Canadian Dollar - Buying In An Uptrend. Using Market Activity As The Best Source.
Seeking Alpha Analyst Since 2009
Wednesday Evening 18 May 2011
Volatility and quick reversals seem to be the "norm" for the
markets, of late. It is difficult to find entries that afford a
reasonable risk/reward. The Canadian Dollar fit that bill, this
morning. We always focus in on the trend to know in which
direction to position for market momentum. The weekly chart
shows how the trend has persisted for the past few years.
Virtually all of the corrections have been first degree, lasting
1 to 5 weeks. The current one is in the third week lower low,
and it is showing signs of stopping above the last swing high,
a little over a year ago.
102 has been a support area since late February. On Tuesday,
price stopped right at support, and it closed strongly at the upper
end of the range, coming from weakness. Every once and a while,
we will check a market move relative to its predecessor. The "A"
reflects the distance from end of April high to just under 103, four
trading days later, marked by a heavy line. The retest high at 105
then corrected to Tuesday's low, and that correction leg is marked
"B." Sometimes, there will be an equality or a Fibonacci relationship
between swings. In this one, "B" is equal to "A." Markets can
reverse under conditions like this measure, alone. However, this
one is not alone.
We already mentioned the correction stopped at 102 support, so
there are two independent measuring tools that converge. There
is yet a third. A supply trendline was drawn from the high,
connecting the retest high at 105. A parallel line is then drawn off
the low, at "A," extending lower. You can see price stopped at that
reverse trendline, too.
When three different measures confirm a single area, and the trend
is supportive of a resumption move, that is where opportunity can be
Currencies are a different technical "animal," at times, because
the banks are the largest players, and their volume never shows
up, plus, banks are on the other side of the trades so they know
exactly who is positioned where. Still, we drew in a 50% area to
see if price would hold around there. Initially, the decline in the
first 20 minutes went right through it, but by the close of that 20
minute period, price rallied to close on the upper end of the range
and above the 50% line. With all of the above analysis, we had
our reason to buy, and buy right now! We are in at 102.52.
Next chart shows if the analysis was a correct read.
This is an excellent example of not having to "predict" what a
market may do, and instead, let the market reveal its intent through
developing activity. You can see the Tuesday low that held support
at 102, as mentioned above re the daily chart, and then the retest
on Wednesday that held the 50% retracement and became one of
the collective the reasons for going long.
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