*DISCLAIMER*
THIS IS FOR EDUCATIONAL PURPOSES AND I WILL NOT BE TAKING THIS TRADE. WHAT YOU DO WITH THIS INFORMATION IS ENTIRELY AT YOUR OWN RISK AND I AM NOT LIABLE.
EURUSD has been on a prolonged bearish market on the weekly time frame, along the way it had some bullish corrections as the market cannot go in one direction for ever. I believe we're at the stage where price action will face another bullish correction but this time, will be a more significant turn around in the trend. The bullish deep crab indicates that price has been oversold and may face a bullish correction or a significant change in trend as you can see from the heavy assault from the bears. Price has tested the entire range of the PRZ first with extreme price action, marking the TPB almost exceeding the 2.0 make or break stop loss limit. The nature of price action when it comes to this particular pattern is, for price to first exceed the PRZ, then reverse immediately after testing this range. You can see how price action closes just above the 1.618 on the weekly time frame, showing the liquidity spike it did towards the late sellers leaving them trapped. This spike also indicates price action's first sign of exhaustion as this spike level of spike is huge. Back on the daily you can see price action consolidating and if you go on a lower time frame, you can see this range more in detail. One may say on a lower time frame, price action is in the accumulation phase which is the act of gathering the liquidity before the big shift towards the upside, so we can use this as a layer of confirmation for the bullish persuasion.
Another layer of confirmation for the bullish persuasion is the RSI BAMM. The extreme RSI readings does a complex W type structure in the oversold reading, initiating the RSI Trigger bar. This begins the first phase of the divergence as the reading has a sharp rally towards 50% level. Although the reading did another impulse test on the oversold limit, it's okay because it did not test the 50% level as this is a minimum requirement before triggering the confirmation bar. The RSI reading does however, start to roll over after testing the 50% level which begins the final phase of the divergence which is the confirmation point. As price and RSI reading began to breakdown, this told us the short lived uptrend is over and the final push to the low has began before price action reaches a significant turning point. This "final push" indicates the composite operator is quickly trying to reach his target before the trend shifts. Scott mentions in volume 2 "The best trading opportunities develop when distinct patterns complete at important retest points for the RSI. When patterns complete while the RSI stabilizes, these signs accurately validate successful reversals well in advance." Which happened in this case, both price action and the RSI reading came in union to validate that price action has reached a significant turning point, although the RSI reading may have signalled an early trade, as price had to test and exceed the critical number in the PRZ, this has validated this PRZ as the sign post for a possible reversal.
Over the past serval months I've noticed traders will place a limit order on the crucial number of the PRZ, although I respect them as they have high belief in the system, it is imperative you understand the nature of each pattern and also the time frame as so patterns may exceed the PRZ as a form a liquidity grab. Traders must remember the characteristics of extreme price action, just like in reality, if someone is desperate, they would like to achieve their target in a quicker turn around time by all means. This is where I see the human behaviour within price action.
I won't go into further detail beyond this point as the rest is for my research and journal, thank you for taking the time for reading this blog.
See you on the charts.
Beaucoup Pips
THIS IS FOR EDUCATIONAL PURPOSES AND I WILL NOT BE TAKING THIS TRADE. WHAT YOU DO WITH THIS INFORMATION IS ENTIRELY AT YOUR OWN RISK AND I AM NOT LIABLE.
EURUSD has been on a prolonged bearish market on the weekly time frame, along the way it had some bullish corrections as the market cannot go in one direction for ever. I believe we're at the stage where price action will face another bullish correction but this time, will be a more significant turn around in the trend. The bullish deep crab indicates that price has been oversold and may face a bullish correction or a significant change in trend as you can see from the heavy assault from the bears. Price has tested the entire range of the PRZ first with extreme price action, marking the TPB almost exceeding the 2.0 make or break stop loss limit. The nature of price action when it comes to this particular pattern is, for price to first exceed the PRZ, then reverse immediately after testing this range. You can see how price action closes just above the 1.618 on the weekly time frame, showing the liquidity spike it did towards the late sellers leaving them trapped. This spike also indicates price action's first sign of exhaustion as this spike level of spike is huge. Back on the daily you can see price action consolidating and if you go on a lower time frame, you can see this range more in detail. One may say on a lower time frame, price action is in the accumulation phase which is the act of gathering the liquidity before the big shift towards the upside, so we can use this as a layer of confirmation for the bullish persuasion.
Another layer of confirmation for the bullish persuasion is the RSI BAMM. The extreme RSI readings does a complex W type structure in the oversold reading, initiating the RSI Trigger bar. This begins the first phase of the divergence as the reading has a sharp rally towards 50% level. Although the reading did another impulse test on the oversold limit, it's okay because it did not test the 50% level as this is a minimum requirement before triggering the confirmation bar. The RSI reading does however, start to roll over after testing the 50% level which begins the final phase of the divergence which is the confirmation point. As price and RSI reading began to breakdown, this told us the short lived uptrend is over and the final push to the low has began before price action reaches a significant turning point. This "final push" indicates the composite operator is quickly trying to reach his target before the trend shifts. Scott mentions in volume 2 "The best trading opportunities develop when distinct patterns complete at important retest points for the RSI. When patterns complete while the RSI stabilizes, these signs accurately validate successful reversals well in advance." Which happened in this case, both price action and the RSI reading came in union to validate that price action has reached a significant turning point, although the RSI reading may have signalled an early trade, as price had to test and exceed the critical number in the PRZ, this has validated this PRZ as the sign post for a possible reversal.
Over the past serval months I've noticed traders will place a limit order on the crucial number of the PRZ, although I respect them as they have high belief in the system, it is imperative you understand the nature of each pattern and also the time frame as so patterns may exceed the PRZ as a form a liquidity grab. Traders must remember the characteristics of extreme price action, just like in reality, if someone is desperate, they would like to achieve their target in a quicker turn around time by all means. This is where I see the human behaviour within price action.
I won't go into further detail beyond this point as the rest is for my research and journal, thank you for taking the time for reading this blog.
See you on the charts.
Beaucoup Pips
Trade closed: target reached