Its Holiday time & take some time off for family and friends.
The markets will be here & we can all come back afresh after a well deserved break.

I wish each and everyone of you a “Merry Christmas” and may you have a joyous and profitable New Year ahead.

Sunil.

You can download the video recording of the Monthly webinar topic “The 123 chart pattern” from the Transcripts section of FXstreet
http://transcripts.fxstreet.com/2008/12/monthly-webinar-part-1-the-123-chart-pattern.html

It has also been put upon my website www.fibforex123.com

In addition, the PDF file of the same topic is also available for downloads from FXstreet
http://www.fxstreet.com/education/technical/the-123-chart-pattern/2008-12-22.html

as well as the “Free download” section on my website.
Sunil.

We are looking at some long term harmonic patterns on the Eur/Usd Monthly time frame. We do know that Euro & Gold have a very strong correlation
(Refer to my article on Currency correlations - http://www.fxstreet.com/education/forex-basics/important-things-to-know-about-your-currencies/2008-11-11.html

Since we have been following Gold for some time now, it would be worth looking at the Euro for some similar movements.
Looking at the monthly chart of the Eur/Usd, let me first put up a chart image taken in the month of November.

A strong support at the 78.6 fib level, had given us an indication of a possible harmonic pattern in the making.
Looking at the current situation, price seems to have found resistance at the 61.8 Fib level.
Now, even though the monthly bar of December has yet to close, we can look at this level as a strong resistance, since price had been rejected at this level previously (as seen by the blue horizontal line)

This does seem to be in tune with an expected down move in Gold.
But again, we don’t trade without any additional confirmations.
First & foremost, we should wait for the monthly bar to close, which means that we should wait till the end of the month.
If the monthly bar does not close higher, then we start planning for short trades & enter on confirmations.
But lets also play the “Devils Advocate”
There seems to be the possibility of a bullish hidden divergence forming. In that case, we could be looking at some strong up moves.
Maybe price has a nasty surprise in store for the year ending -J
In either case, we have a fair estimate of the extent of the move..

Sunil

Referring back to the previous post of “Is price movement random?” we can see that Alternative.1 played out quite precisely -
I am repeating the chart and the lines from the previous post. (For reference)
Alternative.1 of a bearish Gartley pattern.
Looking at this chart, we can conclude that the wave B-C has completed and price should rally higher now to complete the wave C-D.
This means that we can expect some more rallies in this pattern.

Looking at the current situation, we can see that price did rally & found resistance precisely at the 78.6 level (tell me that fibs don’t work -J) to complete the last wave of the Gartley pattern.

The expected target of this bearish Gartley pattern would be the Fib projection of A-D and one would expect price to fulfill the targets.

But, like always, we don’t just jump into a trade but wait for price to confirm the entries.
A correct entry into a Gartley is always the break of the mid point “B” of the pattern.
In this case, the “B” level is also a strong level of previous support/resistance AND price has now found support precisely at this level.
Hence we can take this as the ‘barrier’ level.
Only a convincing break of this level would give us the highly probable target of the 127 fib projection plotted on the chart.

Let me repeat my dialogue again -J
We don’t predict price……..we follow it.

Sunil.

We had an excellent response to the monthly webinars topics & I would sincerely like to thank each and everyone who attended it.
Just for reference, these were the 2 topics that were presented -
1.) Open session - The 1-2-3 chart pattern
A chart pattern is a distinct formation on a chart that creates a trading signal, or a sign of future price movements. Chartists use these patterns to identify current trends and trend reversals and to trigger buy and sell signals.
The 123 pattern is a reversal chart pattern which occurs very frequently and has a very high success ratio.
When the 123 pattern occurs at the end of trends and swings, they are an indication of a change in trend. They can also be found within a trading range, and they take place when the directional momentum of a trend is diminishing.
For any trading technique, one must understand its advantages and drawbacks.
Implementing the technique in the live markets is the crucial part and one must have a trading plan defining the precise entry, stop and exit levels.

2.) Premium session - The trend following 200 Moving Average strategy.
The 200 Moving Average strategy is a very easy to follow system which has a very high success ratio.
While the forex markets are highly trending markets, they tend to trend only 30% of the time, while 70% of the time is spent in a range.
Identifying and trading these trends would offer excellent profit potential.
This technique uses the two basic technical indicators – the 200 period Simple Moving Average & the Slow Stochastic to identify a trend valid across all time frames, and define precise points of entry and exit.

The sessions were highly interactive and we had interesting discussions on both the topics that we covered.
The first session of the 123 pattern was recorded, and it will be put up in the Transcripts section of FXstreet soon. I will also be putting up the recording on my website for downloads.
Also, as per the requests of a lot of attendees, I have put up the PDF of “The 1-2-3 chart pattern” on my website for free downloads.
This will be available on the FXstreet website too.
The PDF for “The trend following 200 Moving Average strategy” will be available in the ‘Reports’ section of the premium page.
I will put up the links here, once it has been done.

Once again, I want to thank all the attendees for making the sessions interactive & I look forward to conducting more of the same.

Sunil.

I will be conducting the monthly webinars on FXstreet on the 18th Dec 2008.

I will be covering 2 interesting topics in this 3 hour long session -

1.) Open session - http://www.fxstreet.com/live/sessions/session.aspx?id=44e82cd1-3a8e-4991-a3c3-177cad1ce6be

The 1-2-3 chart pattern
A chart pattern is a distinct formation on a chart that creates a trading signal, or a sign of future price movements. Chartists use these patterns to identify current trends and trend reversals and to trigger buy and sell signals.
The 123 pattern is a reversal chart pattern which occurs very frequently and has a very high success ratio.
When the 123 pattern occurs at the end of trends and swings, they are an indication of a change in trend. They can also be found within a trading range, and they take place when the directional momentum of a trend is diminishing.
For any trading technique, one must understand its advantages and drawbacks.
Implementing the technique in the live markets is the crucial part and one must have a trading plan defining the precise entry, stop and exit levels.

2.) Premium session - http://www.fxstreet.com/live/sessions/session.aspx?id=a08efb31-bb66-4878-95ee-9beea19aa955
The trend following 200 Moving Average strategy.
The 200 Moving Average strategy is a very easy to follow system which has a very high success ratio.
While the forex markets are highly trending markets, they tend to trend only 30% of the time, while 70% of the time is spent in a range.
Identifying and trading these trends would offer excellent profit potential.
This technique uses the two basic technical indicators – the 200 period Simple Moving Average & the Slow Stochastic to identify a trend valid across all time frames, and define precise points of entry and exit.

It would be great to see all of you there.

Sunil.

Lets follow with some anticipated harmonic patterns on Gold (refer to the earlier post of “Gold again”)
On the daily time frame, we had discussed 2 alternatives and we were going to decide on trades based on which alternative was fulfilled.
So far, price seems to have fulfilled Alternative.1 of a bearish Gartley pattern.
But now, we seem to have a confusing situation -

Looking at this chart, we can conclude that the wave B-C has completed and price should rally higher now to complete the wave C-D.
This means that we can expect some more rallies in this pattern.
But if we look at Alternative.2

The present resistance seems to have formed precisely at the 61.8, which can be classified as the “B” point.
In that case, we would expect a down move to complete the wave B-C.
So, do we look at long trades or short ones?
The practical approach, of course, will always be the “If-then” method.
We wait for price to confirm the moves, before we decide to enter the trade.
But some additional confirmations always help & we should look for some other factors to swing the balance.

Let’s start with a very common question - Do Fibonacci ratios really work?
Looking at this weekly chart of Gold, we can see that price has formed waves at precise Fib ratios.

I have labeled the waves as A-B-C-D-E-F-G, simply for convenience and if you plot the Fib levels as described in the chart, we can say that price respects the Fib levels.
But this could be just a coincidence, couldn’t it?
As one skeptic once told me - “You have so many fib levels plotted, that every turning point would happen at some Fib level.
He had a point & it’s entirely possible.
But in defense of my approach, coincidences don’t occur very often, do they?
We can have a coincidence once, maybe a coincidence twice.
All right, 3 times a charm and we can even have 3 coincidences.
But coincidences happening 5 times in succession….Naaah!!!
So, coming back to the earlier point of having some additional confirmations, in spite of the strong fib “coincidences”, I would still look at some other factors to confirm the fib levels.
Which brings me to the topic…is price action random?
Looking at the previous Fib levels, we can certainly assume that it’s anything but random.
And to further reinforce the fact, have a look at this chart.

It’s the same weekly chart, with the waves A-B-C-D-E-F-G.
But now we don’t look at Fibs at all, but identify simple horizontal levels of support/resistance.
And we can see that each and every Fib ratio (mentioned in the earlier chart) coincides with a level, that price has respected earlier.
And this is a fact that we can take advantage of. While there may exist numerous levels of previous support/resistance, I would look for a confluence of these levels with a Fib ratio.
This gives me a stronger indication of price movement.
Coming back to the current situation, we seem to have a strong resistance at point “G”, which is also a fib 61.8 ratio.
Hence the possibility of this level holding price is quite high & if it does, then we can anticipate the extent of the possible down move.

We again use the similar concept and target a 61.8fib level…which is a strong level of previous support/resistance.
Bottom line - by using these factors we are prepared with our trade targets. If price breaks higher, then this is the next resistance level & if it breaks lower than we have the next support level identified.
Most of the times, it’s the exit of the trade which is more important than the entry & by predefining the exit levels, you have given your trading that ‘edge’.
Sunil.