Hey mate
Hope you had a good week trading, thought I’d send you an example of what I meant when aligning trend lines with rally base drop set ups (see below) if you zoomed in on a smaller timeframe you can see the base at each level.
Also an example of a small 2:1 trade I took last night.
Thanks for the levels email, speak to you soon
Cheers,
My Answer:
Okay, here’s what I’m thinking right now…
I’m leaning towards EUR/USD dropping down to that 1.10000 level.
This dip should give USD/JPY a boost, maybe even up to the 107.000 level, where it looks like the banks might have some sell trades waiting. Then, I reckon EUR/USD will start climbing back up once it hits 1.10000, which will cause USD/JPY to fall…
That’ll signal the next phase of this downtrend we’re seeing.
But, I don’t think this upward move in EUR/USD will last too long.
It’ll probably run out of steam when it gets back to that sell zone I marked on the daily chart. (You can check it out in my daily S&D levels.)
From there, I’m expecting another drop. EUR/USD’s downtrend will continue, and USD/JPY’s downtrend will finally come to an end.
At least, that’s my long-term outlook for now.
Thanks for sharing the image about trend lines and rally-base-drops. It seems like you’ve discovered a clever way to find confluence between those zones and trendlines!
Your trade was impressive, by the way.
The high where the supply zone formed was pretty close to the other highs in that consolidation on the daily chart. That drop could have been the banks adding more sell trades, right in line with their previous ones. Those are the swing highs you see at the top of the consolidation.
Also, if the banks did create that drop by selling, they might not have gotten all their trades filled at the price they wanted because there weren’t enough buyers around. This means they might try to pump the price back up a bit to lure in more buyers before reversing it again.
Finally, the high of that drop (where the supply zone is) is probably where the banks placed their initial sell trades.
So, if they’re trying to push the price up to get more sells in, it’s likely to stop around that supply zone.
And that’s exactly what happened!
The market went back to the supply zone and then dropped again, confirming our analysis. Now, I’m betting on a move down to the consolidation lows sometime this week.
Have a great week trading!
PAN