Trading The Trend On USD/CHF

In my yesterday’s post, I wrote about the BIG picture on USD/CHF and I did a Weekly time frame analysis. If you missed it then you can check it out here:

Weekly USD/CHF Analysis

Today, I would like ho have a closer look at a lower time frame and show you some strong intraday trading resistances there.

How to trade in a trend

In the last couple of days, the USD/CHF has been moving downwards in a really strong sell-off. It fell around 450 pips just in few days!

When there is a development like this I look for areas where I can enter a short trade.

Those of you who follow me know, that in situations like this I always look for pullbacks. This means that I want to see the price to make a correction. When it does, then I jump into a short trade.

There are specific places where I want to jump in the trade. It is the Volume Cluster areas = places with significant volumes created.

Whenever there is a trend I use my Flexible Volume Profile in that trend area and I look for significant Volume Clusters.

When the price makes a pullback to them, then I enter my trade. Such a trade is always in the direction of the trend (so when there is a downtrend I enter a short)

Let’s now have a look at the USD/CHF, 30 Minute time frame.

I printed the Flexible Volume Profile over the recent downtrend area. This revealed three strong Volume Clusters.

#1 Resistance (0.9443)

The first Volume Cluster is around 0.9443 and it has been formed earlier today. There was a little rotation in today’s Asian session. Then the European session started and there was a new sell-off. I think that sellers were adding to their selling positions in the Asian session (at the place where the Volume Cluster is).

When the price makes it back to this area I think those sellers will become active again and they will try and push the price from this area downwards again.

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#2 Resistance (0.9515)

The second resistance is based on a significant Volume Cluster created around 0.9515. The logic behind this one is more or less the same as in the previous one. There were sellers adding to their selling positions there and I expect them to defend their positions in the future.

What I like about this resistance is that it worked as a support in the past. I marked this in the picture with the blue color. The price bounced of this level nicely and aggressively (this is how I know it was a strong support). When the price made it through this support, it then became a resistance (0.9515). A cool thing is that this is the same spot as the one where the Volume Cluster is. I really like confluences like these!

#3 Resistance (0.9560)

This is where the recent sell-off started. As you can see there was quite a long rotation where heavy volumes got traded. In my opinion, this is the place where the sellers who initiated the recent sell-off placed most of their positions.

When the price makes a pullback into this area again I think that those sellers will become active and they will try and defend their selling positions. They will do this by aggressive selling activity which would push the price downwards again.

Macro news

There is a significant macroeconomic news coming up later today. It is the Non-Farm Employment Change and Unemployment Rate. Both these strongly affect the US Dollar. This means they will also affect the USD/CHF.

Anything can happen during the release of such news and I would not advise you to take any intraday trades no matter how strong and appealing they appear. A safer approach is not to trade few minutes before the news release and then start trading only after the post news volatility has calmed down.

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I hope you guys liked today’s market analysis article. Let me know what you think in the comments below!

Have a GREAT weekend.

-Dale

EUR/USD: All Significant Supports EXPLAINED

The EUR/USD is pushing upwards like crazy. It made over 400 pips just in eight days! An interesting thing is that there were eight consecutive bullish Daily candles (all green). Not a single pullback! This is a sign of strong and aggressive buyers. Even a blind person can see this.

How to trade in a trend

The main intraday trading strategy in such a situation is to wait for little pullbacks and enter long trades at supports.

In this article, I will focus mostly on those supports.

When there is an uptrend like now, it is best to use the Flexible Volume Profile to look into the volumes and how they were distributed throughout the uptrend.

What you are looking for are significant Volume Clusters. A Volume Cluster created within an uptrend tells you this: There were a lot of buyers adding to their buying positions there. Then they pushed the price even higher.

How does that help? When the price makes it back to a Volume Cluster then there is a solid chance that those buyers will become active again and that they will try and push the price upwards from this Volume Cluster.

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The current situation on the EUR/USD

Let’s now have a look at the EUR/USD and examine all the Volume
Clusters one by one. Below, you can see a 30 Minute chart of the EUR/USD
with all significant Volume Clusters numbered #1 to #5.

#1 Volume Cluster

This one was created close to the beginning of the new strong buying activity. What i like about this one is that the volumes are distributed in a way that there is no doubt where the support is (Volume Cluster is nicely visible and “sharp” looking).

#2 Volume Cluster

This one is a bit weird one. There was a bit of sideways price action and then the price shot upwards. What happened an hour later was that there was a little pullback. This pullback went almost into the Volume Cluster zone.

Now it seems that those volumes have already been tested by this (support is no longer valid). Maybe it will still work but it would be the 2nd test and 2nd tests don’t have as good win rate as the 1st tests.

#3 Volume Cluster

I liked this one and I was looking forward to trading it. However, the price went quite close to it and then made a strong buying reaction. It seems that this support is also spent (tested).

My general rule is that a level is tested if price turns 3 pips or closer before reaching it. In this case, it was a bit more than 3 pips but given the higher volatility we see on EUR/USD now I rather discard this level because to me it just looks already tested.

#4 Volume Cluster

This one is already spent. The price made a nice pullback to it, and there was a 30 pip reaction. This support is no longer valid because the price has already reacted to it.

#5 Volume Cluster

The last Volume Cluster got created yesterday. What I like about it is that a really aggressive green candle shot from it. BTW that’s what I like to see in all volume-based support/resistance levels.

Now the price rotates above this support. This means that the market participants accepted the higher prices. This is important because if there was a sharp rejection of higher prices then it would mean higher prices weren’t accepted and that price won’t tend to return there.

But now, if there is a pullback into the 1.1119 support, then it is likely that the price will bounce from there and go upwards, back into the current rotation (current balance).

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I hope you guys liked this Volume Cluster analysis. Let me know what you think in the comments below!

Happy trading!

-Dale

How Deep Can The EUR/USD Drop?

All eyes are on the EUR/USD again. The reason is that it broke all significant supports and it is under strong and constant selling pressure since the beginning of this month.

Is there a way to tell where this strong downtrend might stop and possibly turn?

Yes, there is! But we need to have a look at higher time frames – weekly or monthly. Why? Because we need to see the price action and volumes that were in this area in the past.

The last time EUR/USD was as low as it is now was in 2017. For that reason, we need to look into this area and try to find something to hold onto there.

What happened in 2017…

2017 was a trend year. First, there was a few months of rotation from the end of 2016 to the beginning of 2017. Then a massive uptrend started and lasted almost a whole year.

Now, I am interested in how the volumes were distributed in this area. When I use my Flexible Volume profile on the 2017 uptrend, then it shows this.

EUR/USD, Weekly chart:

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In the screenshot above you can see that I marked a significant volume cluster area from beginning of 2017.

What this tells me is that there were massive volumes accumulated there. Then the trend started.

Trend started with a gap

If you look closely, then you can see, that it actually started with a gap! An interesting thing worth pointing out is that sellers were not able to close this gap! The buyers were just pushing too hard. Scenario like this is very rare and it shows the power of buyers.

So, we have heavy volumes at the bottom, then a gap which did not get closed and then one year of an uptrend.

Heavy volume cluster in 2017

The buyers who started this crazy uptrend in 2017 were initially building their buying positions in the rotation I marked. From there they were pushing the price upwards.

Currently, after almost three years the price is heading back into this area.

What is going to happen? This is trading, we can never be sure, but chances are that there could be a buying reaction from this old volume cluster (around 1.0600).

The reason for that is that the buyers who were there in 2017 could become active again and cause another strong buying activity. This would stop the current sell-off and it could eventually turn it into a new buying activity (an uptrend).

Also the sellers who are currently pushing the price downwards probably won’t want to risk a fight with the buyers from 2017 and they will quit their selling positions.

They will most likely do so at the volume cluster from 2017.

When a seller gets rid of a short position he needs to buy (go long). This also helps to push the price upwards.

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If you liked this long-term EUR/USD analysis, you may want to check out two older articles, where I predicted and traded this strong sell-off on EUR/USD:

EUR/USD short – trade description and strategy

EUR/USD short – how I made +1.600 pips on this single trade

 

I hope you guys liked this analysis. Let me know what you think in the comments below!

Happy trading!

-Dale