“Fibonacci Trading Strategy Explained: Unlocking the Secrets of Fibonacci in Trading”

Arya

4 months ago

Harmonic Trading Strategy Explained

Having a look at the daily chart using fibonacci of the index f from a harmonic point of after topping at 7620.00 on May, 05, 2011 shows that DAX has been dominated by the following Fibonacci rhythmic:

• AB leg has been limited between 50% and 61.8% Fibonacci of XA leg.
• BC leg represented 76.4% Fibonacci of AB leg.
• The upside rally above B point should be classified as the resumption for the last leg-CD leg- started at 5370.
The rebound from B point between 50% and 61.8% offers two reversal probabilities or rather presents two potential reversal zones for the harmonic structure:
• Reversing from 76.4% Fibonacci of XA leg.
• Reversing from 88.6% Fibonacci of XA leg.Indeed, the under construction negative divergence appearing on RSI 14 suggests 76.4% to be the reversal level and a break below 6445.00 zones will fully negate the possibility of reaching 88.6% level and will change the positive sign on AROON indicator.

Ultimately, the mixture between Elliott sequence and harmonic studies argues us to classify the recently established bullishness as a correction not as a major wave as we are looking forward to witness the peak of C wave to enter a new IM-impulsive downside wave sooner.

EMA and RSI Harmonic Strategy

The daily chart offers various bearish classical probabilities suggesting that the top could be the short term peak. The declines from 132.30 may continue over upcoming sessions; particularly after drawing a bearish engulfing candlestick pattern yesterday that closed negatively below SMA 20 and SMA 50.Furthermore, The minor uptrend that carried the movements… from 127.30 zones to the aforesaid top is currently under attack with the bearish candlestick formation and we believe that the price will penetrate this support due to the negativity of technical indicators as follows:
• Vortex down-red- has crossed over Vortex up-green- presenting an actionable bearish sign that reflects the strength of the bearishness started at 132.30.
• RSI 14 has stabilized below the value of 50.00 reflecting a clear bearish momentum.
Technical objectives reside at 129.70 followed by 128.65 while the major technical target resides at 127.30 areas. Conversely, areas of 132.30 should hold to protect our constructive bearish overview.

MACD and RSI

The provided weekly chart shows that the pair is presently hitting the horizontal neckline areas of a head and shoulders bottom pattern. The sharp incline seen during the past and the current weeks confirmed the bullish effect of the hammer candlestick pattern formed in the last week ok January, 2012. Moreover, we have been capable of catching the following technical signs on indicators that argue us to predicate more upside actions over upcoming periods:
• The bullishness appearing on MACD traditional indicator.
• The positivity appearing on Stochastic.
• SMA 20 continues carrying the movements since the opening of this week.
The technical objective d this classical probability resides at 81.20 zones but on the other side, the pivotal support-low of the right shoulder- at 76.00 should hold to protect this scenario.
Of note, a break above SMA 50 at 78.75 will motivate bulls to support their long positions.

RSI and Fibonacci

Looking at the daily graph of the index from a pure harmonic point of view will show that a potential bearish harmonic pattern is currently approaching the levels of reversal. The Fibonacci rhythmic dominating the price behaviors explains the harmonic sequence as follows:
• AB leg = 61.8% Fibonacci retracement of XA leg.
• BC leg represented 88.6% retracement of AB leg.
• D-potential reversal zones- should be seen at 161.8% Fibonacci projection-golden ratio of Fibonacci- of XA leg where 261.8% projection of BC leg exists.
In result, the index may move mildly higher over upcoming sessions towards the PRZ of the bearish harmonic Crab pattern where a huge reversal could be seen towards the technical objective at 20290.
Note:
• The pattern usually provides an almost exact reversal in the Potential Reversal Zone.

Finally, RSI 14 reflects a clear overbought case while Vortex reinforces the technical idea of reaching the PRZ firstly before reversing.

After bottoming at 560.00 zones, the metal has created an uptrend that took it to the peak of 716.00 as seen on the provided daily chart. With a three reaction highs at 671.00, 713.00 and 716.00 a resistance line of a potential rising wedge pattern has been formed. Actually, the pattern is still under construction and we can’t judge whether it will bring a huge …downside actions or the resistance line will be neglected from buyers. Thereby, we need to witness a decisive breakout along with series of daily closings below the pivotal support of 688.50 to make sure that the peak was placed already at 716.00 over short term basis. Meanwhile, RSI 14-momentum indicator- continues moving close to overbought areas and AROON-trend indicator- couldn’t give off a confirmed sign reflecting the continuous conflict between bears who took the metal downwards during the past two days and the bulls that opened trading bullishly with the opening of the week. In result, we recommend staying aside until the metal clears 688.00 to confirm the solidity of resistance line or ignoring this line via taking 720.00 zones. Finally, breaching 688.00 will send the metal towards 650.00 followed by 560.00 but taking 720.00 will ease the path towards the high recorded in September, 2011at 790.00.

Since bottoming around 1.5770 on July, 07, 2011, the pair has started a harmonic sequence that was dominated by an ideal Fibonacci rhythmic as seen on the provided daily graph. This Fibonacci symmetry suggested that a potential “5-0” pattern might have been completed yesterday and the pair is on its way to move downwards after touching its potential reversal zones o…r rather “D” level at 50% Fibonacci retracement of its AB leg; noting that the pattern frequently offers a huge reversal that send the price below C level but for now, we will look at 1.5420 as a soft technical objective. We have been able to catch major four technical catalysts that argue us to believe in this pattern as follows:
• The bearish candlestick formation formed yesterday-similar to dark cloud cover pattern-.
• SMA 200 has sent the pair downwards once it was touched.
• Vortex-trend indicator- warns of lackluster of bullish momentum behind the recovery started at 1.5230 zones.
• RSI 14 is moving close to its highest level since the pair has started at “0” point.
Finally, the second subsidiary image is an educational one explaining the harmonic structure and its effect.

Updating our previous outlook for the index published on January, 26 , we can see how it succeeded in surpassing 127.2% Fibonacci projection of XA leg for the suggested bearish harmonic deep Crab pattern. Actually, the index has found a very good support around the lower line of Keltner channel that pushed it upwards above 1327.30 zones- the first potential rever…sal zones-thus; we believe that more bullish actions might be witnessed during the upcoming sessions towards 1376 before creating the reversal zones of the aforesaid harmonic formation. The overbought signs appearing on RSI 14 may cause some kind of fluctuation Vortex –representative for trend indicators- is presently positive designating that the CD leg is in progress. Ultimately, Fibonacci projection of 161.8% for the BC leg at 1376.50 will meet 224% Fibonacci projection of BC leg and thus, a huge reversal could be witnessed there. Technical objectives for the reversal are seen at 1305.00 followed by 1265.00.

EURJPY The pair is presently creating a descending channel after touching 61.8% Fibonacci retracement of the entire short term downside rally from 105.65 to the significant low of 97.00 as seen on the provided four-hour chart. Thereby, we believe that the correction might have been limited around the aforesaid Fibonacci level as having a look at the current price behavior…s suggest that a potential head and shoulders pattern is in progress. The soft technical objective of this classical probability resides at 96.40 zones but we need to witness a breakout below SMA 200 and later below the neckline of the suggested classical pattern. Moreover, RSI 14 is currently hitting the value of 50.00 reinforcing the bearish outlook. In the interim, Vortex as another representative for trend indicators is on its way to draw a possible negative sign. Finally, breaching 99.10 zones will accelerate declines inside the bearish channel while 102.35 will be our risk limit.

The index is currently consolidating around SMA 100 where it meets the Fibonacci expansion level of 61.8% for the upside wave “V” shape with three important medium term points, A,B and C as seen on the provided weekly chart. Actually, we classify the negative actions seen during the past two weeks as correction for the bullishness started at 72.60 zones and was toppe…d at 81.80 areas where 100% expansion of the aforesaid wave exists. From a pure classical point of view, we can see how the value of the index been organized as well inside an ascending channel after placing the significant trough of 72.60. This channel suggests more bullish movements over upcoming period retargeting 81.80 zones, while touching the lower line of this channel will not change the classical bullishness but on the contrary, it will provide the index with stronger bullish momentum as RSI 14 will enter oversold areas. Note that, the weekly closing at the end of the day above 79.55 zones will negate chances for touching the lower line of the channel and will fix the sign on RSI 14; moreover, it will prove the strength of SMA 100. To recap, the bullishness remains in favor over short and medium term basis as far 76.55 remains intact.

The four-hour chart is offering a potential complicated bearish harmonic structure consisting of a bearish Gartley pattern where its CD leg has already formed a bearish harmonic Butterfly pattern. The symmetry connected Fibonacci ratios of this pattern seems to be an ideal since Gartley suggests a reversal from 76.4% Fibonacci retracement of its XA leg after for…ming the AB leg at 61.8% of XA leg while 127.2% projection of X1 to A2 of the Butterfly pattern represents the PRZ meeting the PRZ of Gartley at 8915 zones. Thereby, the bearishness is favored softly targeting 8755, followed by 8675 and 8520 later. RSI 14 is showing a possible negative divergence while Vortex reflects a case of hesitation, but MACD trends downwards reinforcing the negative scenario.

The pair is trapped within two lines forming a triangle pattern as seen on the provided daily chart. The pattern started at the significant peak of 90.00 and was bottomed at 72.00 areas. Having a deeper look at the price movements started at 83.90 we will see how it took a potential bearish harmonic shape and was confirmed by the reversal started at the resistance …of the major triangle pattern. Thereby, we suggest potential resumption for the downside wave started at 82.85 zones mainly targeting 78.00 areas and a break of which will send the pair lower towards 77.00 areas.
Indicators Analysis:
Measure SMA 200- AROON- Stochastic- MACD
Direction Down Trending downwards

After topping at 0.8830, the royal pair has moved sharply downwards as seen on the provided daily graph. Measuring from A to C points using Fibonacci expansion claims that the pair has closed negatively for the second consecutive day below 100% expansion. Moreover, SMA 20 started to cover the pair as same as SMA 50. Henceforth, the aforesaid breakout below expansion level proved the classical continuation pattern-symmetrical triangle- mainly targeting 0.8175 zones over upcoming sessions. Stochastic reinforces the constructive bearish overview but coming back above 0.8410 zones will damage the bearishness.

In line with our weekly predictions and yesterday’s outlook, the pair has moved aggressively upwards activating the awaited bullish crossover on RVI 14 indicator and Stochastic as seen on the main daily chart. Moreover, we have witnessed a comfortable closing above SMA 100 for the second consecutive day; thus, the bullishness may continue over intraday basis supported by the bullish classical structure appearing on the four-hour timescale. Meanwhile, a break above 0.9230 will bring additional buying interests and will accelerate the bullish wave.

Adopting a favorable action to yesterday’s technical comment, the pair has plummeted sharply attacking SMA 50. Moving to the four-hour graph, we can see how it has drawn a reversal classical pattern breaching its neckline areas while MACD traditional and RSI are giving off negative signs. Thereby, the bearishness may continue over intraday basis and targets are well seen on the provided graph. Only a break of 1.3230 will give us a rational reason for pause.

The market is seemingly forming the right shoulder of a potential inverted head and shoulders pattern as seen on the provided four-hour chart. Actually, the angle of the proposed neckline suggests that we are witnessing a rare classical structure with a sloping neckline but we should be aware since this formation will not be activated unless the pair achieves a sus…tained breakout above 1.5785-1.5790 zones. Assessing indicators, we can see a positive crossover appearing on moving averages combination as SMA 50 has overlapped SMA 100 successfully and both of them are carrying the bullishness as well; whilst RVI 14 is on its way to the upside once more. A break of 1.5790 will send the pair towards 1.6075 over upcoming sessions. On the downside, breaching 1.5535 will negate the pattern and will give us a rational reason for reconsidering our bullish classical overview.

After bottoming at 17560 on November, 24, 2010, the index has moved upwards forming three waves towards 20615. The second wave was a corrective wave and was limited at 88.6% Fibonacci retracement of AB leg; whilst the CD leg has taken a longer time than the time AB leg has taken to be formed designating that the entire structure is a harmonic AB=CD extension pa…ttern. In the case of AB=CD extension, the potential reversal zones reside at 127.2% or 161.8% Fibonacci projection of AB leg. Thereby, the mild downside actions started at 20615 suggest that the PRZ have been placed already. Assessing indicators, Stochastic succeeded in overlapping negatively within overbought areas and Vortex started to cues a case of trend exhaustion. Technical targets reside at 19525 areas but not before taking 19940 and finally, 20615 should protect the bearish harmonic scenario.

The pair is currently finding a very good support above the short term key level at 0.9105-previous broken resistance- as seen on the provided daily chart. It started to attack SMA 100 while oversold signals appearing on Stochastic and Keltner channel. In the interim, RVI 14 is running behind the clear sign appearing on Stochastic. As a consequence, bulls… may dominate the movements of the pair during this week. A break above 0.9225 will weaken 0.9310 areas. Conversely, areas around 0.9030 represent the last defense for buyers.

The trading range for this week is among key support at 0.8890 and key resistance at 0.9470.

Based on the charts and explanations above our opinion is, buying the pair around 0.9140 targeting 0.9360 and stop loss below 0.9030 might be appropriate.

The pair has touched a very strong barrier around 1.3230 zones that forced it to pullback during the Asian session as seen on the provided daily chart. We can see on the same main graph an obvious overbought sign appearing on Stochastic; whilst the secondary four-hour time scale offers a huge negative divergence on its RSI 14. Hence, we suggest potential …downside actions during this week covered by SMA 100 at. Ultimately, a break below 1.3080-Vlaue of SMA 50- will confirm and accelerate declines.

The trading range for this week is among key support at 1.2850 and key resistance at 1.3460.

Based on the charts and explanations above our opinion is, selling the pair around 1.3200 targeting 1.2930 and stop loss above 1.3375 might be appropriate.

The weekly chart of Palladium is offering a huge bearish harmonic AB=CD pattern over started in the last week of November, 2008 as it recorded the bottom of 157.00 and after that we have witnessed three waves towards the significant peak of 847.00 zones. The wave in the middle represented BC leg with a correction of 50% for AB leg; thus, the metal rebounded aggr…essively from 261.8% at 860.00 -the PRZ- or rather the potential reversal zones of the harmonic structure. Moreover, we have another major classical pattern that reached its projected technical objective around 530.00 zones earlier. Shall it touch the extended technical target of the classical pattern? Actually, we classify the upside movements form 530.00 zones as a correction that took the shape of rising wedge pattern while SMA 50 continues covering the metal and that may answer the above presented inquiry as the minor classical continuation pattern-rising wedge- may send the price toward 530.00 areas once more. A break of 623.00-50% Fibonacci retracement of CD leg- will confirm the expected bearishness.

The provided daily offers one of the recently published harmonic patterns discovered by Scott Carney since AB leg represented 88.6% Fibonacci retracement of XA leg suggesting a potential bearish harmonic deep crab pattern. The technical story of this harmonic formation has started on October, 27, 2011 when the significant peak of 1289 was placed and then the index… moved downwards forming the first leg when it placed 1147.00. Inclines from A point succeeded in forming the BC leg and now, we believe that the CD leg or rather the last leg of the structure is looking for a place on the chart to place the PRZ –potential reversal zones-. According to the rules of this pattern, 161.8% Fibonacci projection of XA could be the PRZ, but we know that sometimes 127.2% can replace 161.8% level. Having a look at technical indicators will prove that a strong overbought case appears on RSI 14 and AROON can’t confirm the resumption of the uptrend-CD leg-. Thus, we believe that 1327.00 zones will limit the current uptrend and will bring downside actions over upcoming sessions. On the upside, taking 1327.00 with a daily closing will send the index to the ideal PRZ of the deep crab pattern at 1376.00 but in that case, the reversal will be stronger. Finally, targets reside at 1277.00 followed by 1245.00.

After placing the peak of 3405 on October, 28, 2010, the index has started a harmonic sequence as seen on the provided daily graph. This sequence was dominated by a fine Fibonacci rhythmic suggesting that a possible bearish harmonic Butterfly pattern is currently looking for a place to form the PRZ- the potential reversal zones-. Having said so, we can …see how the index has stabilized above B level and this is a very important technical catalyst that will help it to continue forming the last leg of the pattern. But, we have been able to catch an obvious negative crossover on Stochastic while Keltner channel’s upper line also gives an overbought reading. As a consequence, we believe that the index will move mildly lower to retest the previous broken B point before moving higher once more targeting 3570 zones where 127.2% Fibonacci projection of XA leg will meet 200% of the BC leg to form the PRZ of the pattern.
Notes:
• SMA 200 may cause heavy fluctuation during the period of forming the CD leg.
• The allover harmonic structure is bearish; thus a huge reversal is expected from 3570 level if the index touches it and the arrows seen on the chart explains the suggested future steps for forming the last leg.

Since bottoming at 117.56 on March, 03, 2011, the daily chart has been capable of drawing an obvious uptrend which has been topped out at 131.96 as seen on our provided graph. The pullback from 131.96 succeeded in offering negative technical catalysts that argue us to suggest more bearish actions over upcoming sessions:
• The consecutive bearish candlesticks… patterns formed during the past three days.
• The weakness appearing on RSI 14 as it has lost its upside steam, moving below the value of 50.00.
• Stability below SMA 20 and SMA 50.
• Vortex is on the way to overlap negatively.
A break of the uptrend suggested that 23.6% Fibonacci retracement of the upside rally could be retargeted followed by 127.30.
On the upside, any upside rallies should be well capped below the former peak of 131.96 to keep our negative scenario valid.

After bottoming at97.00 zones, the pair has inclined steadily breaching the resistance line of a suggested reversal classical pattern as seen on the provide four-hour chart. Our caught broadening bottom pattern has sent the pair towards 38.2% Fibonacci retracement of the entire downside wave from 105.65 to 97.00 and we know reaching the aforesaid Fibonacci correc…tional level could be the rational technical objective of this classical probability. Now, let us say that the breakout above 100.30 will designate additional bullishness towards 61.8% Fibonacci retracement of the prior downside move matching the Fibonacci rules. But, the negativity appears on RSI 14 and the cover provided by SMA 200 cues trend exhaustion while we shouldn’t ignore the importance of the 38.2% when we are talking about corrections. To conclude, the pair might have ended its correction at 38.2% retracement and on its way to move lower once again retargeting 97.00 areas again and a break of which will bring more downside pressures towards the psychological level of 95.00. On the upside, clearing 100.30 will take us towards 102.35 without neglecting 50% retracement of the downside wave.

After placing the significant top of 0.8240 on October, 27, 2010 the pair has started a harmonic structure that was dominated by the following Fibonacci rhythmic:
• AB= 61.8% Fibonacci retracement of XA.
… • BC = 76.4% Fibonacci retracement of AB leg.
Thus, stability above B point occurred during the past 10 days suggested that the allover bearish harmonic pattern is seeking for a potential reversal zones. Since B point represented 61.8% Fibonacci, we believe that the pair is on its way to form the PRZ for a Gartley pattern around 76.4% Fibonacci retracement of XA leg.

Technical analysis for indicators:
• Bollinger bands’ upper line acts as a good resistance that may send the pair lower.
• RSI 14 shows signs of trend weakness.
• AROON reflects exhaustion of the bullish trend started at C point.

The index is presently forming one of the most reliable continuation classical patterns over daily studies as seen on the provided graph. Our chart shows that the index is on its way to achieve a potential breakout below the line connecting the higher lows or rather the support line of our caught symmetrical triangle pattern due to the negativity appearing on t…he technical indicators as follows:

• The combination of SMA 50 and SMA 100 are covering the movements as well.
• Stochastic is preparing to crossover negatively.
• Vortex reflects an obvious bearish case.

Technical target: Via drawing a line that is parallel to the resistance line we can define the technical objective of the symmetrical triangle pattern; thus, areas of 7830 will be under our technical microscope over upcoming sessions.

Invalidation: A breakout with a daily closing above 8590 will give us a reason for concern.

Crazy harmonic outlook started with German Mark before launching the EURO!

Form the first look at our provided chart; we may think that using the yearly interval when we talk about medium term isn’t a convenient choice. But, we intended to provide you with this chart to clarify some technical factors. Besides, the longer time frames are more reliable than the shorter timescales and technical anal…ysts can trust them more!
Since bottoming at the significant low of 0.6385 in year 1985, the pair has moved within three waves to the upside where it succeeded in placing the all-time high at 1.6035. Those three waves have been able to create a very huge bearish harmonic AB=CD pattern.

The Fibonacci rhythmic shows that areas of 1.6035 represented the PRZ or rather the potential reversal zones; particularly, when we look at the bearish candlestick pattern formed in 2008 as a “Spinning Top” has been drawn ideally as seen on the secondary image.
Indeed, the pair has adopted a favorable reaction to the duplicated reversal consisting of 127.2% Fibonacci projection of BC leg and the aforesaid candlestick structure as it moved violently downwards reaching 50% Fibonacci of the CD leg in 2010 at 1.1865.
According to the harmonic rules, areas of 61.8% Fibonacci retracement of CD leg becomes at 1.1200 under our technical microscope to be the second technical objective of the bearishness appearing on our chart after placing the first technical target of the harmonic pattern before at 38.2% retracement of CD leg.
Of note, the yearly closing of 2010 has been achieved comfortably below 38.2% level.

Technical indicators analysis:
Stochastic as a representative for momentum indicators is still showing an obvious bearish case while the combination of exponential moving averages is reinforcing our negative bearish technical overview.See More

The pair has been capable of reacting as well when it touched one of the suggested potential reversal zones of our caught bullish harmonic AB=CD pattern started at the former peak of 1.4310 as seen on the provided four-hour graph. The harmonic rule suggest that when BC leg represents 76.4% of AB, the PRZ should be activated at 127.2% Fibonacci projection of BC leg. …Thus, the entire harmonic structure is not an ideal one but the violent bounce seen yesterday exactly from 161.8% Fibonacci projection of the BC leg at 1.2905 should be seen as a very positive technical catalyst to create a rhythmic between Fibonacci ratios regardless the rule of alternation.
We also have been able to catch the following technical factors:
• RSI 14 is moving obviously upwards hitting the oversold areas.
• The lower line of Bollinger Bands provided the pair with a very solid support assisting the pair to form a bullish candlestick formation.
• The sign of Vortex that became a friend of the CD leg started to be weaker.
Technical targets start at 1.3205 followed by 1.3390.
Invalidation: A breakout below the PRZ of the pattern at 1.2905 with a daily closing will negate and give us a reason for pause.

Updating our technical overview for the index, we can see how it has achieved a sustained breakout below 261.8% Fibonacci projection of CD leg of our previous caught bearish harmonic “5-0” pattern as seen on the provided weekly chart. The bearish effect of our caught pattern started after placing the –D- potential reversal zones. Actually, technical story of the patte…rn started after bottoming out at 103.50 zones in the second week of January, 2011 where it placed a significant low of a correctional wave according to the scientific rules of the pattern. From “0” level, the index moved upwards forming the peak of B which took out the prior high of X level forming 113% Fibonacci projection of XA leg. Pulling back towards areas between 127.2% and 161.8% of AB leg has been able to form the BC leg. Now, we think that the index on its way to reach the extreme technical targets after breaching 127.2% and 161.8% and 261.8% with weekly closings earlier. Consequently, areas of 361.8% projection at 98.70 will be our awaited objective; noting that the pattern famous for beating the extended Fibonacci levels of its CD leg. Assessing indicators, SMA 20 is covering the bearishness as well while Stochastic is very close to overlap positively and may cause some kind of fluctuation .Finally, Vortex-trend indicator- is definitely negative reflecting the strength of the bearishness and it may bet the positivity of Stochastic.

Technical note:
The pattern is not ideal since CD leg should retrace 50% of BC leg in the typical cases but it proved its efficiency with the bearishness seen below “C” and “0” levels.

It seems that the market is poised for the next major downside wave as we can see a potential continuation pattern appearing on the daily graph for the index. With two lower highs and two higher lows, the movements of the index have been trapped within a potential symmetrical triangle pattern after bottoming at 1925 that followed the ongoing bearishness star…ted at the significant high of 3080. About duration, the rule tells that the triangle could extend from three weeks to several months and in our case, the index has started forming the shape since September, 2011. Now, we believe that our caught pattern is on its way to touch the resistance line at 2390 once more before moving downwards as trading range gets narrower below SMA 200. But, we need to witness a breakout below 2270 areas to imply room for downside actions over upcoming sessions softly targeting the support line of the pattern where a break of which will trigger further downside rallies towards the scientific technical objective of the pattern at 1700 zones. On the upside, taking 2505 will negate the bearish outlook completely.

The pair is presently offering one of the best bullish harmonic sequences over daily studies as seen on our graph. The Fibonacci rhythmic which connects its legs has the ability to create a potential bullish “Deep Crab” pattern as follows:
•AB leg= 88.6% Fibonacci retracement of XA leg and this is a major technical fact for defining a deep crab pattern.
… •BC leg =76.4% of AB leg.
•The D-potential reversal zones- reside around 1.2300 zones where 161.8% Fibonacci projection of XA leg will meet 224% of BC leg.
Consequently, the pair is on its way to form place a huge reversal point over upcoming sessions. Assessing indicators, we can see RSI 14 reflecting an obvious oversold case as it is currently valued at 20.00; whilst SMA 50 could be a target of retesting process if the reversal occurred.

The technical objective of this awaited reversal resides around 1.2880 zones. Finally, the secondary image is an educational for the harmonic pattern recently published by Scott M. Carney.

The weekly graph for the pair has provided us with a potential bullish harmonic AB=CD structure after topping at 1.2300 zones in November 2008. Actually, the bounce from the PRZ or rather the potential reversal zones was aggressive due to touching one of the extreme technical targets of “D” point at 261.8% Fibonacci projection of BC leg; thus the reaction was very …sharp. Accordingly, we have witnessed a fast upside wave towards 50% Fibonacci retracement of CD leg earlier. Now, we can see how the previous week’s closing was achieved comfortably above 50% suggesting that the second technical target of the harmonic structure at 61.8% Fibonacci at 0.9950 zones should be visited over upcoming period after clearing 38.2% before. Assessing indicators, SMA 100 is under attack after being carried as well by SMA 50, while Stochastic continues giving off positive signs despite moving close to overbought areas. Finally, a break above 0.9600 will accelerate the highly anticipated bullishness.

In line with our yesterday’s technical comment, the pair has violently slipped yesterday reaching the first technical target of the recently caught bearish harmonic AB=CD pattern at 38.2% retracement of CD leg at 1.0250. Moreover, the bearishness was strong enough to take the pair towards 50% Fibonacci level of CD leg at 1.0210 levels as seen on the provided four-…hour graph. Now, some kind of consolidation is seen around 50% as it met SMA 50 and the lower line of Bollinger bands, but the negativity appearing on the candlesticks formation and Vortex indicator argue us to suggest more bearishness over intraday basis towards the second technical objective of the harmonic structure at 61.8% Fibonacci retracmenet of CD leg; noting that a break below 61.8% will send the pair easily towards the extended targets starting at 76.4% followed by 100%.

After bottoming out at 5280.00 zones, the index has moved steadily upwards forming laddering waves se seen on the provided four-hour graph. Those price actions have been dominated by a good Fibonacci projection rhythmic where we could have been able to catch a potential bearish harmonic three drives pattern. Actually, 113%, 127.2% and 161.8% are the most used levels to form the drives but… that doesn’t mean 261.8% couldn’t act as an accurate reversal but on the contrary, the reversal from 261.8% Fibonacci projection could be sharper according to the alternation principle in the technical analysis. Consequently, the bearishness may start sooner supported by the following technical motives:

• The bearishness appearing on the candlesticks formation.
• The negativity appearing on AROON-trend indicator-.
• RSI 14 reflects momentum weakness.

Of note, we are not sure yet that the above seen gap is an exhaustion gap which always indicates marks an end for the trend and violent reversals, but filling it may confirm this type and assure the bearish harmonic structure.

Back to the smaller time frames after discussing the huge bearish harmonic pattern over daily studies yesterday where we have recognized a recently established minor bearish harmonic AB=CD pattern over four-hour time scale. Our short-term bearish harmonic pattern has started at the significant low of 0.9860 and succeeded in forming a corrective 50% Fibonacci retr…acement leg between B and C points. Accordingly, the PRZ should be seen at 200% projection of BC leg which is very close to the current levels as seen on the graph. A breakout above 1.0395 will cause a fast visit to the second PRZ-potential reversal zones- at 1.0500 areas. Actually, RSI 14 supports starting the reversal at 1.0395 zones, targeting 1.0260 followed by 1.0180.

With second year of trading in year 2012, we will leave the small time frames to have a deeper look at the pair over daily basis, where we recognize a huge bearish harmonic AB=CD pattern as seen on our provided graph. The technical story of this pattern started at 0.6000 levels where the AUDUSD has placed a medium term bottom to rise within three waves towards the… significant high of 1.1080. The Fibonacci rhythmic dominated the above mentioned harmonic pattern was very close to be an ideal one since BC leg represented 50% of AB leg; thus, the bearishness started at 224% projection of BC leg was very sharp according to the alternation principle of harmonic studies. Having said so, we can see that the bearishness has been limited between 50% and 61.8% Fibonacci of CD leg after clearing 38.2% earlier. Now, the pair continues correcting the downside from the high to 0.9385 and it may move downwards sooner as it is well capped by SMA 200. Finally, RSI 14 approaches overbought areas and to recap, areas between 23.6% and SMA 200 might be re-test before resuming the downside rally of the bearish harmonic AB=CD pattern.

From a pure classical point of view, we can see a potential continuation pattern formed on the daily basis. Actually, the metal has been capable of achieving a confirmed negative closing below the support line of our caught descending triangle at 28.35 zones. But, we may witness a retest of the aforesaid level-turned into support- before resuming the downside rall…y started at 49.85 zones. The signs appear on the indicators solidify our constructive bearish overview as follows:
Trend indicators: Vortex continues reflecting the strength of the bearishness, while Parabolic SAR is covering the metal from the upside.
Momentum: Stochastic has overlapped positively suggesting a potential retest of the resistance of 28.35.

Technical targets: Areas around 21.30 should be under our technical microscope over short term basis.

The technical story of the following discussed pattern seen on the weekly graph started after bottoming out around 72.69 in the first week of May 2011 where the index has moved violently upwards. When we look at this incline, we will notice that it has been able to create the right shoulder of the head and shoulders bottom pattern. We can see how the index succeede…d in penetrating the 38.2% Fibonacci retracement of the entire downside wave from 88.70 to 72.69 with consecutive weekly closings above it designating that the index is on its way to retest the key resistance of the 61.8% level at 82.58 according to Fibonacci rules. Moreover, we can see stability above SMA 50 and SMA 100 along with consecutive positive candlesticks formation that may assist the index to reach the aforementioned Fibonacci level. Actually, Stochastic is within overbought areas, but it is has overlapped positively. Ultimately, the breakout above the sloping confirmation line is the major technical catalyst that cleared the path towards the soft technical objective at 82.58 and a break of which will send it higher towards 84.92 which represents our main technical target. Conversely, areas of 78.81 should act as a floor for any downside attempts to keep our captured pattern valid.

We will leave the shorter time frames to update our previous outlook published on Feb. 08 since the daily studies offer a different classical probability. In fact, we are facing a potential reversal classical pattern with a neckline at 1.4325 zones as seen on the provided chart. We should witness a sustained breakout with a daily closing above the aforementioned… level to make sure that the uptrend started at 1.1450 zones and was topped at 1.4805 areas will show a convenient retracement. Yesterday’s long black candlestick pattern may assist the pair to breach through the pivotal support of 1.4325 but we prefer taking 1.4220 for further confirmations. Assessing indicators, SMA 50 started to cover the current bearishness as well; whilst (RSI 14-RVI 0) combination is negative is definitely negative. Technical targets are seen at 1.3650 but not before taking the support levels.

Classically speaking, we can see how the daily chart succeeded in drawing a descending channel after topping at 123.40 in April, 2011. The recovery started at the significant low around 97.00 zones has been limited for the fifth consecutive day at the resistance line of the aforesaid downside channel. Moreover, we can see how the bullish recovery has stalled out around 100-Day SMA suggesting that the recovery may stop around the current levels and the major bearish trend will be resumed sooner. This bearish outlook is supported by two main negative technical catalysts as follows:
• The negative divergence appearing on CCI 14-Commodity Channel Index- and OsMA indicators.
• Facing 23.6% Fibonacci retracement of the entire downside rally from 123.40 to 97.00.
A break below 100.70 will confirm and accelerate while 106.45 should protect medium term traders. Technical targets are seen at 97.00 zones followed by 95.00.

GBP/USD Daily Chart Analysis 16 February 2012. We can see in this picture that GBP/USD was trying to go up until it hits a strong resistance level @1.5880 For now we expect the price to penetrate a support level @1.5647. From there, we assume the price will retrace to the same level. We will seek a sell position opportunity when @1.5647 level will become the next resistance

Crazy harmonic outlook started with German Mark before launching the EURO!

Since bottoming at the significant low of 0.6385 in year 1985, the pair has moved within three waves to the upside where it succeeded in placing the all-time high at 1.6035. Those three waves have been able to create a very huge bearish harmonic AB=CD pattern.

According to the harmonic rules, areas of 61.8% Fibonacci retracement of CD leg becomes at 1.1200 under our technical microscope to be the second technical objective of the bearishness appearing on our chart after placing the first technical target of the harmonic pattern before at 38.2% retracement of CD leg.
Of note, the yearly closing of 2010 has been achieved comfortably below 38.2% level.

Technical indicators analysis:

Stochastic as a representative for momentum indicators is still showing an obvious bearish case while the combination of exponential moving averages is reinforcing our negative bearish technical overview.

Orient Technologies IPO