November 18, 2010
Potential Set-Up On The EUR/USD Pair - November 18 2010
Sorry for the lack of blog activity recently but I've had a pretty stressful week. After having chest and stomach pains for about ten days, I went to see a doctor, had an ECG, and was immediately sent to hospital as I had an irregular heartbeat. Anyway after having lots of tests, I was eventually told that it was nothing serious and that it should resolve itself with medication, but it was quite a scary experience.
Anyway back to the subject of this post and I just want to alert you to a potential high probability set-up on the EUR/USD pair. For those that follow my 4 hour trading system (fill in the short form to the right for more details), you will have noticed that the Supertrend indicator has recently turned red on the daily chart of the EUR/USD pair.
This doesn't automatically mean that you should jump in with a short position because you often get a slight pull-back when this happens, before this new downward trend really starts to kick in.
Therefore one of the best high probability set-ups that you will get trading this system is when the price retraces slightly before the EMAs cross in the same direction as this new trend on the 4 hour chart. This is particularly the case when we have had a long and sustained trend beforehand, as we did with the EUR/USD pair.
So in this instance it looks like the EMAs are in the process of crossing upwards on the 4 hour chart, so we therefore want to wait for them to cross downwards again (the blue EMA crossing through the green EMA) before entering a short position.
I personally would like to see the price rise to around 1.38 or 1.39 before the EMAs cross downwards again because I think this could potentially yield a lot of points.
I wouldn't be at all surprised to see this happen either because the news that Ireland may get bailed out is likely to give the EUR/USD a short-term boost, but the long-term outlook for the Euro is still pretty bleak because there are concerns that other European countries may need some help as well, and that the Euro is a basically a flawed currency.
We will have to wait and see, but the point is that the first EMA crossover (on the 4 hour chart) after a major change in trend (on the daily chart) is often the most profitable. So it may be worth keeping an eye on.
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