4xForecaster

Trading Pearl: How To Tell That An Asset Is Done Rising? #Forex

FX:AUDNZD   Australian Dollar/New Zealand Dollar
2538 87 15
Traders,

Being in the business of predictive analysis and forecasting, the most common question I ever get is:

- Is it done rising? Is it turning aroundyet? Is it coming back to ... ?

My inner answer is pretty simple:

"At what point in your trading plan did you build such a contingency plan that would preclude you from having to ask the question?"

In another behavioral way of asking yourself the question would be: At what exact point in the chart did you start worrying about this? If you know the answer, you just refined yourself as a trader, as you would have determined your tolerance threshold point for which such price action             would be deem intolerable to you.

but that's really not what the immediate answer you'd be looking for, I should presume.

If I may, let me simply say, from one trading friend to another: This threshold of doubt and fear should NEVER be reached within any of the trader's trades. Hence, know your exit strategy before you even enter into a market position via a pre-defined Stop-Loss - As it is commonly said:

"Plan the trade, then trade the plan."


Following is a method that will provide you with the most immediate and re-assuring answer, and keep skeptical thinking from having to put you in a devastating situation of rumination and doubt:


I will use the chart inclusion features of the discussion thread so that I may use illustration - Very quick, simple way that will get you less of a chance to engage in that dreadful self-injurious thinking which often arises when doubt creeps in and ruminating thoughts keep you up at night.

Here are the tools what you will need to follow (very simple:):

1 - RSI set at (HLC)/3

and

2 - MACD kept at TradingView's default

and

3 - Coffee            

... Ready? ... Let me write it frame by frame before inputing any comment, so that it appears in its entirety following this text ...

BRB


David Alcindor
Predictive Analysis & Forecasting
Denver, Colorado - USA
David Alcindor, CMT Affiliate #227974
Alias: 4xForecaster (Twitter, LinkedIn, StockTwits)

Signal Service or Private Course - Contact: MarketPredictiveAnalysis@gmail.com
All updates on https://twitter.com/4xForecaster
22 NOV 2014 - Update: A 360 ANALYSIS SYNOPSIS: Banking FX Positions, Technicals and Algo Biases:


Traders,

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:
snapshot


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.

$AUDNZD-Daily:
snapshot


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:
snapshot

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.

snapshot


Cheers,


David Alcindor
Predictive Analysis & Forecasting
Denver, Colorado - USA

----------
Twitter: @4xForecaster
----------
Reply
20 NOV 2014 - FUNDAMENTAL UPDATE:



* * * Major Bank FX Positions in $AUDUSD * * *

L/T: none

M/T:
- Short: 2
- Long: 0

S/T:
- Short:1
- Long: 0


* * * * * * Major Bank FX Positions in $NZDUSD * * *

L/T: none

M/T:
- Short: 2
- Long: 0

S/T:
- Short: 2
- Long: 0


David Alcindor
+1 Reply
4xForecaster PRO 4xForecaster
ADDENDUM:

* * * Major Bank FX Positions in $AUDNZD * * *

L/T:
- Short: 0
- Long: 0

M/T:
- Short: 0
- Long: 0

S/T:
- Short: 0
- Long: 1


David Alcindor
+1 Reply
Just simply....thank you for so much work!
Reply
kmk.msp Fib.The.Gentleman
Sir David,
You have explain the things very nicely which has answered my question very well and it was worth reading. Huge info and technicalities you have explained. Really nice and extremely helpfull. Thanks a lot Sir. Hope to gain knowledge from you in future also.
Regards.
kmk.msp
Reply
18 NOV 2014 - INSTIT./FUND./TECH-NOTE & Update:


FUNDAMENTAL NEWS:

- Dairy Global Price data: - 3.1%

> Forex implication: Bearish Pressure onto $NZD


MAJOR INSTITUTIONAL FX POSITIONS:

- L/T: none
-- Long = n/a
-- Short = n/a

- M/T: 2 Banks
-- Long = none
-- Short = 2

- S/T: 2 Banks
-- Long = 1
-- Short = 1



TECH-NOTE:

From Twitter:
-----------
$NZDUSD winds along WW's 1-4 Line; Nears significant resistance at 0.79926:

snapshot


via @tradingview | $NZD $USD #forex
-----------


$NZDUSD - H4 Chart:
snapshot



David Alcindor
+1 Reply
4xForecaster PRO 4xForecaster
Global Dairy Trade Pricing Info - Source:


https://www.globaldairytrade.info/en/product-results/


David Alcindor
+2 Reply
18 NOV 2014 - TECH-NOTE/LESSON:


-- STRUCTURAL ANALYSIS OF THE DAILY CHART:


(This is a repost so that it may stand alone for clarity)


=========================================================
Hello @kmk.msp - In the chart I posted overnight, there are three values I decided to concentrate on, namely:

1 - the highest at 1.12808

2 - The lowest at 1.09098

and

3 - A middle one at 1.10075.


What you are looking for here is to systematically cordon off the recent price action in terms of a historical set (i.e.: several days) as well as a single set (i.e.: a single bar).

So, looking at the price action from a highs and lows, let's see if we can make sense of how to approach what would be a structural analysis of the chart - Consider the chart below:


snapshot



What you are looking for are the levels at which price is likely to find support or resistance. For this exercise, you need to concentrate on keeping it simple. What you are looking for is:

1 - Recency: The closer in time a price action has occurred, the more likely it is to influence the next move
2 - Reiteration: The more a level is repeated, the stronger it will act as a future support/resistance ("S/R") level as it is revisited in the near future

That's it.

Now, simply follow the chart from its lowest-low ("LL"), which is represented by its BLACK star. Although there could very well be a lower level achieved in the past, here the LL refers to the price action that is represents within the visual frame. In contrast, the all-time-low ("ATL") would be a lower value that was ever achieved in the history of the underlying issue, here the $AUDNZD Forex pair.

Now that you have anchored your sight at the LL, simply follow the price and note the levels where price achieves a new high relative to a prior high. Although not marked here, this new height is the one immediately above the black star ... See also that price retraces about 88.6% of this small swing (see first chart below) , answering the EAGLE condition I wrote about yesterday (i.e.: great entry point for a long position).


snapshot



What you want to do here is keep in mind the recent higher-high just achieved, and see whether price reacts relative to it. You will see that it does in TWO distinct, albeit discreet but VERY important ways:

1 - First, as price approaches this recent higher high, if fails to surpass it, and instead retraces from the GREEN star. You might perhaps have noticed that this retracement is not a 88.6% as was in the chart above, but instead a closer value to about 61.8% or 50.0% (here, you have to make sure to use the SAME reference point, which is the low at the BLACK star) - See next chart:


snapshot



2 - Once price prints this 0.786-Fib level, it then rallies on up and higher. This higher value finally surpass the higher high and carves a newer higher-high at the BLUE star. Here too, a retracement occurs, but the most important feature is that it reaches a LOWER value relative to the recent retracement that had occurred from the BLUE star - See following chart:


snapshot



The relative lower low achieved is important because it defines this low point as the SECOND higher low achieved - The first one is represents as the 0.886-Fib level from the LL, whereas this is occurs at the NEXT Fib value within the Fib matrix, as 0.786.

Now, if you look at the following chart will all of its stars for reference, you will see that the price action at the BLUE star achieved more action than any other prior swings:

1 - It achieved a higher high, followed by...

2 - a lower low.

It is THIS very DISCREET price action that you are looking for, because it will help define several of the future conditions.

For now, you will see that the BLUE star has defined a level that offers a relative floor for price to bound off of. This floor is measured by the difference between the prior GREEN and current BLUE stars. Remember that the GREEN star represents that level of activity that was rejected, thus defining a STRONG resistance ... It now represents a STRONG support.

In turn, the BLUE level represents a softer level where the market was allowed to penetrate to carve a higher high. It now represents a level where price will return and facilitate "negotiations" so to speak, which in terms of geometry will be represented by "consolidations", or a cluster of tightly wound-up bars of lesser height and closer open/close levels to one another - See where the RED #1 and #2 are, and you can see how well the price action submits itself to this GREEN-to-BLUE geometric range of consolidation, whose support is offered by the GREEN price level along which RED-1 and RED-2 line up obediently.


snapshot



The higher levels, defined by BLACK-1, 2, 3 define a solid bearish entrenchment as well, by the mere fact that this line up also defines a TRIPLE-TOP. If you wonder how this ever came about, simple interrogate your Fib matrix at its 1.618 extension level, and you will see that all three BLACK stars are lining up quite well at that level as well - See next chart.

snapshot



Now, the last value I had defined was the INTRA-DAY value that marks the HIGH of the bar. Since the market open NEAR that high and reversed quite immediately, and kept its residency at the low of that same DAILY bar, then I assumed that it would take a same but opposite market force to NOT ONLY return to the OPEN level near that high, but a dedicated BULLISH force to push it ABOVE the high of that bar.

So, i wait for it to happen, if it decides to do so. And if so, then this STRUCTURAL ANALYSIS of price action will possibly indicate its underlying directional intention.

Hope this makes sense. Here is where we are as of this writing:


snapshot



David Alcindor
====================================================


Thank you,

David
+1 Reply
kmk.msp 4xForecaster
Sir David,
You have explain the things very nicely which has answered my question very well and it was worth reading. Huge info and technicalities you have explained. Really nice and extremely helpfull. Thanks a lot Sir. Hope to gain knowledge from you in future also.
Regards.
kmk.msp
+1 Reply
iefan PRO 4xForecaster
Hi David

A quick question. Price is moving down again to retest the 1.09098 level. What would be a sensible entry at this point, going long at 1.09098 or waiting for price to break and stay above 1.10075 before going long? Thank you very much

Kind regards

iefan
+1 Reply
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