Stop Fishing with False Breakouts - forex trading signals daily

Stop Fishing with False Breakouts ~ forex trading signals daily

False Breakouts to catch Stops

Stop Fishing in Forex

1 hour Stop Fishing | False Breakouts 

The Euro

 penetrated the monthly pivot (second test) but closed above it on the hourly chart (rejection). From there the Euro tried to break to the upside but market could not break the orange line (January low). The penetration of the recent pivots (low, high - red circle on hourly chart) and thus the stop fishing on both sides very often precedes larger moves in the market as most of the traders are already stopped out or trapped in the wrong position.

The failed break to the upside (orange line) with the clearing of the stops above the recent high (1.2614) of the short positions led to a third test of the monthly pivot today, which got already penetrated at the second test (weaker now). Some indication for a break of the monthly pivot were the facts that it was already the third test, the hourly close of the 11 a.m. candle below the monthly pivot and the confirmation of the break at 12 a.m. on the 5 min chart and at the 3 p.m. hourly candle close (lower close than the range of the breakout candle-blue circle on hourly).

 The blue circle on the 5 min chart at 1 p.m. shows how the monthly pivot started to act as resistance now and the green circle shows a typical 3-wave consolidation pattern before market impulsively moved down. The Euro found some support at  61.80 % fib retracement of the recent swing up at 1.2517 (brown line) and from there the Euro retraced up to the 61.80 % fib retracement of the recent impulsive wave down at 1.2543.

The consolidations below the weekly and monthly pivot on the hourly chart can be seen as bear flags.

Prior to the impulsive wave down market penetrated the recent lows (blue and red line), which often gives some short term support (see the candles with the long wick which penetrated these levels (12, 12:15, 14;20 p.m.-stop fishing accomplished).

Weekly and Monthly Pivot Point

On the 5 min chart (below) we also see the changing role from support to resistance of the weekly pivot and the August 2010 low (purple line). This price zone provided support in the Asian session (ellipse) before market breached this level (9 a.m.) and retested it at around 10 p.m. (now resistance).

5 min  EUR/ USD Chart analysis

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Stop Clearing and Price Rejection - forex trading signals download

Stop Clearing and Price Rejection ~ forex trading signals download

Price Rejection at Support/ Resistance

Stop Clearing at Key S/R levels

Pivot Points in the Euro

Daily Double Top

EUR/ USD had a relatively quite session. On the daily chart we see that the support level around the monthly pivot at 1.2568, the low of August 2010 at 1.2588 (purple line) and the 20 SMA (purple) held the market so far.

1 hour Pivot Points

The circled areas on the hourly chart (left) show how price bounced from support/ resistance.

On the hourly chart we see that the Euro moved up to the daily pivot at 1.2611 at 7 a.m. GMT but market could not breach the resistance and moved lower from there. The Euro penetrated the monthly pivot and cleared some stops below it and yesterdays low but the Euro closed above this key resistance level on the hourly chart (green circle).

After the clearing of the stops and the rejection of  prices (close above the monthly pivot on the hourly and higher low on the 5 min chart) market moved to the other side of the consolidation (1.2568 - 1.2614) to test it.

The EUR/ USD breached the pivot point and the recent high at 1.2614 (stop clearing) but the key level at 1.2624 (orange line- January low) provided strong resistance and the Euro bounced back.

The false breakouts (stop clearing) seem to be typical in a quite session when everyone is waiting for major news and thus traders are lacking commitment/ low participation.

5 min Forex Chart Education

On the 5 min chart (above) we see how price bounced from support/ resistance (blue circles) and the formation of consolidations/ bull/ bear flags (red circles) as well as some Fibonacci extensions (100 % and 161 %).

The price zones of the consolidations (red circle) provided some temporary support/ resistance as the market moved back into these zones.

At 9 a.m. market formed an inverted Head & Shoulder at the purple line (August low 2010). During the pattern market did not confirm the break of the purple line (no close of the succeeding candles below the range of the 9:30 a.m. breakout candle on the 5 min chart). Market breached the brown neckline and moved up to the H&S price target (100 % of the larger swing in the H&S-(left shoulder to head)-moved to the break of the neckline).

Between 1 and 3 p.m. the Euro breached the monthly pivot but the Euro formed a higher low and closed above the monthly pivot on the hourly chart (rejection of the breakout). From there, the Euro moved up to test the other side of the consolidation range and market found temporary resistance at the weekly pivot/ 161 % fib extension at 3 p.m. and the daily pivot at about 4 p.m.. The chance of a breach of the daily pivot increased due to the bull flag, the rising 10 SMA, the prior test at 7 a.m. (second test now) and particularly the fact that the prior 4-hour candle closing at 4 p.m. already touched (respected) the daily pivot so that this resistance level got weaker with the beginning of the new 4-hour candle (Breakout Timing setup).

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Price Rejection - free forex trading signals today

Price Rejection ~ free forex trading signals today

Market Price Rejection

4 hour 20 SMA

Daily

Daily 6 p.m.

Understanding price pattern 

Breakout trading

On the daily chart at 6 p.m. GMT we see that EUR/USD found resistance at the daily 10 SMA at about 1.2805 and pulled back from there to find some support at the 20 SMA (4 hour chart-purple line) and yesterdays consolidation price zone (1 hour chart below).


Furthermore, this price level got also supported from the 100 % fib extension from A-B at C at about 1.2733 (1 hour chart below). The price bounced back  strongly from the confluence support level and created a strong bullish candle (long price wick-4 hour chart-left), which closed right at the weekly pivot point at about 1.2768. Initially, after the 4 hour candle closed at 4 p.m. GMT (resistance level-weekly pivot-got touched/respected-Timing) EUR/USD went up for one candle (Breakout candle 2 on 5 min chart -last chart).


However, the Euro came back due to the resistance of the 20 SMA (purple line and prior consolidation zone on the 1 hour chart (4 p.m.-the doji) + 200 SMA on 5 min chart. From 4 p.m. to 5 p.m. GMT EUR/USD consolidated around the weekly pivot point (5 min chart) before price moved up again at 5 p.m. GMT (Breakout candle 3 at 5 min chart) just after the prior 1 hour candle (starting at 4 p.m. GMT-doji) closed and respected the resistance level, particularly the 20 SMA on the hourly chart at about 1.2775. The 5 min chart also shows that market got supported due to the rising 20 SMA (last chart).


Finally, EUR/USD is closing right at the 10 SMA and monthly S2 resistance (respect the resistance zone).

1 hour chart

5 min chart

Fibonacci Extensions

If we focus on the price development on the 5 min chart today from 1 p.m. and 6 p.m. we see that EUR/USD bounced back from the support level in a kind of V-shape pattern at 2.20 p.m. GMT.

In general, if a trend prevails then market often moves strongly in one direction then consolidates before market resumes the trend direction. Typical targets of the continuation are the 61.80 % (weak), 100 % (normal) and 161 % (strong) fib extensions.


The initial target is often the 61.80 % target  where market is likely to react. In a strong trend market could easily ignore the 61.80 % level or only  react  on a shorter time frame and proceed directly to the 100 % fib extension which often provides solid support/ resistance, at least for a while. Very often price consolidates (smaller consolidation pattern than the prior consolidation) (bear/bull flag) at the 61.80 % fib extension before resumption.


However, if price is not at least consolidating at the 61.80 fib extension level and is instead bouncing back strongly into the prior consolidation (V-shape) then the underlying trend is in question (turn around or larger consolidation pattern). The last breakout is a false one/ shake out) to trigger stops and fool breakout trader, particularly at strong support/resistance levels, which only temporarily gets breached/ penetrated without confirmation.

 V-shape turn around

On the 5 min chart, we have a small example of this kind of price rejection. If we focus on the small bear flag on the left of the 5 min chart after market dropped from the prior consolidation at point a then it is observable that the last downward candles only reach the 61.80 % fib extension from a-b at c and that price does not consolidate there but instead turns around and moves back into the consolidation pattern. Furthermore, no succeeding candle closes below the range of the breakout candle 1 (no confirmation).

This kind of price behaviour ( V-shape turn around at the 61.80 % fib extension and/or non confirmation of the breakout candle is often observable before market either turns around or at least is starting a larger consolidation pattern.

We had another example of the V-shape turn around at a 61.80 % fib extension on the 18th of May (recent turn around) at the strong confluence support zone at about 1.2642 due to the 61.80 fib extension from the recent swing down + the weekly S3 (EUR/USD Market Update 18.05.12 -A-). Furthermore, the chance of a turn around of price at the support level got also increased due to the lower downward momentum of the second swing into support compared to the first swing down.

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Trading the Market High of (updated) - forex price action trading signals

Trading the Market High of (updated) ~ forex price action trading signals

EUR USD Market High

After the Euro USD broke out of the larger consolidation pattern on the daily chart last week market approached the high of 2012 yesterday at 1.3486. Market closed at the high of 2012 yesterday and today the Euro broke through it (Breakout Trading/ Timing- see red circle). A similar pattern occurred at the monthly R1 (red circle), where the daily candle also closed at the monthly R1 before market broke the monthly R1 with the next daily candle.
Currently, the Euro USD is trading at the monthly R2.

Daily - Support/ Resistance

Todays rise started with a kind of bull flag between 8 a.m. and 9 a.m.. The Euro USD rose to the monthly R2 at 11 a.m. where market temporarily found resistance. Market broke the monthly R2 with the beginning of the new hourly candle at 3 p.m.. The 5 min candle at 3 p.m. closed at the recent daily high and the next 5 min candle broke this resistance (red circle-Breakout Timing). The  monthly R2 changed its role from resistance to support and held the market so far. 

5 min Euro USD Pivot Points, S/R

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Rejection Candle Chart Patterns Hammer - what are forex trading signals

Rejection Candle Chart Patterns Hammer ~ what are forex trading signals

Candlestick Chart Analysis

Hammer Rejection Candle

The Euro moved upwards against the US Dollar after the rejection candle/ hammer candlestick pattern on the 13th of November. There are important Support/ Resistance levels on the daily EURO US Dollar chart. Market currently trades at the daily confluence resistance level consisting of the 20 SMA and further the monthly S1 and the low of October 1st, which both held the market on the 15th of November at around 1.28 (First test). 

During the start of the US session today, market penetrated the 1.28 resistance level (second test) and moved up to the weekly R1. On the 5 min chart we see that market closed at the 1.28 resistance level with a bullish candle at 3:40 p.m. GMT just before  the Euro breached this level (Breakout Timing). The following breakout candle at 3:45 p.m. got high bullish momentum because of the stops placed above the 1.28 level. However, there was no follow through or breakout confirmation on the 5 min chart but market retested the 1.28 level and held 1.28 so far. As long as the Euro holds this level we might see a continuation pattern triggered for a true or false breakout with the start of the new daily candle (Bullish daily candle close at daily resistance-Breakout trading). The next resistance level might be the low of October 11th at 1.2826.

The 4 hour chart shows the two rejection candles on the 13th of November which contributed to the daily rejection candle.

[The hourly chart shows the news shakeout/ stop running on the 14th of November. Market cleared the stops above resistance at 1.2755 (low of Sept. 10th) and then EUR/USD reversed and the logical next target was the recent low to clear the stops of the breakout trader at 1.2724. Stop running is an important driving force in Trading.]

On the hourly and 5 min chart we see that the EUR/USD found support at the low of Sept. 10th and the Euro continued its upward move at 1 p.m. due to the increasing hourly 20 SMA and 200 SMA on the 5 min chart.


On most of the charts we see:

How prices respected support and resistance (blue ellipses), purely stop running behaviour (red arrows), breakout trading setups (red ellipses), continuation chart patterns (most of green ellipses) and support and resistance due to consolidation price zones (orange arrows).

Daily Support and Resistance EURUSD

4-hour Rejection Candles Hammer 

1 hour Hammer/ Pin bar Euro US Dollar Candlestick Chart Patterns

5 min Technical Chart Analysis Euro US Dollar

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False True Breakout - free forex trading signals update hourly

False True Breakout ~ free forex trading signals update hourly

True or False Breakout Trendline Break

Breakout Candle Confirmation

Weekly Support/ Resistance Forex Trading

Trendline Analysis

On the weekly chart we see that we breached the weekly low at 1.2588 in 2010 and the January low 2012. The recent trendline (green) could not hold the market after the trendline got respected last week. 

In general a trendline is stronger when the test of  it is not so early after the trendine got created. In this case the trend line came into existence due to the January low 2012 combined with the low in 2010 and the trendline got already tested in May 2012 (much to early to give strong support). EUR/USD is now clearing the stops below these lows.

Daily Head and Shoulder target

On the daily chart we see that market reached the classical Head and Shoulders target (see also EUR/USD Market Analysis (15.05.12))  at about 1.2554. Furthermore this price zone is likely to provide some support due to the 161% fib extension from C-D at E, the 61.80 % fib extension from E-F at G. The clearing of the stops under the recent lows is a typical target of price movement and can give some support - manipulative stop clearing accomplished.

1 hour Trendline Break Signal

Breakout Trading 

The Difference between true and false breakouts

We had a similar consolidation (blue circle) like yesterday (EUR/USD Market Recap 22.05.12)(green circle). Both 3 wave consolidations had a lower point B and higher point C, which often precedes a strong trend continuation. Point B slightly breached the recent lows (blue and pink line) and the weekly S1, monthly S3 but the hourly candle closed at the monthly S3.

So the first breakout lower failed (5 min chart) and market moved up to point C slightly above point A. This false breakout caught many breakout traders to early who had there limit orders below the low of yesterdays strong daily downward candle.

However, market did not confirm the first breakout and turned around at the recent lows + the weekly S1, monthly S3 after the slight breach at 9 a.m. GMT and closed above the recent high (point A) to trigger some of their stops (point C). At point C market finished the 3 wave consolidation at the resistance of the 20 SMA (purple line) and went down for the second true breakout.

In the Asian session at 1 a.m. GMT the monthly S3 got already touched (weaken), which increased the chance of at least a breach of this level.

The 2 p.m. hourly candle respected (closed at) the monthly S3 just before the true breakout occurred (Breakout Timing). The  decreasing 10 and 20 SMA (red and purple line) also provided resistance and pushed price down.
 

5 min True/ False Breakout Confirmation

On the 5 min chart we see that the breakout candle 1 at 9.10 a.m. occurred just after the prior 5 min candle touched the low from 18th of May (blue line). However, this breakout (blue line) did not get confirmed and market also did not accomplish to close below Januarys low (pink line) so that market reversed and triggered some stops of the breakout traders by creating the new high.

However, the false breakout weaken  the the confluence support level of the monthly S3, weekly S1, daily S1 and the lows of the 18th of May and January due to the breaching so that the second breakout had a high chance to break this support level.

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