We have seen a sudden reversal now on the EUR/USD. How this next 4 hour candle closes should help illuminate our direction.

Once closed, if a large wick remains to the downside the two opposing candles with their wicks help illuminate pivot points for bearish or bullish action, acting as support and resistance.

These triangles give way to what is referred to as a terminal thrust. Meaning that if the observation is correct a top should form in a 5 wave sequence that should then give way to a reversal.

The Psychology that forms a wave 4 and wave 5 terminal thrust is really quite interesting and is usually the place where most retail traders (Yes folks that’s us) jump on the last move up only to find out why wave 5 is often referred to as: The Fools Wave. As there is evidence of a potential top, use caution if you are still wanting to go long EUR/USD and JPY pairs.

Having said that, the most common target for the 5th wave is usually equal to wave 1. In this case, wave one is not that discernible so the default is to expect firstly a double top and next targets are; 1.382, 1.5 and 1.618.

What I will be looking for is a tweezer top on the 1 hr chart as a potential reversal signal this evening.

Note: There is always the danger that the 5th wave extends beyond the target zone or that the observation is incorrect.

I am still a bit cautious about the possible top. If the 4hr candle closes without much wick that is the first evidence of a trend change as it becomes an “Engulfing candle”.

A Zig-zag may yet happen to form a double top.

Cheers

We are only pips from the last reversal point.

I would not be surprised by a break to the upside but then a strong reversal becomes probable.

I haven’t posted the index for some time so here it is.

There is a technical gap area that concerns me. The chart suggests it needs to be filled. If this is the case, then there is the potential for the EUR/USD to gain another 200 to 300 points.

For now I am watching the barrier at 84.40 as this is where we are stuck at the moment. A break below there targets the gap.

I’m re-posting my view from a week ago that suggested we could need anther visit to about $1.35 to complete a B wave triangle.

At this point the structure of the waves this week have been inline with the path that should be followed to get the Eur/Usd there.

Here’s the old post

And here’s where we are potentially considering what the wave structure appears to be.

So in the event of a breach 1.33 we should see 1.35

The next possible count treats the descending channel as a B wave and allows for a revisit to 1.38 or higher.

So, a few possibilities still exist on the upside. If we turn here and make a new low below 1.28  we are on our way for the second leg of the major correction, “Wave 3 down”.

What I would like to make clear is that this whole move is a correction of the inital drop from 1.60 and once the correction is complete a new and very strong move down should take us well below 1.20 long-term

Now that’s a hell of a comment isn’t it. Truth is you can guarantee your own success in trading. In fact you are the only one that can.

So here is how you do it:
1. Trade only when your conditions for a trade are met
2. Know what these conditions are - They should be written down in a format that someone else could clearly understand. This makes theme real and solid
3. Have a plan for where to exit successful trades
4. Have a plan on where to exit unsuccessful trades
5. Log what you do
6. Use sound money management practices

There, that’s it. That’s what will guarantee your success. I mean it. Of course it will take practice to always follow your rules and your plan. And of course sometimes you will have losing trades and it will feel bad. And as time goes by your success will improve. This I can promise.

As a follow up to my previous post I suggested a bottom could be forming.

A reversal has taken place and may continue. Consider a re-tracement that should be supported by Fibonacci levels such as; 38%, 50% and 61%.

Cheers

Much lower and the EUR/USD will likely drop like a rock…

Or… up from here to about 1.35 to possibly complete a triangle.

Cheers

Well… we saw some recovery in the EUR/USD only to give way to a volatile move not seen for over a month.

Having said that; as a trader one must now consider if this is the beginning of a trend or the end of one. Trends usually start and end with a bang!.

So… is this the final move of a leg down? or just the start of what is to come?