How I Analyze the Markets - Part 2 of 4
After I have plotted all the swing levels on the yearly chart I move to the monthly chart.
Chart setup: On the monthly chart I show the yearly pivot points. These pivot points are plotted on the chart from the beginning of the year to the end of the year. I also drawn in any swing levels from the yearly chart that pass through or are close the the yearly pivot points. In the chart I show the swing level from the yearly chart having 8 touches as it passes through the yearly pivot points. This swing level is drawn on the chart as a dashed black line at price level 77.180.
Analysis: The chart shows AUDJPY starting the year below the yearly pivot point "P". To floor traders pivot point "P" represents the "True Value" of AUDJPY for the year. When the market opens the year above true value it indicates the market is bullish and floor traders then expect price to continue to move upward towards "R2" by year end of before year end. When the market opens the year below true value it indicates the market is bearish and floor traders then expect price to continue to move lower towards "S2" by year end. Since AUDJPY began the year below "P" floor traders expected price to move lower for the year. As the chart shows price moved lower almost touching "S2" in August. The last part of August say price reject moving all the way down to "S2" and closed the month off its monthly low leaving a lower candlestick shadow. This indicates price rejecting lower prices and is an indication price wants to start moving higher. In September we see price move back up through "S1" during the month but then rejected higher prices closing out the month below "S1" leaving an upper shadow indicating price is rejecting higher prices. Also notice price moved below the yearly swing level at 77.180. It is going to take a lot of work for price to move back above this level. As a result I consider 77.180 to be a very strong resistance level and I do not expect price to move back above 77.180 any time soon. The last candle on the chart is the October candle that is only half way complete. It looks to me like this candle is testing resistance from "S2". I would not be surprised to see this candle close below last months low by the end of the month. This would keep in step with the monthly candles making lower highs and lower lows as the downward trend continues. With very strong overhead resistance at 77.180 above this months candle I would be surprised to see the market try to attack this resistance level. To get a closer look at this months trading we need to move to the daily chart.
To complete this monthly chart analysis I must mention the next possible very strong lower support level comes in at 66.1900 or 55.5200 (See yearly chart in Part 1 of this tutorial).
Note: I am analyzing AUDJPY to show how I analyze all my currency pairs to gain a complete understanding of the trading psychology behind each of these markets.
Conclusion: Price is in a downward trend and with very strong resistance just above at 77.180 I would expect this market to continue downward for several months ahead. Next very strong support level could come in at 66.1900 or lower.
Chart setup: On the monthly chart I show the yearly pivot points. These pivot points are plotted on the chart from the beginning of the year to the end of the year. I also drawn in any swing levels from the yearly chart that pass through or are close the the yearly pivot points. In the chart I show the swing level from the yearly chart having 8 touches as it passes through the yearly pivot points. This swing level is drawn on the chart as a dashed black line at price level 77.180.
Analysis: The chart shows AUDJPY starting the year below the yearly pivot point "P". To floor traders pivot point "P" represents the "True Value" of AUDJPY for the year. When the market opens the year above true value it indicates the market is bullish and floor traders then expect price to continue to move upward towards "R2" by year end of before year end. When the market opens the year below true value it indicates the market is bearish and floor traders then expect price to continue to move lower towards "S2" by year end. Since AUDJPY began the year below "P" floor traders expected price to move lower for the year. As the chart shows price moved lower almost touching "S2" in August. The last part of August say price reject moving all the way down to "S2" and closed the month off its monthly low leaving a lower candlestick shadow. This indicates price rejecting lower prices and is an indication price wants to start moving higher. In September we see price move back up through "S1" during the month but then rejected higher prices closing out the month below "S1" leaving an upper shadow indicating price is rejecting higher prices. Also notice price moved below the yearly swing level at 77.180. It is going to take a lot of work for price to move back above this level. As a result I consider 77.180 to be a very strong resistance level and I do not expect price to move back above 77.180 any time soon. The last candle on the chart is the October candle that is only half way complete. It looks to me like this candle is testing resistance from "S2". I would not be surprised to see this candle close below last months low by the end of the month. This would keep in step with the monthly candles making lower highs and lower lows as the downward trend continues. With very strong overhead resistance at 77.180 above this months candle I would be surprised to see the market try to attack this resistance level. To get a closer look at this months trading we need to move to the daily chart.
To complete this monthly chart analysis I must mention the next possible very strong lower support level comes in at 66.1900 or 55.5200 (See yearly chart in Part 1 of this tutorial).
Note: I am analyzing AUDJPY to show how I analyze all my currency pairs to gain a complete understanding of the trading psychology behind each of these markets.
Conclusion: Price is in a downward trend and with very strong resistance just above at 77.180 I would expect this market to continue downward for several months ahead. Next very strong support level could come in at 66.1900 or lower.
"The last candle on the chart is the October candle that is only half way complete. It looks to me like this candle is testing resistance from "S2"."
To read:
"The last candle on the chart is the October candle that is only half way complete. It looks to me like this candle is testing resistance from "S1"."