Today I am going to briefly go over a few things to notice in the markets.  For those of you who actively trade you will have noticed certain pairs have died – meaning volatility and movement has decreased.  Other pairs have been extremely active and have developed strong trends.

Certain strategies work during certain types of market conditions and therefore it is important to know which environment we are trading in.  This seems obvious, but many traders fail to realize when conditions are not ripe for a certain strategy.

So let’s look at what some pairs are doing (or not doing) right now and then hopefully that will help pick better pairs to traded based on what strategies you use.

EUR/USD, GBP/USD are quite tightly wound at the moment.  Until a major breakout occurs on the daily chart these pairs should not be traded for large moves (relatively speaking).  Rather quick trades within the range (the ranges which started around mid-July) are the best bet.  Looking for reversals within the range using candle sticks is effective.

EUR/GBP and USD/CHF are also moving in a choppy fashion at the moment, although this is not too uncommon for these pairs.  Other than the major movements seen basically in all markets world-wide toward the end of last year, these pairs often move in what I would call a choppy fashion.  These pairs right now are good for similar trades as mentioned above.  Day charts will give many false signals, so use shorter time frames for entries and exits and trade within the ranges established on the daily charts.

USD/CAD and AUD/USD have been moving extremely well, both in strong trends as the dollar has experienced massive declines against these pairs.  Both these pairs are currently at levels which will help determine if the trend is likely to reverse or continue.  Both are approaching former swing lows and highs respectively which if punched through will mean a continuation of the trend.  Large moves still have the possibility of being captured as these pairs continue to trend – whether they continue to reverse (this is a topic for another post).

The examples given are used to show that while we may like to trade a certain pair and a certain strategy, it may not work all the time.  And what worked at one point may not work right now, but it may work again in the future.  We can minimize losses by not trading a certain pair when conditions are not right.  We can trade a pair that is more suited to our strategy, or we can do nothing.  Some of the greatest traders in history were the best not because they made the best trades, but because they knew when not trade and therefore not waste money.  That said there are plenty to opportunities if we match up the right strategies with the proper conditions (different pairs).

To Your Trading Success,

~Cory Mitchell, CMT
Chief Market Strategist
Remember, failed breakouts are tradeable too!

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The USD/CAD forex currency pair is jostling higher in a narrowing channel.  This often means a break out and a profitable trade set up.  From the chart you can see the current trendlines which have formed, with the internal lines being the minor support and resistance and the outside lines being more important.  A break of either of these outside trend lines would provide a profit target of 200 pips from the breakout price.

Levels to be aware of outside the formation are the 1.1400 support level and the 1.1800 and 1.2000 resistance levels.

Want to learn more about chart patterns or other forex and stock market trading methods?  Check out my Trading Courses page.

Source: Forexyard, USD/CAD 2 Hour Chart

Please read the latest How to Use the Trade Ideas blog if you have questions. If you still have questions after, feel free to comment

~Cory Mitchell, CMT
Chief Market Strategist
Remember, failed breakouts are tradeable too!

Are you interested in getting into trading? Or if you are already trading and dissatisfied with your broker, check out mine at Forexyard. Switch to Forexyard, open a Standard account and receive up to a $1,000 bonus.

Open a SuperMini or Standard account now and receive a 100% cashback worth up to $300.
Open a Standard account and trade commodities, receive 10% cashback worth up to $1,000.

I am here to personally help you out if you open an account, and need help with strategies or figuring out the trading platform.

In my last post on the longer term view of this pair, I mentioned that how the pair reacted at 1.0800 would be critical in its longer term movements (this analysis was contributed to ForexPros.com and can be seen under my submitted analysis – My analysis of the eur/usd and usd/jpy can be viewed daily, all day, on the homepage of the site as I provide an idea of what to expect through the upcoming trading day).

We know know that it reacted strongly with the USD gaining over 700 pips against the CAD since that level was touched.

Several factors point that we are in the start of a new uptrend.  RSI has moved up above 70 which it did not do on the downswing.  Thus we have a breakout on the RSI.  The (small) correction also held above 40, which is a strong sign.

With the rate surging, at the moment, higher we will likely test the trend resistance line.  This trend line is just below the former swing high at 1.1750, the former swing high is at 1.1800.  Obviously a break of that level will be required to really confirmed a reversal and a new uptrend.

The trend line moved down over time so the break of that trend line can give us early indication of a  move ever higher.

The break above 1.1800 indicates a move to 1.2800 over the long term.  This could be adjusted as low as 1.2400 depending on the when the breakout occurs.  The longer it takes to breakout, and thus the lower the trendline price is when the breakout occurs, the lower the profit target will be.

Failure to move above 1.1750 (this will decrease over time as the upper trend line falls) and ultimately 1.1800 would mean a testing of the small correction lows at 1.1200 and a more significant correction.  A break below 1.1200 would indicate further weakness and a likely resumption of the downtrend.  That downtrend would be confirmed with a move below 1.8000.  Intermediate support between 1.1200 and 1.8000 is 1.0950.  If that level can hold, it will likely be choppy trading for a while as the market chooses a direction.

BOTTOM LINE:  Right now it appears we are heading even higher, but we are still in a downward sloping trend channel.  Corrections should hold above 1.1200 and and resistance is expected between 1.1700-1.1800.

Keep in mind, oil is breaking hard, and you see that analysis at http://www.darkpooltraders.com/vb/energy-futures/106-oil-about-break.html.  Get the analysis and updates to that trade there.

Falling oil prices hurt the CAD, which will mean the USD is likely to rise in relation to the CAD.  It is not a perfect indicator, but as a general guideline it works well.  This means the USD/CAD currency pair is likely to push higher as oil prices fall.  While this is not an oil analysis, a move back to former lows is not expected in oil, so the oil fall is likely to be  just  a natural correction.  Thus I believe oil will fall, but for a short time.  Large moves in oil can affect the pair dramatically…as they did today (June 22).  Thus, keep an eye on oil when following this pair.

The average daily range of the pair is currently hovering around 150 pips per 24 hour period starting at 00:00 GMT.  Keep this in mind when making projections for day trading and when using profit targets with time constraints.

Please add comments or if you questions please ask them view the comments link at the bottom of the post.

Want to learn more about chart patterns or other forex and stock market trading methods?  Check out my Trading Courses page.

Source: Forexyard, USD/CAD Daily Chart

To Your Trading Success,

~Cory Mitchell, CMT
Chief Market Strategist
Remember, failed breakouts are tradeable too!

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Are you interested in getting into trading? Or if you are already trading and dissatisfied with your broker, check out mine at Forexyard. Switch to Forexyard, open a Standard account and receive up to a $1,000 bonus.

Open a SuperMini or Standard account now and receive a 100% cashback worth up to $300.
Open a Standard account and trade commodities, receive 10% cashback worth up to $1,000.

I am here to personally help you out if you open an account, and need help with strategies or figuring out the trading platform.

The USD/CAD pair closed above the stop level.  Positions should have been exited near the close today, as we were about 50 pips above our closing stop level.  Trades can also be exited at the open on Sunday night/Monday morning.  If for some reason the market gaps below 1.2377 – then a firm stop at this level should be used.

But this trade is now considered closed, as we have hit the stop-based on a closing price.

Final Result: +289 pips (1st target), +519 pips (2nd target), +298 pips (closing above stop today at 1.2412)

See last post here, and link back to previous updates from there.

http://vantagepointtrading.com/archives/1142

To Your Trading Success,

~Cory Mitchell
Market Strategist

View last post for this trade here: http://vantagepointtrading.com/archives/1071

Original post can be viewed from that post. Entry was at 1.2719

This trade has already realized a 500 pip profit on part of the position. Profit targets hit so far are 1.2430 (a 289 pip profit). We have also hit the target at 1.2200 (a 519 pip profit).

Currently we are trading at 1.2290 – well onside. Yet the large drop has also caused a short term oversold condition (13 on RSI), while prices have so far held above the former swing low. This does not mean we are about to head higher but it makes it less likely we will head lower in a hurry.

Bring in trailing stop to 1.2377. But we want a close above this level. If you use a different time frame on your charts than I do, at least make sure the US market close is above this level.  If we do continue lower, next profit target is 1.1850.

(square box is our entry, circles are profit targets hit so far.  Black line is current trailing stop – based on a closing price)

~Cory Mitchell
Market Strategist

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Are you interested in getting into trading? Or if you are already trading and dissatisfied with your broker, check out mine at Forexyard. Switch to Forexyard, open a Standard account and receive up to a $1,000 bonus.

Open a SuperMini or Standard account now and receive a 100% cashback worth up to $300.
Open a Standard account and trade commodities, receive 10% cashback worth up to $1,000.
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The pair did make a break above the strong resistance level of 1.3000, but failed to hold above it by the close (24:00 GMT is what I use for daily bars). The upper shadow does show selling pressure, similar to what we saw on the last two attempts at this level.

But even though the pair did not stay above 1.3000 calling a reversal is at bit premature, as is calling for a move back higher again.

So we will wait. And while Mondays action did push the rate above 1.3000, I am still using the trading signals I originally published here http://vantagepointtrading.com/archives/924

~Cory Mitchell

The USD/CAD currency pair has made several attempts to break above the 1.3000 mark. With the first attempt in October of 08, subsequent attempt have been stifled resulting in a pull back from the major resistance level. There is an upwards trend line though and RSI is holding strong in a bullish range.

The CAD has a high correlation with oil prices. If oil prices continue to rise, especially if they manage to break $50, this could put downward pressure on the US$ relative to the CAD$. But at the moment that is only something to aware of.

The market just a few days ago made an attempt at 1.3000 (4th attempt since Oct, 08) and pulled back, currently trading at 1.2850.

This is how I would set up a trade.

SELL if the market drops to 1.2765 and closes at or below this level. Stop=1.2930.

First target would be 1.2600 (would bring in my stop to break even, but would not likely take any profits here, but that is up to you), 1.2430, then 1.2200, then 1.1850.

If we see another rally, BUY if the market closes above 1.3000. Stop=1.29000

First target would be 1.3275, then 1.3580, 1.3780, then 1.4170

You can exit at different profit targets if you have multiple lots or you may simple choose to keep holding if rates keep advancing through profit targets. You may also use a form of trailing stop. Average True Range (20) right now is 170 pips on a daily chart so keep this in mind when setting a trail.

This is a potential long term trade set up, or you may turn it into a swing trade. By adjusting the time frame to a shorter period you may find stop levels and profit targets that allow you to risk less or take profits earlier.

~Cory Mitchell