Good morning traders:).
Looks like the euro is back up to its old tricks again as we had a quick about face and retraced the whole of Tuesdays up move. While we are in these conditions it is tricky to pick levels with confidence of getting a model strategy target and yesterday proved to be a case in point.
What we really have to do is to watch the price action during the day and act accordingly i.e. take note of market structure and liquidity areas to get a better feel for where price might be heading. While I try to take these things into account with the levels I indicate on the hourly first thing in the morning, sometimes the conditions are not in our favor and its about seeing the price moves intraday.
For example, I said be careful to watch the levels I noted to see if they change their purpose i.e. from S to R and vice versa and that´s what happened yesterday. We came into S1 and pushed straight through thereby invalidating any trade to the upside but it did give us a good entry short once it retested from the downside. You could then have been watching to see how far the push down might go and noted that there would be liquidity below Tuesdays lows and possibly have trailed your stops below the 1.13 short entry level.
If you were at your charts you´ll have spotted this but we wouldn´t have known this in advance. It was about being at your charts and tracing how price action unfolded. If we are looking for intraday trades we need to see the intraday action. I´ll not count any trades for our model performance for yesterday.
For today we have preliminary GDP for Germany out early and US retail sales in the afternoon.
The Daily Chart
The chart is self evident. The break up on Tuesday was completely retraced and more to take out any liquidity below the lows formed. While we are here I don´t know at this time first thing in the morning what might unfold. The picture is definitely bearish but we have to watch price unfold.
The Hourly Chart
On today’s hour chart I´ve noted zones of S & R rather than levels. This is more instructive for those of you at your charts. As an example I´ve noted how price might react at one of the R zones.
It is not as easy to use as a set and forget strategy. I´m not a fan of such strategies and I only try to pick levels each day and track model performance to help traders who are not able to watch the charts. It has been working well so far but at the moment I don´t think its wise to set level trades and blindly let them play out. Perhaps you could set alarms for when price is coming into our zones and watch for a while to see what it does next.
Hopefully the chart will get a little easier to read in the next week or so and we will go back to our levels but for now – intraday action takes precedent.
Have a good day – and don´t forget – it´s Valentines day – I´d better go get some flowers :).