For the first few weeks of the new year, I’ve been saying that it’s probably safer to stay on the sidelines of the FX markets in a capital preservation mode. However, I’m now seeing some high-conviction trades as the market sorts itself out and begins offering some good risk/reward opportunities.
Today I’ll go through every promising trade and my thinking behind each one, starting with EURUSD (the Euro versus the U.S. dollar).
The first thing I do when I open any chart is to make an assessment. I ask myself ‘what’s the phase (or direction, or condition) of this market?’. Everything else flows from that.
And in this case, it’s not hard to figure out. Going back several years, EURUSD has dropped from 1.70 in 2009 to about 1.08 currently. It’s clearly in a well-defined primary downtrend.
Once we identify the major trend, it’s time to look for certain patterns that support that trend. With EURUSD, that pattern is the first double top…
Normally a double top is a reversal pattern. And here it reversed EURUSD’s attempted rally out of the downtrend. You can see that once EURUSD crossed the 1.15 neckline of that double top, it’s been downhill ever since. EURUSD has continued in the primary direction, albeit quite slowly until very recently.
What’s changed now to make me so bearish on EURUSD?
EURUSD has just formed another, more recent double top. After penetrating the latest neckline, the pair made multi-year lows. To my mind, EURUSD will be seeing 1.04 – 1.06 (previous support) quite shortly.
So even though EURUSD has been a frustrating pair to trade for the last several weeks, it’s now opening up new territory to the downside. In fact, there’s nothing standing in the way of EURUSD falling below recent support at 1.04 – 1.06 to the 1.02 level and perhaps ultimately to parity (one-to-one) with the U.S. dollar. Any rallies in this pair should be shorted for the ride down.
In this week’s session (recorded 02/14/2020) – I was excited to go through the markets as things have changed rapidly.
Although during 2020, I’ve encouraged you to preserve your capital and play “on the sidelines” – the markets are now opening up with several high risk:reward opportunities showing their face.
In this session, I walk you through these and identify where you should be focusing to be part of the next big trades.
I also covered:
- The “frustrating” currency pair that are at a multi-year low and why I predict that they’re about to go even lower (my reasoning may surprise many people)
- Why I’m predicting that we’ll see new lows on a long-term downtrend that has been “kicking around” since 2015.
- The “trading for dummies” pattern that indicated where USDJPY was heading and why I believe my 750 pip “win” from last year is going to repeat itself (action required now to be part of this).
- Why a certain “narrow range bar” is not as innocent as it could seem, and why it will be a catalyst for a BIG reversal (full information and instructions at XX)
- Why this governing pattern has indicated a trajectory higher, yet the warning signs that have been discouraging traders (this is poised to go a lot higher, full information at 11.10)
- A rare instance of a mature price behavior that I would urge you to NOT put a “stop” on (and the unique set of circumstances behind this decision).
- The big mistake that many experienced traders make when it comes to use correlations and the rules that I follow (an unorthodox approach from 40 years of trading).
- The “give it a spin” low-risk high-reward trade that could be something HUGE (but should only be considered with minimal risk) – start at 22.49
- Plus much more
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