price does not hit 1211.3 before connecting with the above said H4 supply, we’ll be looking for lower timeframe sell opportunities around this region today.
Levels to watch/live orders:
- Buys: 1211.3 [Tentative – confirmation required] (Stop loss: dependent on where one confirms this level).
- Sells: 1224.6-1226.8 [Tentative – confirmation required] (Stop loss: dependent on where one confirms this area).
