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Forex: Climaxes Should Get Minor Reversals

Published 08/24/2015, 10:38 AM
Updated 07/09/2023, 06:31 AM
EUR/USD
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USD/JPY
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EUR/CAD
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DX
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The dollar was weak and the euro and yen were strong overnight. The daily chart of the EUR/USD has had 4 consecutive big bull bars closing near their highs (including today, which has not yet closed), and it is reversing up from a double bottom (June and July) higher low major trend reversal. It is now just above the May high and therefore now has a significant higher high after a higher low and is in the early stages of a bull trend.

While this rally is still only a pullback from the breakout on the monthly chart below a 10-year trading range to test the 1.2000 bottom of that range, it is a bull trend on the daily chart. The reversal up on the 60-minute chart is in a tight channel with a parabolic curve. This is a buy climax, and it should soon be followed by about 10 bars and 2 legs down (a pullback for a day or two).

The 5-minute chart is pulling back from a 2nd push up in a wedge channel. This is a potential top whether it has a 3rd push up to a new high, and a 5-minute top today or tomorrow would the start of the 60-minute pullback into a bull flag. Those learning how to trade the markets should only look to buy a pullback, especially on a higher time frame, like the 60-minute chart. The 60-minute moving average is around 1.1425, and there will probably be buyers there. Since the bulls have been willing to buy above the moving average for about 40 bars, the odds are high that they will be eager to buy at an average price.

The 60-minute chart of the EUR/CAD is similar to that of the EUR/USD. It is extremely strongly up, but climactic. Although traders can buy for any reason, the stop is so far below at this point that those trading Forex markets for a living will stop buying the breakout and switch to buying pullbacks. The result will be a pullback today or tomorrow.

The USD/JPY 60-minute chart is in a parabolic sell climax, and it has had bad follow-through after the last several big bear bars. Buyers are becoming stronger. The bears are getting quicker to buy back shorts and bulls are starting to buy bear closes. This is the early stage of a transition into a trading range, the the day trading tip is to look for trades in both directions today. Until there is at least one strong reversal up, it will still be easier to make money looking for shorts than buys.

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