Elliott wave analysis of the week - December 4th, 2009

I begin by writing my mid term view of US dollar. Here is the daily US dollar index chart:

Elliott wave is very bullish on US dollar

Notice in today’s session, DX has broken up the trend resistance before making the new low. This is another supporting fact for the speculation that USD has bottomed.

Elliott wave analysis is telling me of dollar bullish in both mid and short term.

If USD is in a corrective wave in seasonal cycle, the next wave will be blue c wave that should aim towards the high of March 2009. In this case, we could anticipate EURUSD=1.2457, AUDUSD 0.6281, and USDJPY=99.49 by the end of the wave.

If USD is in the young impulsive wave up, the next wave should be blue 3 wave, and it is going to be much stronger wave than the first scenario. In this case, EURUSD=1.093, AUDUSD=0.5596, and USDJPY=120.66 by the end of the wave.

If you look around the news, everybody is pessimistic about US dollar, and this kind of talking of my should certainly be heard with a skepticism. Anyways, I am a short term currency trader, so I will keep my mid to long term view in my mind, and focus on the short term trading that lasts half day to a few days at most.

Now, the currency I traded is Aussie. I entered the short position of AUDUSD at 0.9220, and I was conservative as to booked profit of one half of my position with 30pips to ensure my trade this time would not make any loss. For the remaining half of the position, I took final profit at 0.9110, partly because it was the planned target, and partly because the week was ending. 107pips for this one. For the first time after a while, it was a good trade.

What is coming up next week? Let’s look at AUDUSD 30min chart:

$AUDUSD Selling into 0.9177

Now I think the purple .iii wave is over, and it should be in purple .iv wave that will most likely be choppy wave. I would say 0.9160 to 0.9180 is the short entry zone, and I would put stop at 0.9218 that is within the territory of purple .i wave. The take profit target is 0.9060 to 0.9070.

From the previous to this week, I was focusing on AUDUSD because the trend line was straightforward. Now that EURUSD was a big looser today, I will jump on EURUSD trade too.

Here is 12 hour chart:

$EURUSD channel support broken!

As you can see, the channel support line that lasted over 6 months has finally been broken, and the acceleration of EURUSD selling is possible in the next week.

EURUSD seems to be in the purple .3 wave, and it implies that 1.4735 to 1.4624 may be the end of this backdrop.

So, here is my strategy: I will assume the trend will continue if 1.4810 is going to be traded. So I put stop sell order at 1.4810. It’s a bit difficult to set a good stop loss order, but I would say 1.4875.

Real time trading tweets

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

Current risk exposure:

"","","","","$29,058.30","","","","","","","","","","","","","","","","","","","","41.95%","","","2.00%","","","","","","","","","","","","","","","","","","","","","","","","","","","",""
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.

Capital growth

From recent 100 trades (%) The growth right before the 1st trade is set to 0%.
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Drawdowns

From recent 100 trades (%)
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Total returns

Since inception
(Aug 10, 2009)
Year-to-date Quarter-to-date
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This is a normalized value: the return on each trade is normalized against the capital just before the trade execution. This way, it is eliminating the effect by the capital change from deposits and withdrawals. The calculation thus reflects the trading performance of each trade. The value does not contain unrealized profits and losses. RM's trading strategy never risks more than 5% of the present capital. Not including subtraction by tax.

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