This chart shows the major support and major resistance lines as I have placed them. There will always be some controversy when it comes to placing support and resistance lines as well as trend lines. Some traders will say you should have put them here or you should have put them there. Everyone has their own opinion and they may all be correct. The point is that the market is composed of a multitude of traders and as such they may all see the point in which price is overbought or oversold at different price points. This is easily recognized at support or resistance lines and trend lines. Have you ever seen all the candle highs all line up perfectly at resistance or support. No! So here is how I define a support and resistance line: Support and resistance levels are a footprint left by all participants in the market where collectively, most market participants make decisions. So when I draw a horizontal support or resistance line I look for a price level where the majority of traders has made a decision to reverse directions. Once I draw this line I will often see a candle wick that is excessively high above the resistance line I've drawn or excessively below the support line drawn. In statistics these are called Out-layers and are ignored. I ignore them as well.
Looking at the monthly chart I see the latest candle has bounced off major resistance from its open and has moved downward to close near its low for the session. This is an indication sellers are in complete control of this monthly session. Also this candle is rather tall indicating the majority of traders are in agreement to move this market lower. Further this candle closed below the open of the previous candle; this is known as an engulfing candle. Engulfing candles at support or resistance levels are indications of a market reversal. All these readings are evidence this market is ready to move lower. One thing I need to watch for when there is a tall candle, and that is that they are often retraced by as much as 40 to 50% so I need to watch out for that outcome.
This is definitely a currency pair I am interested in trading on the Short side.
The next thing I do in my analysis is to move to the daily or 4 hour time frame to look for trade setups.
Note: EURAUD is one of the 10 most volatile currency pairs. I am very interested in analyzing these 10 pairs for entry opportunities as they can provide the best money making opportunities.
Looking at the monthly chart I see the latest candle has bounced off major resistance from its open and has moved downward to close near its low for the session. This is an indication sellers are in complete control of this monthly session. Also this candle is rather tall indicating the majority of traders are in agreement to move this market lower. Further this candle closed below the open of the previous candle; this is known as an engulfing candle. Engulfing candles at support or resistance levels are indications of a market reversal. All these readings are evidence this market is ready to move lower. One thing I need to watch for when there is a tall candle, and that is that they are often retraced by as much as 40 to 50% so I need to watch out for that outcome.
This is definitely a currency pair I am interested in trading on the Short side.
The next thing I do in my analysis is to move to the daily or 4 hour time frame to look for trade setups.
Note: EURAUD is one of the 10 most volatile currency pairs. I am very interested in analyzing these 10 pairs for entry opportunities as they can provide the best money making opportunities.