Inside technicals and chart patterns by 
I’m not sure why questions seem to come in waves, but it seems many of you have aussie on the brain…the AUD/USD.
I first posted the daily aussie’s Dow 1-2-3 short set up and Fibo extension update back on July 17th in this post.
There has certainly been a lot that has happened since then!
And it always seems that during extremes there is this sudden shift to how and when a reversal will take place. For every entry there’s got to a be a set up before we shift to a buying mentality after a dramatic and/or extended downtrend.
Ok, first psychological trap: Bottom (and top picking) is for losers. It’s the glory trade, the ego trade, the "look how brilliant I am to pick a top/bottom" trade. Don’t do it.
Seriously, think about it this way. Realize that anyone short (I am still hanging on to a single lot as I have scaled out of my original Dow 1-2-3 set up) is still looking for lower lows and navigating through each support level. I’m conscious of the fact that one of the support levels will finally being a bounce or stall BUT I’m not looking for a reversal buy on the daily chart quite yet.
A key low at 0.8513 was broken but that’s not the significant low that is being watched…that low is 0.8500.
Today’s session low of 0.8495 is a sign that the "00" buyers are still hanging in there. But each push by sellers is chipping away at this "00" support. This psychological level is where the battle between buyers and sellers is being fought. With the slight bounce I’m seeing there is indeed reason to think that in the near term 0.8500 will hold.
There is 30 minute and 60 minute RCI resistance between 0.8546 and 0.8599.
On to the weather…As many of you may know, then "Tropical Storm" Gustav was upgraded to a hurricane. I set this trade up when I read the NOAA report (I live in South Florida so it’s a part of life…). For forex traders, this means that the crude oil market is in play with the storm path decidedly Gulf-bounce and that has in turn effected the dollar…which ofcourse has effected the dollar-correlated majors. You can check out my "weather report" here.
Finally a big thanks to those of you who joined me this morning for the my weekly Chart Pattern Trading webinar. We had a few new traders in the room who had questions about the RCI (Raghee’s Cycle Indicator" aka the "Wave").
About the name change: My "Wave" was all too often confused or associated with Elliot Wave (it’s not). And frankly, had I known when I put this tool together and started testing it all those years ago that I would be writing books, traveling, teaching, and posting charts all over the web, well, I would have given it a better name!
The RCI (aka Wave) is three individual 34 period exponential moving averages. One is set on the high, one is set on the close, and one is set on the low.
- Raghee
Raghee,
Have finished your second book and now the three market entry setups make a lot sense to me. I like your simple yet effective way of using the wave to determine the market cycle. Had some successful momentum and swing trades. Thanks for showing me your effective way of trading the forex.
By the way, the new name RCI is not very indicative and it just put it in the same category of over thousand other indicators. I would prefer the RWave (Raghee’s Wave) or RCWave (Raghee’s Clock Wave) as a name where the name tells everything.
I still have problems determine the profit target on the longer term chart because the 00 point normally cut the profit short. Any suggestions?
You can use the Fibo EMAs that I just wrote about in my post “Fibonacci-based Moving Averages”. You can also use the Wave as a trailing stop for those entries that you see merit more wiggle room within the context of a established 2-4 o’clock or 4-6 o’clock angle.