GBP/USD Analysis and Trade

Finally it broke out the bull flag and i have my entry too

The trendline i drew on the previous chart gave way hence i didnt enter but it fought back bouncing along the bottom trendline and produced a nice pinbar candle to take it back to above 21ma.



I didnt think it was safe to enter until the bull flag was broken though and i even missed the initial rise but waited for the pullback on one hour to horizontal support and the bullflag trendline which was broken. Order to enter was in at 16525 which was triggered which much in a nice area



Stop was originally 100pts but this has now been moved to 16493. The limit is a problem now as this has the potential to go to 17000. massive resistance there with 200ma too. I initially was looking for 16725 but the way it broke so quickly to the upside suggests there is potential to gain 4/5 times my risk. i shall monitor

GBP/USD Analysis cont.....

Now we have our price action setup, im looking to enter long. Along with the inside bar, we are importantly with the trend and have bounces off support which adds to the bullish case

Entry - i would enter above the bull flag, so a order would be in at 16546. Normally i would enter just above the "Mother" candle which is the larger candle of the inside bars but as we have that bull flag upper trendline, ive adjusted the entry

STOP - 16460. Low of the Mother candle plus a little more allowing for spread

LIMIT - 16718. The limit has to be at least twice the amount of the stop. Risk/Reward is important as they allow your winners to be bigger than your losses. so for example you might have 3 losing trades and 1 winner but youd still be in profit due to the size of the winner

GBP/USD Analysis

Taking a birds eye view of cable, its had a nice bullish run since the Dec 2010 lows. The Daily charts shows nice setups forming if you used pin bar candles, especially with that strong support at 15976.

As the trend is up and the next big resistance area (looking at weekly) doesnt come until the 16740s, im looking if this trendline support now holds. If it does, id look for price action formations around this area.

FTSE Analysis

Well, it failed in the 5400 region... AGAIN and does look like a top is being formed. There is one count that i havent mentioned which looks good on the dow but i thought not too good on the FTSE, i maybe wrong. This is the expanded flat wave 2 count. The fibs seem to be fitting pretty well on this.

Take the 1st July to 14th July top as Wave 1 of c being 519pts. Now if Wave 3 is 0.618 in length of wave 1 we get 320pts. Take the top of wave 3 on 27th July to the start of wave 3 on 20th July and its 324pts. Thats close enough to count as a 0.618. Now if Wave 5 which i guess we're in now is 0.618 of Wave 3 it equals to 200pts. Take the start of wave 5 on 30th July and add 200pts we get 5438.

5438 is again a significant number as its the 0.618 retrace of the drop which started on 15th April. And what do Wave 2's normally retrace Wave 1 by??? yes, 0.618!!!

Well, its just some ratio analysis which fits well this count. So tomorrow could be a classic buy the rumour sell the news situation ahead of NFP.

FTSE Analysis

All 3 counts mentioned on the last post are still valid but it is looking ever more bullish for the time being.

The double top count is still in due to the fact we keep getting failures at the 5400 area. However todays dramatic reversal and ABC formations on the bigger scale suggest more upward movement. Count #2 from the previous post, the zigzag would just have one more 5 wave movement up. in the c wave from 30th July, if c is to equal A we would fall short near the 5500 area above the .618 retrace of wave 1

If this is Count #3 ending diagonal (ED), i would think we're in the 3rd wave up with one more high before a short break for wave 4. Wave 3 would be shorter than wave 1 if it is a ED. But its important to keep in mind that its very rare ED's occur in C wave position (according to the EWP book that is!)

FTSE Analysis

Theres potentially 3 different counts on the FTSE at the moment.

Count Number 1

The Double Top, which is where we are at the moment. From the 20th July low is a clear zigzag formation upwards. From Fridays low we've also had 5 waves up. The 1st wave on the 20-21st July is pretty much equal in points to the 5th wave up we had from late on Friday. So theres a possible truncation scenario here as theres roughly 5 failures around this mark.

Count Number 2

We're in the final stages of a zigzag correction up. Tomorrow could see a slight correction from todays overbought conditions. If this is the case and a temporary top is in, the count would be going into B of C of C of 2/B. Will be looking for a drop potential to the 5362-5371 area.

Count Number 3

This is pretty much similar to Count Number 2 but the C wave up starting from the 20th July low would be a ending diagonal in C wave position. Now as we know these are pretty hard to call in EWT terms if you stick to all the rules. The rise right now would be wave 3 of C.

If i had to choose a count, id be spilt between counts 2 and 3 at the moment. I think the weekly stochastics need to go a bit more higher for a decent sell off to occur.

The dollar is getting pretty overbought, cable hit .618 of the drop it had recently on the daily chart. USD suggests a turn is very near.

As a general guide on the weekly charts i sometimes look at the number of candles each particular wave does. corrective waves candles as a guide (doesn't happen all the time) start to turn after reaching the number of candles of the previous wave. For example, from the April, on Daily we had 12 candles as part of the whole wave which went down. Now counting upwards from W27 July we're in the 6th candle up, which is half of the candles that did the first drop. Something to keep an eye on here for potential turns

FTSE Analysis

Ok this is getting ever more confusing, it could really go either way.

The 2nd descent today has questioned whether this can rally towards 5600. The drop today has seen the FTSE break slightly out of the upwards channel it has been in since the 5th July.

I still think theres one more high left in this but it looks like waves 1 to 4 done so a top could be in in the low 5400s. Also note 13th May, wave 4 of lesser degree area. so the retrace for wave 2 could be 61.8 rather than 79%. One other way i see this going to 5600s is if we have a 5th wave extension but again that drop today has messed up that count, the drop is too low in my opinion for this to work. Then there is the ending diagonal in Wave 5 of C position which might have started, this is something to keep and eye out for.

If this is Wave 4 of C, its retraced wave 3 by 50% and as long as it doesnt go into wave 1 area, the count upwards is still ok. If wave 5 equals wave 1 (starting 20 July) then again we finish near the 61.8% retrace mark for wave 2 up. One other interesting observation ive noticed are the fibs. If wave 2 does finish around the 5400 area it would mean wave A of the zigzag up is 1.618% length of wave C. dont think ive seen that before.

From a technical perspective, 200ma on daily seems like its having none of the bull and it seems to be bouncing off that area. also take the highs of 16th and 26th april and draw a line down to see the FTSE bounced off that area. Another test of that line could see a failure just below 5400