Trading / Investing

Weekly Trading Analysis (20 March 2016)

5 Min Read

The purpose of this blog post is to support your learning of the tools and concepts taught at The Duomo Initiative.

This post is not intended to substitute your own analysis, to be used as trading advice or to be considered as a signal providing service.

*Deep booming voice* "Previously on The Duomo Initiative!"Let's recap what we covered last week...

Last week...

EUR/USD

Of course, we had a look at EUR/USD but we didn't find much conviction for any trades.I told you that I wouldn't commit to any trades in that pair - and that analysis still holds.The pair is testing the top of the range that it's been bouncing around in for a while.So let's just continue to keep an eye on it.However, one currency pair that we did have conviction with (and ended up performing PERFECTLY in line with what we expected), was of course...

AUD/USD

We may just be getting started with AUD/USD.However, this week I won't be expanding on my previous analysis. I'll leave it exactly how it is.Instead, we'll just recap on the PERFECT trades we picked up last week.Opportunity 1:As I wrote about mid-week in my Inner Circle email, the first opportunity was a really clean one - fantastic!In my analysis last week I said:"The red dotted line is a strong Daily swing high/low that will prove to be very significant (trust me!)"As we know, with significant levels we always look for failure at the level - a Type 1 or Type 2 close.And that's exactly what we got...A perfect Type 2 close on the red dotted line. Let's look at the hourly chart:

20 March AUDUSD 1H

Yes - that's a drop of well over 150 pips. A killing!Then after the Federal Reserve announcement, the market rose to my next significant level.Opportunity 2:Here's what I said:"The purple arrow is a key 161.8 Fibonacci significant level...

We may see a move up to the purple arrow, before returning back down. Maybe even a Type 2 close on the Swing high/low (dotted red line)."Let's take a look at what happened at the purple arrow on a daily chart:

20 March AUDUSD Daily

Bingo! A type 1 close followed by a nice reversal(after a small fluctuation against us)If you followed my rules of closing your trades for the end of the week - you would have banked over 50 pips. Not bad... not bad at all! :-)Here's both significant levels on an hourly chart (not bad for a Sunday night prediction, eh?!)

20 March both AUDUSD opps

In short - last week's analysis, on just one currency pair, produced 2 fantastic turning points in the market!

This week...

Now let's have a look at this week's market. We're going to be focusing on...

USD/JPY

20 March USDJPY 1D

USD/JPY has had some bearish moves recently and is starting to approach some significant levels that could give an opportunity for a breather (and a bullish reversal!)Of course we're looking for some form of failure as a confirmation for any trades.The elements you see on the chart above (daily chart) are:

  • 2 trend lines, taken from the monthly chart. These are significant baselines and will therefore be a big obstacle for any more movements downwards.
  • The purple arrow is a (daily) significant -61.8 Fibonacci extension, based on having a very nice ABC pattern initially. Since there was a range for such a long time, it makes a breakout of the range followed by a Fibonacci extension reversal a perfect situation (and this is what we are potentially looking at).
  • The orange box (this is a Duomo variation of a Darvas Box - not a reversal zone!!) is the area of interest, since that's where we're clustering. If you look at smaller time frames, we would see all sorts of significant levels that can present a path of resistance.
  • The last daily closed candle showed a shift in momentum (a pin-bar of sorts). Volume stayed relatively consistent with previous candles, except the last bearish candle which had a slight spike in volume (therefore, this could be an exhaustion move).

Also (not shown on the chart, but equally important), the daily chart is coming off an oversold status on the Value Chart (on the last bearish candle) and the market has moved relatively far away from the 14 EMA - which suggests a slight pullback will be necessary.[For clarification on any of these topics, make sure you sign up for our Inner Circle mailing list, to receive our 4 part mini series - or for the more advanced concepts, check out our full online course.]As I said, there are more significant levels on the lower time frames.I don't want to go too small with the time frames in this article (e.g. 5M, 15M), otherwise this analysis will be out of date as soon as the market starts moving.Instead, let's look at the hourly chart:

20 March USDJPY 1H logo

In this chart we see the market creating higher highs and higher lows (but with small candles and relatively lower volume - therefore, conviction is low).The blue arrow is a significant Fibonacci level. This is the 'D' point of the ABCD pattern, if the orange arrow at the top is considered as the 'C' (And I would bet my house on that being the case!)So as you can see, momentum is heading upwards.Significant levels are suggesting the path of least resistance (where the price wants to move) is upwards.The only obstacle may be some short term minor trend lines and swing high-lows on the upside.Otherwise - get your bullish shoes on... looks like we'll be heading up.Remember - only trade once we get failure at a significant level.That was your quick and simple run through... Now use this to produce your own more detailed and dependable analysis.I'll leave this in your capable hands - have a great week in the markets and good luck!