Here I have a rising wedge pattern on the 30 minute chart.  This chart has a total of three patterns on it and I could reduce or increase it depending upon how many completed and/or emerging patterns I want to see.

I’m pretty excited to show you the Autochartist plug-in on the MT4 platform.  I just got it today and have been testing it but thought I would post a few charts as I am scanning pre-Asia.  The Autochartist chart pattern for this alert above looks like this:

The red colored lines are the lines for emerging patterns while the blue are the lines form completed patterns.  Notice also have the forecast regions (blue) shaded on the chart.

The set up here is likely a continuation as long as prices stay above the 90.00 level.  Even though the uptrend line has been broken, with prices above the major psychological level, I am not eager to short north of it.  The reversal would be better confirmed by the uptrend line break and a break of 90.00.  Otherwise look for a buying opportunity off the support AREA here and perhaps a sideways stall are the Asian session open is still about 90 to 120 minute away.

Pattern alerts are great (especially with the ease of automation!) but what happens when the underlying market cycle doesn’t agree.  That’s the case here:  The 60 minute USD/JPY is in a distribution cycle as this asymmetrical triangle squeezes into the narrows of this pattern.  The touchpoints for support are at 90.46 and 90.10.  This is certainly a soft support level with a variance of 36 pips.    It could be aggressively bought but the buy zone is very wide and therefore carries the inherent risk of the validity extending down to the 90.00 decade level.  A breakout play through the downtrend line is not advisable at this time and won’t be until the market cycle flattens out to accumulation.  As long as the market is in distribution the follow through will be unreliable.  There is resistance at the 91.50 area and this is just beyond the downtrend line resistance.  This will be a low risk short entry — again — as long as the 60 minute is in distribution.  The trade off the 91.50 ceiling would be valid until 91.65.

Remember the levels are there as decision levels but what we do at these levels is dictated not by the pattern itself but by the market cycle that the pattern has developed within.

The 60 minute EUR/USD is getting ready to pierce the uptrend line support of the Continuation Rising Wedge pattern.  With the uptrend still intact on this timeframe, this is a nice short term correction and a short trigger that could set up a trend follow buy.

The swing BUY would trigger as the wedge reversal carries prices to the major psychological level at 1.4750 and the top line of my Wave (34ema high).  The “00″ breakdown at the 1.4800 level is triggering during the doldrums of the forex trading day as London has “closed” and so some traders may choose to be patient and wait for the Asian session to play the trend follow buy as long as the market cycle is still in an uptrend.

The dollar-yen was trading today during the bank holiday in Japan but there should be decent movement as the Tuesday morning Tokyo open is underway.

The 60 minute chart is trending higher as prices are testing on 92.00 to 91.80 support.  There is a near term double bottom that is holding prices as buyers step in and there is also the support of the low uptrend line.  The channel up pattern can be a swing buy set up as long as prices stay above the lower uptrend line.  The 34ema low on the 60 minute chart is at 91.72.

When swing trading, you have to put the amount of the correction you’re expecting into perspective.  A bounce on a 15 minute chart is going to be a smaller move as compared to say a 240 minute chart like what we have below.  And more importantly the 15 minute may very well not even be in a trend to set up a swing trade. (I have an example of the 15 min at the end of this update.)  Playing shallow corrections will hurt in the long run and expecting too much of a correction will have you either waiting for an unrealistic entry or flirting with a trend reversal.

The downtrend line of the wedge pattern alert (above) is one way of measuring not only the resistance of the downtrend but also the trigger for the reversal.

There’s another important level to watch in a downtrend and that’s the 34ema low - otherwise known as the bottom line of the Wave.  This is also a great corrective short entry and the top line of the Wave is an perfect way to compliment a pattern but identify the downtrend resistance.

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I prefer to combine both…you’re going to need the Wave anyways to identify the trend and so why not use the support and resistance it provides as well…

…and here’s the 15 minute chart:  Would you consider it a downtrending market based upon the direction of this time frame?  Look at the angle of the Wave.

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I’m looking the 240 minute and 15 minute USD/CHF charts and wanted to point out a few things to those of you who look at multiple time frames to pick your set ups.  Each time frame is a reflection of short to long term psychologies.

The 240 minute chart us ripe for a swing short if prices can rally to the bottom line of my Wave (34ema low).  As long as the trend is down the rallies to resistance are perfect shorting opportunities.  The main question is what will you define a “rally to resistance” to be?  Chart pattern alternatives would be channel down and falling wedge.

The 15 minute char is a perfect example of a “no opinion” sideways market.  This is a good short to long term intraday time frame contrast to the 240 minute chart.  So one option is to look for momentum trades on the 15 minute chart:  triangles and rectangles.  If your outlook is for the near term and you consider the typical pip movement during the Asian session, it’s a good choice.  The 15 minute chart also could be a good way to follow the trend of the 240 minute chart which means that as the short term time frame is going sideways you would consider that the longer term time frame is in a downtrend.  This is basically suing the 240 as a directional filter for the 15 and in many ways “multiple time frame confirmation” which I usually do not use….but it’s worth mentioning/defining it here since many of you will consider that longer term and want to choose a side on the 15 minute sideways market.

I love following up trade set ups because they show how one trading plan can morph into another and remind us all just how dynamic the market can be.

So here’s the follow-through to the upside from yesterday.  Prices rallied toward the Forecast Region of the original 60 minute triangle breakout and fell just a handful of pips short of the initial resistance I was looking for.

Now ofcourse we see that the market has broken down and here’s why it’s so important to 1) realize that a Forecast Region or Profit Target can be a ceiling and to 2) always be aware of the next possible set up.

The cable sold off from the 1.6655, just five pips shy of the lower level of the Forecast Region and five pips above the 1.6650 major psychological level. 

The next set up another triangle and here the uptrend line support broke.  Again, it’s the 60 minute chart so basically after the breakout lost momentum, prices settled down again only to break support for a breakdown.  I think it’s also important to notice that these two triggers occurred during two different financial center overlaps.  The first occurred during Asia (Sydney/Tokyo/Hong Kong/Singapore) and the second during the Frankfurt/London overlap.  Be aware we are now in the Frankfurt/London/New York overlap and another scenario could certainly present itself!  Also note that this 60 minute cable is no longer in a sideways market cycle but now in a mark down.

So here are three of my favorite tools I use for trading…ofcourse first and foremost:  The price chart!

Here I can see the market cycle is heading sideways as my Wave movesat three o’clock.  I know that I’ll likely be looking for breakouts/breakdowns from support or resistance lines.  So next is the Autochartist chart pattern I am watching:

This pattern is a perfect way a capitalize on the breakout from a sideways market.  The downtrend line resisatnce has been broken…so now I can begin to estimate the follow-through:

The set up is on a 60 minute chart but I can use the 15 and 30 minute bars to estimate the short to longer term pip movement as the triangle break could lead to more upside momentum.

Support over 1.6600 will be the key.

The 30 minute chart of the EUR/USD has been heading in a mark up cycle for the week but slowly has begun to stall.  A stall is one thing:  Prices could certainly move higher after congesting/consolidating.  A stall could also trigger a correction or reversal.  Since prices are trading right on top of the Wave a reversal on the 30 min chart is very possible.  With the Dow up only 8, the U.S. Dollar could certainly find some buyers if there is no risk appetite for equities.

The Continuation Rising Wedge has broken but prices did not follow through past the 34ema low which is where current support is waiting.  The near term ceiling is near the minor psychological level of 1.4620 and that will signal whether the wedge pattern breakdown is still valid or not as will the upper trendline current sitting at about 1.4630.  A break of the “00″ could push prices lower to test the support which if broken could finally let the wedge breakdown follow-through lower.  Watch for a a weaker Dow and stronger U.S. Dollar as well.  The initial downside target (see the “Forecast Region”) is 1.4550.

With 92.00 a ceiling overhead now and the Dow Jones up as the market comes out of lunch time, prices are trading just below downtrend line resistance.  The Continuation Down Channel has formed within a down market cycle on the 30 minute but not a strong one as can be seen by the Wave coming in and out of the four to six o’clock angle (not shown) and the low Initial Trend reading on the alert chart (above).

The set up would be to play the weakness off the 91.88 area even the 91.80 minor psychological level as long as the downtrend in intact - so keep an eye on the Wave angle on your 30 minute chart!  The downside target is 91.50 with the point of validity waiting at 92.05.