This is daily chart of Euro futures contract. I use futures chart instead of spot EUR/USD as it provides volume information which I use in my analysis. Euro had been consolidating in a symmetric triangle from start of May. On July 11, it broke below the lower trendline of the consolidation on higher volume. It appeared that finally there is a resolution from the consolidation. But Euro likes fooling traders a lot, and that happens on every timeframe. The next candle marked '1' on the chart was a higher volume hammer, with a tiny body a looooong lower wick. This was a clear hint that it is in no mood of going down for now. During next few sessions it crept back into the triangle, and then boom!, it ripped through it and now has broken out of the upper trendline. I am writing this post to commit a lesson to memory: don't overlook such clear hints or you'll pay the price (which I did).
Wednesday, July 27, 2011
Euro fakeout
This is daily chart of Euro futures contract. I use futures chart instead of spot EUR/USD as it provides volume information which I use in my analysis. Euro had been consolidating in a symmetric triangle from start of May. On July 11, it broke below the lower trendline of the consolidation on higher volume. It appeared that finally there is a resolution from the consolidation. But Euro likes fooling traders a lot, and that happens on every timeframe. The next candle marked '1' on the chart was a higher volume hammer, with a tiny body a looooong lower wick. This was a clear hint that it is in no mood of going down for now. During next few sessions it crept back into the triangle, and then boom!, it ripped through it and now has broken out of the upper trendline. I am writing this post to commit a lesson to memory: don't overlook such clear hints or you'll pay the price (which I did).
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