Resuming...

So, two weeks have passed and we are in a consolidation phase again. Since my last post, price reached my immediate targets @ 1.5370/82

I was expecting some resistance at 1.5400 due it is a round number but then, Bam! a price gap over the weekend, so I needed to wait and see. Gaps are not so common on forex as in the stock market, as I've read, moreover not that big. I assume that the downward movement occur due stop-loss orders taken by brokers or even a natural market's response to close that gap. Price continued its upward movement with a little resistance @1.5400 and continued higher to 1.5500 without any major hold as I expected. The swing high was @1.5523, just 18pips shy from my next target @1.5541 (1.27 fib ext), then price drop sharply. Another gap in the way suggesting prudence.

I was bullish and expecting that price could reach 1.5626/41 but last swings changed my mind. From april 15th high @1.5523, price retraced to 1.5200 zone (monday 19th low @1.5191) and bounced up to thursday 22nd high @1.5473. Because price couln't break the previous high of 1.5523, more than likely we will see a decline in price. Right now it seems that price is ranging again. I drew a resistance line with the highs as the upper channel limit, but I'm hesitating about the lower limit. From my previous post, the support line seems to still be valid but time would tell. We may see price bouncing between this two limits and a break either way could mean a big movement.

Because I'm bearish, my expectation is that price could test once again the upper limit near 1.5440 and drop to the 1.5101/15 zone as first target with a little struggling at 1.5200, then, due there is not any major support levels, price should test the march 25th low @1.4798 showing some trouble around round numbers 1.5000 1.4900 and 1.4800.

Almost in every post I say this... nothing is for sure. Price could continue to go higher but if we analize the daily chart below, I've mark some elliot wave counts. This is when a conflict between analysis appear. Whislt in the weekly chart a bullish gartley seems to be present, with elliot waves theory, we might be in a major impulsive downward wave three and right now in its wave five. So price should go as low as 1.45s so... what to believe in. It's relatively easy to stablish elliot waves once they have occur, but I'm not sure that should be considered as a reliable way of trading. If price breaks the march 1st low of 1.4781, this minor wave 5 should be completed and price should go in a major corrective three-wave fourth and, if october 13th low is not broken through, price should go as low as 1.40s or lower. This is way too much speculation and cannot be confirmed till it actually happens, so... what to believe?

I could be death wrong in this post, though. Make your own analysis!.

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So... where are we?

I was hesitating about my previous analysis, but it seems that it worked out. Tuesday, wednesday and thursday bars were very bullish with a long wick downwards so price had a difficult time to push price lower. I'm not sure why, but 1.5140 seems to be a strong support. My trend line in the daily chart was broke through with today's bar and with a few hours of trading session remaining, I do not see any possible backwards movement.

In a closer look with a hourly chart, we can see my previous analysis and a few more things around it. With a upward movement in mind, I drew some fib extensions and resistance lines. Even though, things didn't seem to go according to the analysis, I was bullish... price started to behave in a consolidation phase. Price bounced within a range in the intraday chart, but forming that long-wick bars on the daily chart.

With the range defined with those resistance and support lines, a breakout of either way could mean a big movement on price, whether up or down. If price would had broke the support line, probably price could went as low as 1.5000; but the breakout occur to the up side; first with a false breakout, but then all the way with a few closes out the channel. In the short-term analysis, my price target was around 1.5370 (1.27 fib extension) & 1.5382 (previous high), which was reached without a problem.

Did I enter the trade? No! I'm still hesitating about my own analysis. What the hell? I need to be more confident.

Which is the forecast about this cross? If I have learnt something in this life... I can say that you can't give anything for granted. Technically speaking, I don't see any near resistance on the horizon. 1.5400 could be a psychological resistance as it's a round number, then 1.5500. Previous fib retracement levels could mean some resistance, maybe 1.5421 or 1.5619. Applying fib extensions, price could reach 1.5541 (1.27 fib extension from last swing) or between 1.5626 & 1.5641 (some fib-ext of different swings)

If I start to analyze things with Elliot wave theory, all my previous analysis are trash. If we see the daily chart, price might be at the end of a corrective upward wave 4 and heading south to complete the 5-waves impulsive downward movement with a target around 1.43s.

That's something I can't overcome yet. Sometimes I think in a possible scenario with solid foundations, but an indicator or another kind of analysis just tore it down. And I don't want to start talking about multiple time frames analysis with the same problem.

Personal reminder: Keep It Simple Stupid!
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GBPUSD development

From yestarday post, things haven't change so much. I was a little concern about a retracement in price but we should expect that due the big previous advance in price; maybe people taking profits or traders putting some shorts. By now, almost all the retracement has recover its value and for me, price is leading north.

In the 240 chart, we can see this in more detail. I expect that price continue to go higher and maybe find resistance @1.5300 due it's a round number and also is clearly near a previous high. We may also be troubled @1.5319 but with any major resistance ahead, more than likely price will intent to test march 17th high @1.5382. That price range coincides with last swing 1.272 fib expansion level @1.5370 leaving a narrow target zone.

Not so fast, though. Whether price may break this resistance levels, I'm seeing another trend line to break that could be annoying. If we analize the daily chart, I've drawn this resistance line and today's bar didn't break it. Although we have a long wick or tail in today's bar, which tells me that market is very bullish and probably price continue and break through this.

Nevertheless, price could retract even more. Just one bar I don't think is a lot. Price may go as low as 1.5000 level before leading upwards.

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GBPUSD outlook

Since my previous analysis, due the pattern I spotted, I was expecting a reverse in price action. In the hourly chart almost every condition to a bullish Gartley pattern was accomplished; in the next graphic you will see the result. I've enclosed in a red rectangle were a long position could be triggered, but probably that could result in a lost. Price did reverse but not for long tearing a part the pattern. A houndred pips down later the actual reverse occur @ 1.4800

The next chart is a 4H where price did retrace when it supposed to. This time with an ABCD pattern and a narrow range where to put the long position (between 1.4819 and 1.4809). That makes me wonder... what the hell? Are price patterns a reliable tool? Not sure.  I do know that price itself is a good indicator.

By now price is heading north @1.5300; if triggered @1.4800 that's a 500pips move. In a specific technical point of view, there isn't any resistance level near, till 1.5382 (wed march 17th high) so more than likely, price should reach that, maybe strugle for a while and continue towards.

In a bigger timeframe, reviewing the weekly chart we can spot a bullish Gartley. Whilst mon 1st march low holds, there is a plenty of room upwards. Probable targets are around 1.9250 or even 2.0600, but again, this is speculative and we have to wait a long time to see if this really happens.

Are fibonacci ratios a secure way to trade? Not convinced, maybe with a sum of other factors.

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A few thoughts

Patterns... in conjunction with indicators and even fib retracements are speculation.

Nevertheless, trading depends on it. I mean, every decision is speculative. So, what is really important then? I'm not sure yet but definitely I could say money management and capital exposure.

I have read many times, put the odds in your favor. If a trade doesn't work, it doesn't matter when you have a correct money management procedures. By example, if you risk 3% of equity, you need a winner trade of 3.1% to recover it; but if you risk 50% and lose it you will have to make 100%.

Putting that in numbers, if your start balance is 1000 and you are risking 3% and lose one trade, your balance would be 970. To recover that 3% (30USD) you need to make 3.1% of 970 which means 970 x 103.1% = 1000.07 If you risk 50% and lose, with the same start balance of 1000, you would have 500 and to recover that 50% drawdown, you need to make 100% (500 x 200% = 1000) which is very difficult.

I've read a lot of publications, web sites, some books, etc... I could say a little too much, and still I can't find anything really valuable. I'm not saying that I've lost my time because I have not. I've learnt a lot by my own but is painfully slow.

Backtesting, papertrading, etc... gives an edge over time, but still it's not the same with hard earned money in the line. I haven't entered any trade since the last lost of 78 pips, but I'm testing a few strategies.

I'm aware that I need to find a mechanical trading system that actually works. In the psychological aspect of trading, when a valid trading system is set, there is nothing to do about it. There will be some losers and a few winners... this is part of the game, but when a system is applied, you know everything in advance... how much you are going to lose if price runs against you or how much you make if a target is reached, so there is no emotion related to it. I think finally I got that part.


That's it... I need a system.   Later I'm going to post an outlook on gbpusd.
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