Followup 2 – BEOB AUD/USD 11/16/12

After retracing a bit yesterday, AUD/USD has continued its move down. It is meeting strong support at the first trouble area (FTA) we pinpointed two days ago, 1.0300. In fact, the low of the current bar was 1.03003!

The question now is whether that level will hold. Price might move back up, or it might manage to break down below 1.0300. If it breaks below 1.0300, it is likely that that level will change from support to resistance. Price pivot zones (PPZ), once breached, often switch from being support to being resistance and visa-versa. So it if goes below the PPZ, we might see a small retracement back up to 1.03, followed by another move down as shown on the chart. If that happens, look out. There is now a lot of room for AUD/USD to fall further.

If you are still in this trade, you might want to consider moving your stop loss down. Above the current bar, around 1.0350, might be a good place to move it.

Followup 1 – BEOB AUD/USD 11/15/12

This is a followup to yesterday’s post. Look at what happened to the Bearish Outside Bar (BEOB). Price broke through the bar and then retraced up to 1.0400. The level, which had been support, now served as resistance.

Price then resumed its move down. We predicted the first trouble area would be 1.0300 and price went down to 1.0306. Pretty darn close! It has since moved back up, but it is still below the point at which you would have entered the trade. It’s not clear if the move down is over or if it is only taking a break. You might consider moving your stop loss to your opening price – 10 pips to ensure that this will be a profitable trade.

BEOB on AUD/USD -11/14/12

After today’s New York close we see a Bearish Outside Bar (BEOB) on the AUD/USD daily chart. There is a lot to like about this price action.

1. Notice how the bar fully engulfs the previous two bars and closes near its low.

2. The bar broken through the big round number of 1.0400.

3. The blue box marks a trading range from 1.02 to 1.06 that the pair had been trading in. Often the middle of a trading range is itself a price pivot zone (PPZ) where you want to look for price action signals. Where is the middle of this range box? Right at BRN 1.0400, which the BEOB broke through.

4. The recent uptrend is marked by the red line. This BEOB has broken through that trendline.

One signal alone does not make a trade worthwhile. All of these signals together, however, provide good evidence that this is a trade to consider. If you were to take this trade you’d want to wait until the bottom of the BEOB has been broken. The first trouble area (FTA) is likely going to be at 1.0300.