FX via Wyckoff

[hcour]

For the pv/Wyckoff enthusiasts on the board, all others ignore, FX pov from a Rookie:

http://www.streamload.com/hcour/CAD.gif

http://www.streamload.com/hcour/CAD-USD.gif

Late Nov the CAD/USD has a SC, note the accelerated downtrend starting mid-Sept, typical of a climax. That parabolic tl and the 20d ema are both broken immediately on the AR, which is stopped at tl resistance and the consolidation at X. The ST is shallow and is quickly tested on a #3 spring, then a rally that decisively breaks the dt line, but is an Upthrust, followed by a brief consolidation at the top of the range, then a sharp reaction back to the ST low at A, either a SOW or Shakeout w/in the range.

Looks like the latter, as here a possible SOS rally to B, but no, as it's followed immediatedly by the equal reaction to C, note the symmetry here of the wide swings. Presently price is consolidating, perhaps forming an apex in the midst of the trading-range. Following the high-volatility swings, one would expect lower volatility as we continue w/in the TR.

Note the convergence and flattening of the 3 ma's (200, 50, 20) at the little mid-June apex, and how these ma's have converged and acted w/other resistance on the chart since they've all rolled over.

The USD has hit significant resistance following a BC and reacted back to the utl and below the little range. The CAD is moving inversely to the CAD/USD and also seems to be consolidating.

Looking for some short-term downside here, a test of the lows possibly, as there's lots of overhead resistance and the downside seems the path of least resistance. Tl's seem to work well in FX, so I'm following these and their subsequent breaks and tests.

H

 

[hcour]

http://www.streamload.com/hcour/USD-CAD_3-HR_A.GIF

Really fascinating trying to figure out some of the peculiarities of Wyckoff TA in FX, as FX definitely has unique characteristics vs other markets, here as applies to the USD/CAD. F'r instance, no gaps of course, but lots and lots of tails. Lots. FX is full of noise, even in trends and especially in consolidations. I think this makes the David Weis EOM (Ease of Movement) bars even more significant. For those not familiar w/these, assuming I understand them correctly, and David please tell me if I'm wrong, they're relatively wide spread bars w/little or no shadows, or wide-spread "Marubozu" bars in Candle-speak, of particular importance at significant s/r points and SOT's.

Looking at the 3-hr chart (from about noon today) on 7/27 there is a climatic EOM bar following a parabolic rally, which is immediately reversed on another equal EOM bar. (See previous post for daily analysis of this resistance area.) The subsequent rally attempt over the next 8 bars does basically nothing at the 50% retracement, a pitiful ST, and the 9th bar closes well below this little consolidation and the BC/AR lows.

From here the next few bars are on narrowing spreads/candlebodies, forming a little apex at that little s/r area from 7/26. Then the next 3 bars drop sharply on relatively wide spreads closing on the lows and at this point all the ma's have rolled over and crossed and a dtl has formed.

The downtrend continues to mid-8/01, the widest spread since 7/27, followed by another wide spread closing on the low and back to the bottom of the consolidation formed 7/15-7/25 (on the 3-hr), the SC. From here the Automatic Rally back to the dtl and the 10 period ma. Then the ST a spring and SOT, followed by a rally that turns out to be an upthrust. From here volatility contracts for a while, which Wyckoff teaches us is natural for a trading range following the high volatility of the trend and climax that preceded, and which continues in the early part of the range as momentum winds down.

So volatility drops off and things quiet down on contracting swings, spreads and candle-bodies until A, a wide spread down closing near the low. But it does not follow-thru, a little shakeout as price rallies to the EOM bar Aug 5, one of the widest spreads on this chart, closing on the high.

Ah, but no follow-thru (note resistance at the downtrending 200p ma). From here this bar is quickly reversed in the next 2 bars and the subsequent rally attempt is weak on narrow spreads unable to get to the 50% retracement or that previous 8/02 upthrust high. Then at B an EOM bar, very wide relative spread at significant overhead resistance, followed by another wide spread closing on the low, back to the low at A.

At C a strong EOM bar up on a very wide spread that breaks all kinds of resistance. But keeping in mind the W principle - Effort vs Result - what happens? Nothing. Same as the previous UT following the same kind of positive-looking bar. The market reacts and then makes a lower high at that same resistance at D. Supply.

From here price breaks support sharply on a wide EOM bar back to/near significant support around 1.2000 and looking climatic. Dropping down to the 15-min as of this writing, 12:30 PM, the rally thus far is unimpressive.

H

 

[hcour]

http://www.streamload.com/hcour/FX/EUR-USD.gif

FX can be so sloppy & choppy that I find it difficult sometimes to determine the traditional Wyckoff relevant s/r boundaries of trends and consolidations. Evans points out that you can draw lines everywhere if you want to (and which some chartists indeed do), but one has to find those lines which actually matter, always keeping in mind that they are really artificial, since s/r are in reality areas, not thin little lines drawn upon a chart. So, because FX does have so much noise, I find sometimes putting the lines at significant candle-bodies, rather than at all the up/downthrusting shadows, yields better results. The thing that's helped me here is David's concept about watching the way price behaves at s/r points.

For example on the daily EUR/USD, note the trading-range defined by the blue lines of the present consolidation. This TR is not really traditional in the Wyckoff sense and here is where understanding of principle over pattern is most important in determing where we are in the trend/consolidation cycle. First of all, we can clearly see that there is a change of character happening in Jun/July, but coming off not so much a strong "climatic climax", but rather a petering-out, a winding-down scenario, but a climax nonetheless, as price clearly consolidates.

At A we have 2 of the widest spreads on the chart, both closing on the lows, the second breaking the demand-line of the channel in an OS position. The subsequent rally the next 5 bars is pitiful, note the spreads and closes of the down days vs those of the up days, all w/upthrusting tails. The reaction to B is sharp but a SOT, the rally to C on a very wide spread closing on the high but which does not follow-thru.

There is a new low at D, then 7/05 & 7/06 are very narrow spreads up making little progress followed by 7/07 and 7/08 where there is the kind of noise that makes FX so nasty. 7/07 a wide spread up but closing near the low w/a massive tail that meets resistance at the B low and the channel demand-line. Looks like a good place to take a short position. But the next day mirrors the previous and becomes a test of a shakeout. Sheesh. That 7/07 bar would've fooled me.

From here a very nice rally to E, 7/12 an EOM back to the top of the range following the SO. But this bar is completely reversed the next day. This is a perfect example of David's concept of the significance of watching how price behaves at s/r. Look at the widest spreads, especially those w/extreme closes, from pt A, they all occur at/near the horz lines of this consolidation.

Following the reversal at E volatility drops off, spreads and price swings narrow until F, a nice breakout of the TR, downtrending channel, and 50d ma on an EOM. The subsequent 4-bar pullback is very shallow and 8/11 at G a nice spread up closing on the high.

Ah. But no follow-thru as it nears the down-trending 200d ma, now looking like a potential upthrust as the reaction back into the range is sharp on wide-spreads closing on the lows. Note the convergence of resistance here of the 20d & 50d ma's w/the TR highs from C&E.

Presently OS at that mid-range s/r. Looking for a weak rally here and a reaction to at least B and possibly D.

H

 

[hcour]

As usual this is posted verbatim from the Yahoo Wyckoff group, so it may seem unclear at times to some here, though the principles should be pretty basic TA to most.

http://www.streamload.com/hcour/FX/EUR-USD_Daily.GIF

http://www.streamload.com/hcour/FX/EUR-USD_HRLY_9-05.GIF

Daily to Fri, hourly to 10:00 this a.m.

Taking up from where I left off, on the daily chart following the reaction to 8/19 there is a weak rally on narrow spreads to 8/25 to the 50% point of the previous reaction. Then 8/29 a wide spread down closing on the low and here one might expect the reaction back to the bottom of the range. However there is no follow-thru to the downside, instead 8/31 a very wide-spread up closing at the high on the strongest vol in wks and here, as Wyckoff teaches us, we see the market change on a dime and a rally is in the cards.

Dropping down to the 60-min, following the EOM (Ease of Movement) bars at A, there is a gravestone doji followed by a sideways consolidation on very narrow spreads, an apex forms on almost nil retracement of the previous rally. Nice place to take a position. (On the daily chart this is convergence of resistance at the now-flattening 200d ema and the 8/12 high.)

From here a sharp rally on mostly wide-spreads closing at the highs until B, closing just below mid-range on a wide-spread and the next 4 bars are narrow, unable to get above the close of that bar. But here again the reaction is very shallow, support at convergence of the 10-period ema and the utl on narrow spreads basically going sideways.

Then a sharp rally on expanding spreads closing near the highs until C, where we get the first real reaction of the uptrend. Note the severe shortening of thrusts from B to C vs X to A and A to B as momentum and volatility expand and contract, the subsequent reaction off C breaking the convergence of the utl and 10d ema, dropping sharply all the way back into the previous consolidation at B and at the 20-period ema. All this indicates a Buying Climax on the hourly and time for a reaction on the daily back into the range (BUI) before the ut can continue.

The ST at E immediately following D is very shallow and thus weak, but then note there is no immediate follow-thru to the downside, instead price goes sideways on very narrow spreads, hanging in the middle of the trading-range (defined by C-D), w/very nice support at B. All this suggests lack-of-supply following a climatic condition.

Price then goes flat on narrow-doji after narrow-doji and forms an apex at F, refusing to give-ground, where price support converges w/the now flat 10p & 20p ema's and there is a strong EOM bar back to the top of the range at G.

Ah, but there is further consolidation, the next 4 bars narrow dojis, the last 2 w/relatively long upthrusting tails and we get a sharp reaction on wide spreads back to that support at B-F.

From here, as of this chart, price seems to be forming an apex on narrowing spreads at price support and the converging and flat 10p & 20p ema's (again).

Presently looking for a shakeout soon (and which we seem to be getting now) back to around the D-lows, then a resumption of the uptrend.

H