Archive for the ‘Wave 4’ Category

Update on EURUSD and gold

EURUSD gradually formed a short-term bottom, and struggled to reach over 1.4300 last week, followed by a sudden drop to 1.4100 to the end of the week. I’m still thinking this is just B of b, meaning EURUSD will try 1.4385 to complete the upward flat wave b. But just in case the rebound had faded already, I set my stop sell order at 1.4038. I may cancel this order if I confirm EURUSD is still in wave b.

I prefer to think gold’s rally has not completely ended. The current nervous price action shows the characteristics of Wave 4. I did finer Elliott wave analysis in the 180min chart:

I give enough time to gold price to swing on the seesaw. There is a good possibility that gold goes down to $1460 level before resuming the rally.

This is how I pyramided gold

90% of the decision making process in my trading is based on technical analysis (Elliott wave), but in this gold trade, I think the fundamental reasons are clear. If I list from what I think to be the biggest factors, they are:

  1. FED’s loose monetary policy
  2. US fiscal deficits
  3. Sovereign crises in Europe
  4. Japanese earthquake
  5. Unrest in Middle East
  6. Central banks’ purchase of gold
  7. Real demands from China and India

It’s funny no body except for Indian wedding is buying gold for real use (yes, it’s an exaggeration). But sinking dollar and uncertainties in all over the world driving people buying this useless metal just because it does not stain. Yet when it goes up, anything goes up like smoke.

After I saw the initial wave (.1), I immediately thought some crazy acceleration of the price might be following. In terms of Elliott wave, it meant an extended 3rd wave. So, I bought gold at $1446 on March 24, risking about 2.5% of my capital.

The price went side-ways for a while, but finally it overcame 1 on April 5, so I bought more, and my average entry became $1450. Again, the total risk was 2+% with the narrowed stop loss level. After a few days pause (and patience), gold never looked back and kept breaking the record. There was no meaningful pullback that one can enter the market…until $1518 (iii).

After we saw the quick pullback to $1492 (iv), we confirmed that the FED assured cheap money for the extended period. I bought once again at $1520 when it went higher than the previous high of $1518. I moved my stop loss to the current level ($1491), and this guarantees the profit since the average entry point is now $1473.

Now, this is my way of pyramiding the position. I think a pyramiding requires extended rally like this time.

Beginning the new week, we are seeing biggest correction down to $1542 after the gold briefly hit $1576. $34 drop is big, and we may see a volatile yet choppy market from here for a while as people start to take profits. But I sit tight here because it perfectly make sense in terms of Elliott wave; this should be the 4th wave correction (4 in the chart), not the market reversal.

AUDJPY sell zone

Update: The Elliott wave count and the trading idea in this article have been rejected.

USDJPY moved 300pips in one hour this afternoon after USA told its military force supporting Japan to stay outside the 50 miles radius of the nuclear plants in Fukushima. AUDJPY was also badly sold off. The move was so fast and violent and once it started, it was too late to enter the market. So, I stayed away of course. It’s funny I just wrote about the idea of selling AUDJPY. But I did not take position for a good reason.

Now it seems to be in a temporary rebound phase in hourly chart, I started to count the wave. In the daily chart assuming the AUDJPY is in an impulse wave towards c targeting 68.36, I believe Wave 3 has not quite concluded yet:

Zooming up to 6 hours chart, it’s a bit tricky to count, but I think 74.437 was the peak of the panic of the day and we are now seeing a clear rebound that I believe to be wave .4. I think I can learn something from May 6, 2010 (flash crash). Though the usual  sell zone is 38.2% rebound (78.00~), I won’t be surprised if it overshoots just it did after the first let of the flash crash (70+% rebound, click this link and check I and II of the 3rd chart). So, I would wait for a while to see how strong the rebound will be, and sell somewhere between 78.00~80.00 and set the stop loss at 82.00, a little above the low of 1 . The ideal target is 72.00, but I’d be ready to take partial profit in the rapidly changing & abnormal market condition.

Real time trading tweets

The plan in the article may get rejected any time, so please check out my tweets on Twitter.

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Rational Move always use stop loss orders, and this is the worse case potential loss over the capital for the currently open positions. This is unrealized loss is less or equal to the risk exposure.

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