This week, we are going to look at the most liquid currency pair. Right away looking left, it’s clear price has been trending strongly bullish. Bulls got exhausted at the top and bears took over and have been successful driving the market bearish. Price has been consolidating in the form of a falling wedge in this bear dominated stage of the market. In addition to that, a few weeks ago, we were trading within an ascending channel. The market broke below the ascending channel and pushed upwards to the lower boundary of the channel for a retest. At the same time we have a level that has acted both as support and resistance. Ladies and gentlemen this is what we call a trading confluence or an A plus setup. Trading confluences are explained in detail in our course, but briefly they are described as when we have more than one occurrence happening at the same time giving us a high probability that something will happen. In this case we have 3 occurrences. Currently price has been resisted by the upper boundary of the falling wedge. The retest on the ascending channel has held at least for this week as price has not been to return to the channel. Finally the level has also held its own and acted as resistance.

SUMMARY:

Following the resistance of the various patterns on price, we have a bearish bias. However waiting for a confirmation is paramount to opening any sell positions. Since we are well aware that price might as well, rally bullish and break out of the wedge, pierce through the level and return back to the channel.

On the gold this week, we are keen to notice that price has been on a strong bullish trend since 2016.Price reached the major level got resisted and sellers took over the market. Bears got exhausted around September 2018 and there was resumption of the bullish take over. Last week price formed a pinbar then followed by a strong bearish confirmation this week. Moreover this week’s candle has engulfed the previous 4 candlesticks and closed below the near term level.

SUMMARY:

Patience of a saint will be needed. The combination of the pinbar and confirmation could be a test of the previous break of the near term level  by the bulls in order to see whether it’ll now act as a support zone. Price may rally even though we have seen a break of the near term level. Alternatively it could be a total reversal of the uptrend and the beginning of a new downtrend. In order to validate the latter we need a confirmation of the bear power by a retest. Further price action will guide us on which path to follow.

On this pair we are also going to follow up on what we observed two weeks ago. Price was on a long term ascending channel. There was a bearish move to the lower boundary of the channel. Right at the lower boundary, formed a bullish engulfing candle. Later the following week a doji was spotted succeeded by a bearish candle. A candle stick pattern known as an evening star.

SUMMARY:

During the analysis of the pair we concluded that we had to wait for a bullish confirmation after the bullish engulfing formation. Here we have another perfect example of how waiting for a confirmation is paramount in trading profitably consistently. It eliminates the chances of getting faked out or caught up in false moves. Price formed a doji there after, showing indecision of the bulls then a bear candle pushing prices further bearish. At this point we’re back playing the waiting game. Additional guidance is needed with either more bear dominance to break and close below the channel or a resistance of the lower boundary of the channel.

This week’s analysis will consist of a follow up of the previous week’s work. In the past 5 trading days on the pair, price broke and closed below the neckline momentarily. Which was then followed by a rejection of much lower prices and price pushed further up. The recent bullish move is seen to have reached on the level of the left shoulder of the head and shoulder chart pattern.

SUMMARY:

Remember we mentioned previously that in order to trade the head and shoulder pattern we have to be patient for a break and close below then followed by a confirmation. Basically the pattern is only complete if the latter happens. However our pattern was not completed, buyers took over the market and bid for higher prices.It should be clear how waiting for a confirmation prevented one to be faked out by the close below of the neckline. Currently price has formed an inside bar. We’ll again have to wait for a confirmation from price whether price will continue bullish with a close above the mother candle or reverse and close below it.

Analysis:

We approach the analysis of this pair based on the weekly timeframe. In this pair we see that price has been trading on an uptrend for two years. On the lower boundary of the channel, prices have formed a bullish engulfing candle. This week’s candle has engulfed the previous three weeks candle, indicating a strong bullish push on the pair in line with the upward price channel.

Summary:

The formation of the bullish engulfing candle shows that there’s a strong bullish momentum after the bearish retracement. This implies rejection of the previous bearish move. We will be analyzing for buy price action signals in the lower time frames of the daily and the 4-hour as long as the bulls can sustain their upward push. Waiting for price confirmation is paramount as they help us not to get faked out.

Today we are going to look at a recent topic we discussed in our first webinar the power of breakout trading. This pair had nice breakout trades that worked really well.

I want you to note how the market topped in the previous bullish trend. Can you identify the price pattern highlighted in yellow? Do you see the candlestick formation in the right top of the chart pattern? If not, feel free to visit www.fourthstreet.co.ke for more information on our Price Action Trading Course.

As you may observe we see a break of the red trendline in the fall of the GBPUSD and we see close outside the bear trendline. Next we see a peculiar candlestick formation that show indecision. Then a strong decision confirms the investor sentiment. What is the price telling you? What is there to say when the price does the talking?

Summary

Our bias on this pair is to stay alert and we will have a very close to see how the bulls will react as price is at a zone of resistance.

Weekly Analysis

Hello guys,

This week we’ll be looking at the GBPJPY pair. We see that the pair has been on a downtrend for the most part. The main trend is bearish. Prices found a bottom and made some retracement. Then we see prices trading within a descending channel. At the most recent bottom of the descending channel, we see a hammer, signaling that there’s a high probability markets will reverse. They actually did reverse. Now at this point we have to wait for a clear breakout of the descending channel in order to have a clear signal of where the market will be headed.

Summary

Our bias is still bearish. The bulls have made a strong comeback by rejecting the prices moving lower and the confirmation by the bullish weeks.

A breakout outside the descending channel may show that the investors sentiment has changed and with the political drama of the Brexit we need to be careful trading this pair.

CURRENCY PAIR: NZDCAD 17th – 21ST Dec, 2018 📈📊💰

This pair has been on a strong uptrend and the momentum of this pair is prone to exhaustion. The quick bullish move has definitely started showing signs of weakness as the market reaches the resistance zone. The pair is indecisive and the bears seem alert. The market main trend is bearish and this is a classic pullback to retest the break of this support. Nevertheless we will watch out for the price to guide us further in order to pick a bias.

Today’s article, Trading-vs-Hunting is inspired by a book. ‘The One thing’ is one of the greatest books I have read and would strongly advice you get. In his book, Gary Keller undertakes to cover in detail the greatest people and the biggest companies that have achieved enormous success mainly by mastering the one thing/skill they are good at, thereby maximizing on their performance and success.

As traders, we should learn from this book, and use the concept of mastering your strength, and banking more on your area of strength as a trader, whether you are a day trader, a position trader, or a swing trader.

Am sure by now you probably wondering why the topic ‘trading vs. hunting’? There are many similarities between successful/high probability trading and hunting. Let’s use a lion hunting for prey in the jungle. Lion in our case being you, the trader, the jungle being the forex market, and the prey being the trading opportunities that we are always looking to find on the markets.

If you have watched the national geographic, then you’d understand the hunting style of a lion, and other cats in the jungle. No matter how hungry the lion is, there is a formula that he uses to hunt. He doesn’t jump out rightly to chase the prey. First, on spotting the prey, he always takes cover, then watches the prey. At this point, I equate lion watching the prey to a trader studying and analyzing the forex markets/pairs that he/she’s looking to trade. After a careful and a thorough evaluation of the prey, the lion then spots the easiest target to catch, whether it is a weak prey, or one that is at the direction that is easier for him to chase.

This is the highlight of today’s article. So then what lessons do we learn as traders from the hunting style of the king of the jungle? At this point, how does hunting relate to trading? One of the most obvious lessons we learn today is that just like the lion, we as traders must not rush at our ‘prey’, i.e. opening random positions in the market, before taking our time to evaluate our chances of ‘catching the prey’ i.e. analyzing and identifying winning trades in the markets. At any one second on the markets, there’s always price movements and volatility, but it is not all the time that we get to identify high probability trades, which have high chances of making us money.

It is therefore paramount that traders need to analyze the markets using the techniques of price action, trend following, while observing the long-term support and resistance zones, in order to go for an ‘obvious’ trade that offers a good loss to profit ratio of 1:2 and above in order to make consistent money in the market. Mastering such strategies, and attaining the discipline of the patience of the lion requires proper trading education, and new traders to practice trading on the live markets while employing the trading education and strategies acquired from the courses they undertake.

As I conclude, it is paramount to note that the lion might not always catch the prey he chooses to chase, but most of the times he catches he’s prey of choice. This relates to trading in that it goes further to show that as traders, we will experience some losing trades, but as long as we have more winning trades that have high ratios of loss to profit, then and only then can we be guaranteed of successful trading and making money consistently from the markets day after day, month after month, year after year.

 

Joshua Matumo,

Fourthstreet Consultants.