EUR/USD Short Trade (#1) Update

Update to trade #1: I have removed my short entry for the time being. I may look to go short later on, but the Wave count has become unclear.

The diagonal triangle count has proven itself invalid. There is still MACD divergence, so the possibility of a decline to 1.5600 exists.

EUR/USD Short Trade (#1)

I will start numbering my trades.

I am looking to take a quick short trade @ 1.5725, stop @ 1.5770. My target is around 1.5600.

The 30-min chart shows a clear 5-wave rally (I think this could indicate that the short term downtrend from 1.5901 may be aborted). I will try to trade this retracement. MACD divergence is nearly complete. 1.5760 has strong resistance, as the the Weekly R1 and Monthly R2 pivot points both reside in this area. 1.5600 is my target, as this is the 38.2% retracement level as well as the Wave4 low.

This is a zoom-in of Wave5 from the 30-min chart. It appears that this wave is nearly complete. Wave-5 of Wave5 is forming as an ending diagonal. There is also RSI and MACD divergence on this final wave. I will go short on a break of the ending diagonal with a stop above the recent high.


CNEH Technicals

China Northeast Petroleum Holdings (CNEH) is a company with apparently incredible fundamentals. It drills oil and has a guaranteed contract to sell it to PetroChina. They have projected earnings of $.50 for 2008, given $75/barrel oil. At a P/E of 6 (the historical low), that's a price of at least $3.00 by early 2009 (a 71% increase).

It has been pretty painful to be long in CNEH over the past 6 months. However, I have several reasons to believe we are near a bottom. First of all, notice that the decline has been rather choppy, without forming clear 5-wave declines. That's indicative of a correction. WaveC would equal WaveA at 1.75. Price hit 1.61 this morning. Also, it looks like Wave-c of WaveC is forming as an ending diagonal. These are normally followed by sharp up moves.

Another interesting fact: volume has been downtrending as price corrected. That means that less and less shares are being sold as price is declining, a good sign of future strength.

Finally, there is MACD-divergence forming. When MACD curls up, the divergence will be confirmed.

Ideally, I would like to see a close around 1.75 or 1.80 on higher volume than yesterday. That would tell me that today's price action was a final washout of the ending diagonal.


EUR/USD Short Trade Update

Update of trade from 3/17/08, @ 6:26pm CDT: I was stopped out for +100 today.

My plan now is to wait for an upward correction and reenter a short trade.

The decline from 1.5901 has thus far occured in 5 overlapping waves, indicating the potential for a leading diagonal in Wave1/A down. Therefore, I will wait to see if we get a nice, choppy correction before entering short.


EUR/USD Short Trade Update

Update of trade from 3/17/08, @ 6:46pm CDT: I am moving my stop to 1.5705, locking in +100 pips.

There is still the possibility that we are just seeing a correction from 1.5900, instead of a top. There are only 3-waves thus far, and WaveC = WaveA within 3 pips. If the rally from 1.5612 is choppy and overlapping, I will look to go short. Otherwise, we may yet see a new high. Either way, I'm putting my stop just above the Wave1/A low.


EUR/USD Update

Talk about a throwover. I was easily stopped out as the EUR/USD surged to 1.5901.

I will now go short @ 1.5805, stop @ 1.5865. Target is below 1.5000.

A very nice Wave5 overtook all my measured targets. However, price has now rolled over and has formed RSI and MACD divergence.

In the past 24 hours, hordes of retail traders have gone long: on Friday, 36% were long. Today, 46% are long. This is the kind of quick change that I'm looking for at a top. Also, there is a 5-wave decline from the top, and price has been retracing nicely. Four levels of resistance lie in the 1.4800-4820 zone: WaveA=WaveC; Wave-iv top; 61.8% retracement level; and R1 weekly pivot point.


A Bird's Eye View of the EUR/USD

While it seems that the EUR/USD makes a new all-time high every day, a longer term view shows that it is extremely close to a top.

The ascent from 1.1640 to 1.2976 was Wave1 (with a truncated Wave-v). I am making this assumption because Wave-v subdivided into 5-waves and Wave-v was roughly 38.2% of the entire wave (a common ratio for impulse waves).

The Wave2 correction followed, and stopped near the previous Wave-iv low.

Wave3 has been underway since the 1.2483 low, and has formed as a very powerful extended 3rd wave. Wave-i of Wave3 formed as a leading diagonal (this count is validated by the fact that each up-leg in the diagonal subdivided in 5-waves, while each down-leg was in 3-waves); Wave-ii was a sharp ABC correction; Wave-iii was a typical extended third wave; and Wave-iv was a triangle. We are now in Wave-v.

There are three indicators that suggest we are within 50pips of a top:
  • 1) price has breached the top of the Elliot wave channel in a typical final throwover
  • 2) Wave-v of Wave3 would equal 38.2% of Wave3's length at 1.5646
  • 3) daily RSI(14) is at it's highest level in the past 4 years
We should soon have a very sharp correction on the EUR/USD, perhaps as low as 1.4438, where Wave-iv ended.


EUR/USD Short Trade

I have taken a new short trade @ 1.5663, stop @ 1.5720. Target is below 1.5000.

The chart above is the 5-min June Euro futures contract (add .0067 to calculate the spot price). The pair shot up on the BSC news, but then declined in a 5-wave diagonal. It has since been correcting upwards in a choppy manner. I took a short near the top of the ABC correction.

The daily resistance is still containing price. Daily RSI(14) is at 83.64, a (near) all-time record. GLD and SLV look like they've put in their final 5th waves. Platinum and Palladium have already topped. We'll see what happens with the dollar.

EUR/USD Short Trade (Update)

Update of trade from 3/13/08, @ 9:29am CDT: I closed out the trade at roughly +10 profit.

The Bear Sterns news caused the EUR/USD to hit a new high. My stop was safe, but the Elliot wave count has changed. I have yet to determine what it will be and therefore will stay out of the market for now.


EUR/USD Short Trade (Update)

Update of trade from 3/12/08, @ 11:27pm CDT: I closed out the trade at roughly +20 profit.

I will now go short @ 1.5650, stop @ 1.5720. My target is still below 1.5000.

I closed the trade prematurely because the drop from the 1.5630 zone was in 3-waves instead of 5. It looks like an ending diagonal is taking place. Thus, I plan to get short near the resisting trendline. The trendline on the daily chart (see post directly below) is around 1.5647. The resistance trendline of the ending diagonal is around 1.5660.

My stop will give me plenty of breathing room should the trendlines be temporarily breached in a final blast up. Should price miss my entry, I will be pissed, and will go short after 5-waves down.


EUR/USD stupidity

I will take a short trade @ 1.5620, stop @ 1.5665. Target still below 1.5000.

I got my ass handed to me today. Nevertheless, with the EUR/USD so overbought and so close to completing Wave5, I'm going to try calling the top again.

Take a look at the daily chart above. The channel top is at 1.5640 today. RSI is near 80, a historical topping point. This is certainly a nice (hopefully terminal) thrust out of the triangle.

The 30-min chart sheds some light as to why my trade from yesterday failed so miserably. The correction from 1.5459 was a 3-wave irregular flat. WaveB slightly exceeded the top of WaveA, and WaveC undercut WaveA. Typical... it's a perfect way for the market to wash out weak investors. In this pattern WaveC normally takes shape in 5-waves. I was preoccupied with the 5-waves alone instead of looking at the broader pattern.

Here are my resistance calculations:

  • 1.5640: Channel top
  • 1.5631: Weekly R2 pivot point
  • 1.5609: Monthly M4 pivot point
  • 1.5599: Wave5 = Wave1
  • =======================
  • 1.5620: Average

Thus my entry is at 1.5620, stop above the highest resistance level.


EUR/USD Short Entry

I will take a short position @ 1.5385, stop @ 1.5505. My target is still below 1.5000.

I was a bit surprised to see the 1.5462 high taken out because the drop from that level was in 5-waves. In retrospect, I see why it was possible. The first drop 1.5462 was in 5-waves, but that was only Wave-a in a larger abc correction. A final Wave-v thrust took place (stopping out everyone like me) before reversing sharply.

With a sharp 5-wave bearish pattern, I am now very confident that a top is in place. There is resistance in the 1.5375-5405 region, including the 50% fibo level, the Wave4 top, the weekly M3 pivot point, and the Wavec=Wavea level. Thus I will enter short there with a stop above 1.5500, as I don't think we will hit that level again.

Calling the top (Update)

Update of trade from 3/6/08, @ 10:17am: I was stopped out at the top of the move today for -23pips.

Not too bad in absolute terms, but horrible considering the upmove ended 20pips later and then price dropped 200+ pips. Yesterday, I couldn't help but feel smug for calling the top. I've noticed that whenever I feel really good and carefree about a trade, I usually get screwed.

Anyway, I am now very confident that a top is in place. My plan will be to go short on a 3-wave retracement of the 5-wave down move from 1.5495. My target is still below 1.5000.

In addition to having 5-waves up, there are two strong indicators for a trend reversal. First, there is clear MACD and RSI divergence. Also, notice that two bearish engulfing candles have occured on supposedly dollar-negative news: NFP's on Friday, and today's liquidity injection (creating and lending new money should be inflationary for the dollar). That tells me that the dollar is oversold.

I will post my exact trade detail later on, as I am unsure of my specific entry and stop at the moment.


Calling the Top on the EUR/USD

I am entering a short trade @ 1.5442 with a stop at 1.5485. My initial target will be below 1.5000.

I know it is risky to try calling a top. However, I am not betting too much on this trade, and I found 6 levels of resistance in the 1.5425-65 zone.

On the 2hr chart above, you can see that Wave5 is progressing nicely. It appears to be forming as an overlapping ending diagonal. Wavev of Wave5 has yet to complete, but once it does, look out below. Also MACD divergence is nearly confirmed.

The six levels of resistance are:
  • 1.5466: Monthly R1 pivot point
  • 1.5462: Wave5 = Wave1
  • 1.5446: 2.618 extension of Wave1
  • 1.5440: Weekly M4 pivot point
  • 1.5438: Triangle resistance (in 12hrs)
  • 1.5428: 2.618 extention of Wavei
  • 1.5410: Triangle resistance (current)
  • --------------------------------------
  • 1.5442: Average

Thus, I am entering at 1.5442 with a stop above the highest resistance point. If this trade fails, I will wait to enter short on the retracement of a clear 5-wave down move.


EUR/USD Short Trade (update)

Update of short trade from 3/4/08, @ 7:03pm CST: I was stopped out of my short trade this morning for -39 pips (I was not awake to move my stop when 1.5155 was broken). With today's price action, I am going to use my alternate wave count.

I am using this count because the decline from 1.5275 to 1.5144 was in three waves, indicative of a corrective move. This count makes more sense because a 5th wave rally would create very clear MACD-divergence. I think the EUR/USD could hit 1.5450-1.5500, which is where some pivot points reside, and where Wave5 would equal Wave1. I will look to go short on a completion of this 5-wave bullish cycle, targeting 1.50 and below.


EUR/USD Short Trade

I have been watching the EUR/USD, and it is showing signs of topping. I will place a short entry at 1.5168, stop @ 1.5207. I will move my stop to breakeven on a break below 1.5156. My initial target is below 1.5000.

On the 4-hr chart above, you can see that potentially 5-waves are complete from 1.4438. Wave5 was a spike (hammer candle) coupled with MACD and RSI divergence.

On the 15-min chart, several bearish signs are apparent: first, there is a Head and Shoulders pattern. A break through the neckline @ 1.5170 should lead to lower prices. Second, the decline from the all-time high of 1.5275 was in 5-waves, followed by a drawn out 3-wave correction which stopped at the 78.6% fibo. My plan is to go short on a break of Waveb and the H&S neckline. My stop will be tight, as I have an alternate Wave count that is still potentially bullish.

Two other events are bearish for the EUR/USD: GLD had its first 5-wave downside move today. EUR/USD has a .84 correlation with GLD. Also, retail long positions in the EUR/USD have shot up more than 50% since last week. All my friends are talking about the dollar's weakness and GLD's strength. Could this be the end of the uptrend?