I am re-posting this analysis in a new discussion thread, as we near a new trading month. I will cut/paste the analysis, as it reviews major bank FX positioning, , and predictive/forecasting data.
All this coming up in the discussion thread next.
Predictive Analysis & Forecasting
Denver, Colorado - USA
Alias: 4xForecaster (Twitter, LinkedIn, StockTwits)
Signal Service or Private Course - Contact: MarketPredictiveAnalysis@gmail.com
All updates on https://twitter.com/4xForecaster
As indicated in recent analyses, $AUDNZD is favored to rally.
This directional bias rests on several influences, each carrying their own weight of evidence, be it institutional (major banks assuming FX positions as primary move behind the expected rally), technical (structural, geometric and Fibonacci analyses) or algorithmic (predictive/forecasting analysis based on set of favorable mathematical conditions).
For a quick review, following is a synopsis of these influences:
1 - INSTITUTIONAL ANALYSIS:
-- a: Major Banks FX Positions in $AUDUSD: 3 SHORT positions
L/T = 0
M/T = 2 shorts
S/T = 1 short
> Banks expect a BEARISH trend to carry on several hundred pips
-- b: Major Banks FX Positions in $NZDUSD:
L/T = 0
M/T = 2 shorts
S/T = 1 short
> Banks expect a BEARISH trend to carry on several hundred pips
-- c: Major Banks FX Positions in $AUDNZD:
L/T = 0
M/T = 0
S/T = 1 Long
> One major bank expects a rallying in the relative strength between $AUD and $NZD. The rational is purely based on sovereign fundamentals, where respective CB is expected to raise rates in Q1-2015 for $AUD, but remain unchanged until late Q2-2015 for $NZD.
2 - TECHNICALS ANALYSIS:
First, let's take a look at the TWO charts posted recently:
$AUDNZD - H4:
In this 4-hour chart, I wanted to highlight the iteration of the three paralleled bearish swings. You will note that this move has occurred in a controlled geometry defined by the zero and 100 values of the Fibonacci matrix on either end of the span. This is important to keep in sight, because the first bullish swing that defined these parameters are to be used to define a potential breakout out of these parameters. So, in effect, over this entire price action span, nothing has really occurred, except the time consumptive event of a to-and-fro range-bound internal repetition.
This internal repetition itself has its own internal structure which reveal little clues as to the potential side of the eventual break-out. The arrows were added to emphasize the automaticity of the overall construct, but the directional influence at work remains in the hands of the larger institutional-level timeframe, represented in the DAILY chart.
In this DAILY chart, I have highlighted the step-by-step methodology that should help the trader define relevant structures. In a recent analysis, I tried to define this same method with stars, colors and what not, but I realized that after re-reading that portion of the response to that trader, it may have come across as a bit too complicated. So, I thought a bit more about it (it is quite difficult to explain complicated concepts that comes easy in the mind, but need a written explanation -So, let me try once more here:
Simple Structural Analysis Methodology:
1 - First, assuming that the price is rising (which is is evidently), define the higher-highs FIRST (I have used "HH" in the chart). Then, simply connect them to visually assure that the slop is indeed rising
2 - Next, do the same with the higher lows ("HL in the chart). The trick here is to define the higher-lows relative to the most recent HH. So, from each HH, follow price as it retraces to a new low. If that low is higher relative to a prior HL, then mark this point.
PSYCHOLOGICAL NOTE: At this point, you could join each HH and HL, or even every other HH and HL and see that a vectorial geometry emerges, one that offers a NET move UP, and ignores all of the "noises" that have developed in the interim. This is an important PEARL, because what the junior trader might be less in tune with is how easily triggerable his/her brain functions relative to a moving target (here, we are referring to price). Point is that our most innate reaction to price is to react as a cat would relative to a moving mouse - The analogy might be cute or naive, but this is exactly what is happening: If you draw a line that joins every over other HH to HL, you would clearly see that price is doing nothing else by climbing up and up. But by the mere action of following a faster ascillation (i.e.: true price action), there is a whole lot more chance to get confuse, and even raise doubt when for instance a HL falls below an insignificant recent low - See the following illustration for instance, where HL fall below a relative low, but still remain above the prior HL ... Would you have been kept assured that price was still moving up and up, or would you have started to doubt yourself?
$AUDNZD - Daily Chart:
Note; In the chart above, price is moving down to certain depth, in a way that could cast doubt and perhaps efface any bullish conviction in the junior trader. However, the important detail here is to remain aware that the relative low that is reach (highlighted by the YELLOW arrow), is not influential. Instead, it is the relative position of the developing (emphasize this "developing") HL relative to a prior HL that matters ... And absolutely NOTHING else.
3 - The rule in structural analysis that should be applied to forecast a probable trend reversal is simple:
"A breach of the most recent HL will signal a risk of reversal of the current bullish trend"
3 - ALGORITHM ANALYSIS:
From an algorithmic standpoint, the predictive/forecasting model remains BULLISH, and the price pathway which it had defined (originally in the POINK arrows) remain in force, and the BULLISH targets remain intact.
Predictive Analysis & Forecasting
Denver, Colorado - USA
Just posted in Twitter:
22 NOV 2014 - Update:
$AUDUSD hit target @ 0.85516; Holds activity up; Eyes rallying to 0.90287:
via @tradingview | $AUD $USD #forex
If $AUDUSD were to rally, it would very much support the continued BULLISH bias in $AUDNZD rallying.
$NZDUSD - An #elliottwave Flat remains expected (A-B-C) near 0.79926 before bearish resumption:
The take-away point here is in the outcome of the chart's implied relative strength: A decline in $NZD should bring about a rally in $AUDNZD.
Fundamentally speaking: Banks are favoring a recovery of $AUD relative to $NZD, and the central bank of the respective countries are rumored to move rates in a way that would cause a net gain in this pair (hike per RBA versus unchanged per RBNZ).
Technically speaking: The structure has posted nothing but higher-highs. The recent range-bound activity has been a wash (i.e.: net move = 0.114-Fib), whereas the developing pattern has been a redundant Flat.
The model itself, along with prop patterns, are favoring upside potential, given defined target.
OVERALL, this pair has been propped up and kept aloft at the recent range. The net move in the range remains bullish, aided by a concurrent bullish structural development of higher highs and no bearish challenge as of it - David
$AUD, as a commodity currency (based on its positive correlation with Gold), is likely to gain the bullish support expected in the overall bullish predictive/forecasting analysis - See following MNI news released yesterday:
"MNI - Nov 21, 14:01
GOLD: Gold has benefited from softer dollar overall (except versus the euro) as
well as from the PBOC rate cut earlier Friday and may see the first close above
$1200 since late Oct. Spot gold holds near $1201.35, on the high side of the
day's $1186.93 to $1207.93 range. The precious metal earlier broke above
Tuesday's peaks at $1204.68, which has shifted the focus to the 55-day moving
average, which comes in currently around $1211. Other than rising briefly above
the 55-day on two days in October, gold last traded above the 55-day on a
sustained basis in August. A decisive break above the 55-day would target a
return to the Oct 21 peaks at $1255.34 initially. UBS precious metals analysts
note that gold had a positive knee-jerk reaction to today's PBOC cuts. "At face
value, policy easing in China should be gold-supportive, particularly if it
helps to hold up economic growth," they say. However, UBS China economists do
not think that the rate cut "moves the needle for 2015 GDP growth expectations."
In addition, recent decline in global dairy rates (see: https://www.globaldairytrade.info/en/product-results/ ) should add further reflexive support to the $AUDNZD, as the prospect of sovereign revenue remains bearish. This negative outlook for the $NZD is further weighed down by the news back in September when RBNZ disclosed its intentions to bring the currency down.
Looking at the $NZDUSD chart and currept price location, it clearly shows that price returned in the vicinity of Point-A in the implied Elliott Wave's Flat Pattern. Therefore, one should expect that this same sovereign central bank (RBNZ) will continue to apply its machinery to bring down the price at further levels, below a value that were recently visited - See following chart:
$NZDUSD - 4-Hour Chart:
Remember that institutional interference and plays are best appreciated in DAILY or at times WEKKLY chart, and that the decline in price since the month of September which reflects the aforementioned currency's own central bank intervention has really not moved with any significance when considering what this represents in a DAILY scale. So, expect a whole lot more depth visitation, courtesy of RBNZ.
$AUDNZD near potential Wolfe Waves completion; Target @ 1.0914; extreme @ 1.08948:
@tradingview | $AUD $NZD #forex
Now, do you know how to define your entry, stop-loss and target for this WW pattern?
Here is what I'd recommend for a standard WW pattern (again, in this particular chart, the underlying geometry may not be that of a WW, so these guidelines may not apply for this particular $AUDNZD chart):
1 - First, expand your chart so that the 1-2-3-4-5 geometry occupies most of the price field (in this or any other chart). This will help define the following lines with greater accuracy.
2 - Copy the 2-4 Line, and place the copy so that it originates off of Point-3.
3 - Next, draw a line that starts at Point-1 and runs across and beyond Point-4
4 - Draw a horizontal line from Point-3 and highlight this level
5 - Using simple wave count, make sure that Point-1 of the WW does NOT correspond to Point-3 of the larger degree (in this $BTCUSD chart, it appears that Point-3 is being used as a similar departure point for the WW. While you can use it as a preliminary reference, once the pattern is complete, Point-1 of WW should preferably (but not absolutely) be distinct from the higher-degree Point-3.
Now, to define an entry, I recommend that the trader considers his/her level of risk exposure based on how many pips he/she is willing to risk. So, in a WW, entering right as price crosses the 1-3 Line and defines the 1-3-5 border of the geometry might be considered aggressive, simply because price could still go a bit further down, as it did in this case where price fell below the 1-3-5 border.
A more prudent approach might be to:
1 - Wait for price to reach the 2-4 Line projecting off of Point-3, which would in fact define Point 5-prime.
2 - Wait for price to reverse and cross back and close above the 1-3-5, and then entering at the open of the next bar.
A much more conservative approach would be to let price travel to the 1-3-5, and to enter at the next candle following the crossing and closing above the horizontal line defined at Point-3
Geometrically speaking, you already defined a SL by the mere projection of the 2-4 Line off of Point-3. Therefore, I would chose a small margin proportionate to the trader's risk tolerance and set a SL below the 2-4 Line projection.
Once price move past Point-3, it is often ready to rally on up. If you feel most conservative, you could set an entry at the crossing and closing above the original 2-4 Line, but the target remains focused at the very moment when price reaches the 1-4 Line projection. Hence, too conservative an entry (such as one effected at the 2-4 side of the geometry) would leave quite a lot of potential profits behind.
I recommend that the trader defines a SL first and foremost before even defining an entry. I like to know what the exit is before I enter any room. Here, it is no different. However, you need to know how far off the floor the windows are before thinking of jumping. In establishing a SL, the situation is very similar, as you need to know what amount of pips you are willing to lose if price turned against you. This is best determined by knowing well in advance how many pips you are willing to lose, which will in turn define the distance you can tolerate between a potential loss and the defined entry.
I hope this helps.
PS: Remember that in this case, the geometry is not the best. While it is not absolute that Point-3 of the larger degree and Point-1 of the WW geometry be distinct, it is best for this to occur. My view is that Point-3 of the larger degree (in BLACK in your chart) will move on to Point-4, and finally to Point-5. It is not until Point-4 is defined and done that the Elliott Wave's Ending Diagonal can be defined.
While a Wolfe Waves pattern is unrelated to an Elliott Wave ED, it would be best to let the two geometries maintain some degree of similarity. Best would be to let them share the some point of origin, which should be the first point defining the development of the 5th wave.
I will cut/paste this explanation into the thread of the chart just posted, so that other trader might benefit from learning more about this WW pattern.
Thank you for contacting me earlier and having me review this pattern at this timeframe, as it prompted this low-risk, high-potential trade.
1 - Fibonacci
2 - Trendline
3 - Basic market geometries
Therefore, there is a whole lot less risk to enter at the H4 level, and the daily chart (see below) offers a potential secondary entry if this H4 trade fails based on such a shallow SL level.
Another downer for $NZD: Milk price fall for a third consecutive times. This is viewed as a $NZD bearish fundamental event, as it negatively impact the export revenue of the country:
$NZDUSD = Bearish
$AUDNZD = Bullish
$AUDNZD - Discreet geo define R/S levels; 1.618 #fibonacci near-miss:
@tradingview | $AUD $NZD #RBA #RBNZ #forex
In your chart the most frequent price in all those bars in the range aligns with the fib and not the extremes or the median of said range necessarily.
Would you say this is a good way of establishing which points to start fibonacci projections from and to?
The square I have drawn are what I have called Nodes.
The nodes are a particular interest in the hidden geometries as they bring their core (50%- Fib) in line with prior levels, and projected potential R/S levels.
Other hidden geometries, called Nodules, have similar role in hidden geometries, but overall, they tend to conform to conventional technical tools, such as Fibonacci levels, basic market geometries, and standard patterns.
DId I answer your question in this short explanation?
I'm using Tim West's methodology, and these trading ranges you highlighted would be areas of price revolving around an accepted fair value level (at the time) from where you can project targets from, when price breaks out from the most frequent price.
It's interesting how this aligns with your charts.
(Tim doesn't use fib though)
In this chart I took a fib measurement between the low of the inside bar which coincides with the most frequent price in the lowest trading range, and the other end at a previous most frequen price level.
In any case, there are an infinite ways to dice the price action, so long as one uses the Fibonacci knife.
Based on this, price will remain tethered to inherent harmonic measures so long as the Golden Ratio remains its common denominator.
I was aiming at reducing the infinity of choices, of where to place the fibs with this idea. As you can see in my chart, the 1.414 level was respected, and I drew this fib between two of this aforementioned levels.
Your suggested fibonacci values seem to work REALLY well with this method.
A tight SL defined at 1.09098 saved us from chasing a losing proposition. Until the fundamentals in gold and oil settle, AUDNZD should remain hands-off.
Keep in mind that deterioration of the Asian theater economy is likely to have a greater deleterious impact on $NZD, even though both $AUD and $NZD are falling under a broad commodity price slump.
The net outcome should be supportive of the $AUDNZD pair.