Pip Diddy's Chart Analysis

If you enjoy trading tops and bottoms, this chart is for you. Notice how the pair has been range trading in between the 100% and 138% Fib lines. Count how many times the pair tested its support and resistance levels. I’ve highlighted them with purple circles.

Do you also see the black numbers I’ve put on left side? Round 00 and 50 numbers act as natural support and resistance levels. I feel they are close enough to the Fib lines so I’m going to count them as current support and resistance levels as well.

Here’s a trade I’m going to take. Right now, it looks like the pair is testing support again. I’m expecting the pair to bounce off support and go up. I’m going to buy this pair now at 1.1868. My profit target will be the 100 % Fib line at 1.1954. My stop loss will be 5 pips below the most recent spike low (1.1846) which is 1.1841. So I’m risking 27 pips to make 86 pips. A 3:1 reward-to-risk ratio.

Based on the long lower shadows of the most recent candlesticks, it’s safe to say that the swing retracement low is acting as immediate support.

I’m going to buy the pair now at 116.85. My stop loss will be 5 pips below the most recent spike low (116.41) which would be 116.36. My profit target will be the 38% Fib extension more specifically 118.00.

That Yen just plummeted through the floor *and* the basement! 115.69!

Hell yes it did. And the EUR spiked lower. So I got stopped out of both trades. Major bummer. Oh well, trading is all about probabilities. The odds of the pairs moving in my direction were good enough in regards to how much I was willing to spend to find it out if it did. There's always next time.

Notice how the top of the channel was previously a resistance level but now it has become the pair’s new support level. A classic example of a resistance level becoming a support level after a breakout. Also check out the consolidation area which I’ve highlighted with a pink box. Look how tight that consolidation was! This was basically guaranteed money. Notice the big move after it closed out of the consolidation area. All you had to do was wait for the pair to close either above the consolidation area’s high or below the consolidation’s low and you would’ve pretty much hit the jackpot. It’s very rare for the pair to trade in such a consolidated range like that. You want to try and take advantage of such opportunities because of their scarcity and high probability of success.

If you missed it, that’s too bad. Don’t worry there’s always next time. =)

Okay, so I like I said earlier, the top of the channel is acting as support for now. I predict that this pair will rise and test its new resistance around the 1.7600 level again. If it’s able to break above this, the next stop is its previous high around the 1.7800 level.

Trade Idea:
I’m going to buy this pair now at 1.7498. My stop will be below its most recent low (1.7460) which I will place at 1.7458. My profit target will be 1.7600. I like this trade due to the double bottom tweezers of the last two candles. But at the same time, it’s kind of risky since 1.7500 seems to be acting as temporary resistance right now. But I like my 2.5 reward-to-risk ratio. I’m risking 40 pips to make 100 pips.

This is the same 4-hour chart from last week. As you can see, the pair finally broke out its sideways trading. It seems to have found temporary support on its 76% Fib extension line and temporary resistance at its 62% Fib extension line. The pair has consolidated between these two Fib lines for now.

I should also point out that the pair has also risen above its purple 200 SMA. These are all bullish signs. If the pair can close above its 50% Fib extension line, I look for it to rise up to 38% Fib line around the 1.2100 level. If the pair closes back under the 76% Fib line, it will likely retest support on its 100% Fib line around the 1.1950 level.

Trade Idea:
Buy the pair at 1.2020 or cheaper. Place your stop below that last spike low. I’m placing mine at 1.1990. Take profit at 1.2100.

Hello Pip Daddy,


which chartingtool do you use?
Is it from FXCM? Seems good

Al Jack

It's Xtick (www.xtick.com). It's not from FXCM but I use the FXCM feed.

Btw, the trade above didn't trigger. It was too expensive to buy when the market opened.

This looks like a nice setup for a short trade. Here’s why:

 

1. Check out the Fibonacci retracement level. It looks like the pair has exhausted its upward move and hit resistance at the 50% Fib line.
2. I see hidden divergence of lower highs with price but higher highs with the oscillators. This is a bearish divergence. If you’re not familiar with divergences, check out my divergence lesson from my previous post.

Trade Idea:
I’m going to short now at 1.2005. My stop loss will be above the most recent high (1.2093) at 1.2105. My profit target will be 1.1800. You’ll notice this trade has a pretty big stop. Only take this trade if you’re able to expose 1% of your capital, 2% maximum. Move your stop to breakeven with the pair reaches 1.1900.

Here’s another short trade setup. The pair has hit resistance on its 62% Fib line. There is also hidden bearish divergence with price showing lower highs while the oscillator is showing higher highs. Also notice that the pair has reached the overbought region in RSI and has turned down which is usually a bearish sign.

Trade Idea:
Sell the pair at 117.49. Your stop loss will above the most recent high (118.74). I’m placing mine at 117.79. A safer stop loss would be above the natural 118.00 resistance price level like 118.09. My profit target is the 38% Fib line at 116.80. Off course I’ll keep an eye on this trade and if I’m feeling greedy, I might exit half my position on 116.80 and try to go for the 24% Fib line around 116.30.

PD,

I like and appreciate your methodical approach to analysis which is reminiscint of my own, but I can not see how you could say that the long trade on the eurusd did not trigger. Your trade suggestion was "buy at 1.2020 or cheaper". That's it. Pretty cut and dried. It was a loser. There was nothing "too expensive" about it. Your credibilty would be enhanced at least from my perspective if you took your hits and moved on to the next high probabiltiy possibilty, like traders have to do.

Insider,

"Your credibilty would be enhanced at least from my perspective if you took your hits and moved on to the next high probabiltiy possibilty, like traders have to do." I like that. You don't beat around the bush.

That analysis is written over Friday night-Saturday evening. Hence the term "weekend analysis". The market is closed at that time. When I say buy at 1.2020 or cheaper, I mean when the market reopens, and I believe the currency pair opened at 1.2060+ which is too expensive. So I didn't enter the trade. 1.2020 did eventually trigger later but any trader worth his/her salt would have known based on the price action that only delusional maniacs would've put a long order in that price fall.

As you can see, the bearish hidden divergence acted like it was supposed to…the pair fell. From my trade idea yesterday, I shorted at 1.2005. I’m looking at the chart right now at 10:32 pm EST and the trade is up 105 pips. I said to move your stop to breakeven once it the pair hits 1.1900 which it has. I’m actually going to “hide” my stop behind the 50% Fib line so I’m going to move my stop to 1.1985. I now have 20 pips locked in.

This trade is still open. Remember, I had shorted at 1.2005 and as of 9:11 pm EST, I’m up 108 pips. I’m moving my stop once again to 1.1955 which is right behind the most recent high. This will lock in a 50 pip profit. My profit target still remains at 1.1800. Hopefully, the NFP report is dollar bullish enough for us to achieve this target. If not, I might close out this trade since I usually prefer not hold trades over the weekend. You never what could happen. Martians might attack the United States and we’d see the US dollar fall 5,000 pips.

Put a fork in this trade because it’s done. I shorted at 117.49 and I was eventually stopped out at 118.09 during the craziness when the BOJ announced they agreed to stop their quantitative easing policy. I actually expected the Yen to strengthen after such news but was dumbfounded when it weakened instead. You gotta love the forex market.

Anyways, do you see this pair forming a regular bearish divergence? Price is forming higher highs while the oscillator is forming lower highs. This is usually a bearish sign but if you look closely at the chart, you’ll notice that the pair broke through all the Fib retracement levels which leads me to believe it wants to at least re-test its swing high level. Especially since a positive NFP report from the US is coming out. Then maybe, just maybe, it will fall back down. I prefer to sit on the sidelines for now. I don’t know if this pair is going to up or down. But with the news of the QE policy change fresh in the market’s mind and the possibility of more BOJ remarks, this pair could make big moves up and down!

This chart is pretty straightforward. I applied good ol’ Fibonacci retracement levels and it looks like the 62% Fib line is holding as immediate support. If this support holds, I look for the pair to rise and test resistance at its 50% Fib line at 1.1980 and even 1.2000. If the support can’t hold, then I’ll look for the pair to fall down to its 76% Fib line at the 1.1800 level.

Bearish divergence on this chart. I'm shorting at 1.1610 or 1.1600. My stop loss will be 1.1660 which is above the recent hight. My profit target will be 114.80., just above the 200 SMA and 50% Fib line.

It looks like the pair has bounced off support off its pink 50 EMA so here's a good long trade. Buy at 118.80. Place your stop loss behind the 24% Fib line. The pair will have to go through both the 50 EMA and this Fib line before being stopped out. Nice safe stop placement. Cash out at 119.10.

Look what we here…some bearish divergence. The price has been making higher highs while the oscillator has been lower highs. This move up might be done for now. I’m going to short now at 1.2020. My stop will be placed above the previous high and above the 62% Fib line at 1.2045. My profit target will be 1.1955, at the 100% Fib line where the purple 200 SMA and pink 50 EMA are also chillen’. This is a low risk trade. I'm risking 25 pips to make 90 pips.

I was stopped out of yesterday’s trade at 1.2045 for a loss of 25 pips. The chart is still showing bearish divergence though so I still believe this pair is headed down. The previous high is 1.2093 so until it breaks above that price, I maintain a bearish bias. The chart might even form a double top where the pair attempts to break the previous high but fails forming two “peaks”.

Here are two possible trade ideas:

 

1. This is a super aggressive trade. Short the pair now at 1.2070. Place your stop at 1.2110 which is above the previous high and 1.2100 (a natural support/resistance level). Take profit at the 76% Fib line at 1.2010 or you can be even more aggressive and target the purple 200 SMA.
2. Here’s a less risky trade. Wait for the pair to re-test its previous high’s resistance. Short at 1.2090. Place your stop at 1.2110. Take profit at the 76% Fib line at 1.2010. You only risk 20 pips to make 80 pips.