Wednesday 24 August 2011
One of our laments of the past several months has been a lack of
quality set-ups. The Canadian dollar may be one, as shown in the
following charts. the trend being the primary consideration, we start
with the weekly chart.
Resistance from 2010 has been labeled. Past resistance becomes
future support, and we see that in 2011. There was a failed downside
probe, three weeks earlier. These probes provide important information
for where they occur. Here, there was an attempt to go lower by
sellers. The break of support found no new selling, and whatever stops
were under there were washed out. The sharp increase in volume
shows that buyers were taking all the offerings from sellers and were
strong enough to close above support.
The weekly shows positive development.
You can see the same failed probe on a daily chart. Of note is
the fast decline preceding the probe. Up to that point, sellers were
clearly in control, but that changed at support. What happened to
sellers being in control? They lost is as smart money was buying
A retest developed over the next few weeks of trading, and a
hinge formed, going into today's trade. One can typically follow the
breakout of such a pattern, and given the context provided, the
breakout was expected to the upside, presenting a low-risk entry
from the long side.
The 20 minute intra day chart show greater detail. The series of
higher lows is a positive development. Price rallied and broke the
supply trendline off the highs of the 22nd and 23rd and then came
back for yet another retest. We took that as an opportunity to buy
with a stop under lows of a few days ago. This is the kind of trade
that either works, almost right away, or not.