GBP/USD - When did the Bulls lose? Discuss

fibonelli · Sep 5, 2008

Hello,

I know there are several very good threads on candlesticks and price action analysis.

I wanted to start a separate thread to evaluate whether, with the benefit of hindsight, there were enough clues that GBP had the potential on a technical basis to fall materially.

My own approach in the broadest terms is to look at the big picture. I look at price action and candlesticks around decision zones and within a developing technical pattern.

I attach weekly, daily with my interpretation of Demand/Supply and Price Trends. 4 hr chart without annotations.

No indicators allowed on this occasion!KISS!

Do you think the Bulls lost on a particular day, or, after several battles with the bears? When? Why?

Note to Mods: If there is sufficient interest in this thread by seasoned traders. Could you kindly consider the merits of moving it to the relevant section as a useful resource for newbies.

ampro · Sep 5, 2008

How simple do you want to get?

If you’re looking for clues or guides via the naked candles/bars, then you could do worse than set an alarm bell around the faithful old bearish-bullish engulfing candles at lower tops (downtrend), higher lows (uptrend).

Sling a selection of indecision markers such as doji’s & spinning tops in around similar locations & I guess you can begin drilling down into your preferred lower timeframes to fine tune an entry or two if you use that type of game play as an execution trigger?

For the bearish engulfing fans, the initial marker on this one was back at end of 1st quarter around the 2.0400 round number.

If you’d dialled into a 240m reference on the back of that 1st Daily bearish engulfing candle of 14 March, you’d have witnessed similar behavior.

Similar combination set-up existed for the next 5 opportunities between March & July to get (compound?) aboard via that specific signal. You’d have gotten unseated on 3 from 5 of those before those multi week prints headed the big freefall on week comm. 21 July.

Using the tops (bottoms) of the engulfing bars as s&r guides on that template (Daily) timeframe will generally keep you honest if you’re seeking to string a line out.

I guess you can work your secondary s&r zones via the 240 or 60m frames if you’re attempting to balance out or job around a core position? Depends on how you want to play it I guess.

But those engulfing visuals all the way thru end of 1st quarter were key alarms for sure. And they’ll be major considerations when the market decides to spin round & probe for any upside.

ampro · Sep 5, 2008

Key level foundation markers have stayed solid all the way thru the year to current activity. You can often use these secondary levels to key off those Daily candle set ups as they form & print lower high & lower low reaction points.

They'll occasionally offer decent risk points to hide stops if you're actioning trades using a daily-4 hour or 1 hour combo. The lower high/low steps are useful trailing measures too as long as the activity isn't too erratic.

If you require to drill down further into the 60min levels for account/size/positioning purposes, those solid 240m levels will get you onboard ok, especially if you get inside bars or engulfing bars printing on the hourly frame vibrating away from the s&r level.

wasp · Sep 5, 2008

It pays to shop around

The GBPUSD drop and move size wasn't obvious imo other than the state of the economy but, had you been watching GBPJPY too............Then it was...

ampro · Sep 6, 2008

It’s early days on the thread, & I’m sure they’ll be a lot more input as to the why’s & wherefores. The most important thing however is what, if anything, can be learnt from this exercise?

I guess that’s maybe one of the forward benefits the op had in mind when giving birth to this thread?

It all comes round in the end to liquidation & psychology. Who (in the main) was liquidating back up yonder at the 2.0400 swing toward end of Q1 & what encouraged the price activity to gather pace off that key?

Obviously, we weren’t to know at that point that it actually was a key swing, but up until mid May the behavior certainly offered sufficient back up.

Neither will we know where the potential resting place for this current aggressive bear thrust lies until a little later down the road, but will the signals & clues tip us the nod as clearly down here as they maybe did back up there?

What was different about the behavior around the bearish engulfing trigger of March to that of July? Were there differing, wider ranging circumstances influencing the sentiment? Was it orderly or chaotic? Does/did it matter?

Does the dominant sentiment or flow affect & impact each timeframe category player differently as price goes thru it's motions on aggressive shifts thru the levels?

Are the circumstances & reasonings any different this morning down here @ 1.7665 than they there were a couple weeks ago as price drifted thru the last higher swing low @ 1.9650?

What kind of psychology is swirling around out there this morning? If you witness a (Daily) bullish engulfing bar or maybe a bullish inside day printing down here on or around weekly support, will this begin to influence your outlook maybe? Do you even recognize or agree that price has nudged a support down here?

Who is liquidating at each step (intraday/sub hourly) on this ugly bearish descent? And more importantly, who is taking the other side of that trade?

Which next minor swing will folks be eyeing if this thing looks to blow a little dust off the shorts? 7850?….7950-80 maybe? who, if anyone is likely to hand their shorts across to the buyers there?

Things is, we all have our own beliefs, structure & skill sets to identify, prepare, execute & manage a particular scenario as it’s unfolding. Although it’s a handy exercise to look back & revise your work, will you do anything different next time around?

Can you get the same tools out & get to work down here (wherever here is?) as you did back up there? & what will influence you to begin preparing for a switch in sentiment?

When did the Bulls lose……………When will the bears lose?

Trader333 · Sep 6, 2008

I wanted to start a separate thread to evaluate whether, with the benefit of hindsight, there were enough clues that GBP had the potential on a technical basis to fall materially.

In my view it was not technicals but fundamentals that have driven this which is why I think that it is good trading practice to consider both.

Paul

FXSCALPER2 · Sep 6, 2008

The cable drop has nothing to do with technicals. The only thing that kept it up was the fear that the MPC would hike rates (lol). On 13 August King hinted they wouldn't. cable fell sharply and never recovered. Technicals are useless when it comes to 2000 pip moves.

wasp · Sep 6, 2008

so the break on gbpjpy was nothing inportant (in my earlier post?) Fundamentals matter but its all obvious on the chart too imo.

ampro · Sep 6, 2008

sweepylongbananafiend said:
so the break on gbpjpy was nothing inportant (in my earlier post?) Fundamentals matter but its all obvious on the chart too imo.

If what you’re doing is keeping you out of trouble & pushing your PnL in the right direction, then I wouldn’t even bother giving it another thought.

Most everything gets filtered & washed thru the price activity anyhow, regardless of the cause. Folks waiting for fundamentals to throw them a biscuit will find themselves behind the curve a good percentage of the time.

Sure, it doesn’t do any harm to keep abreast of what’s bubbling out there, but by the time it hits your ears it’s usually second hand news & the trains already left the station. The rest you can pick thru via the popular sheets at the end of the day.

The main (important) drivers aren’t going to change that quickly anyhow. They might get pushed aside as new 'flavors' get added to the mix, but it all shows up on your chart in one form or another.

There might be a very small handful of folks (if that) on here who can make that (primary fundamental) play work to their advantage majority of the time. But I wouldn’t hold your breath.

FXSCALPER2 · Sep 6, 2008

sweepylongbananafiend said:
so the break on gbpjpy was nothing inportant (in my earlier post?) Fundamentals matter but its all obvious on the chart too imo.

A 2500 move is never obvious from the chart.

trader_dante · Sep 6, 2008

This pin bar on the weekly started the whole move (chart 1). It's not the benefit of hindsight, I called it and traded it as it occured in my other thread MMT. They don't work all the time when you get them at nothing but an "extreme" but all you need is one to go 2,000+ pips to pay for the ones that don't. This happens much more than most people would believe.

Now we have one on the weekly Eur/Gbp (chart 2). Perhaps this will be the top too. I am already a bear from the bearish engulfing on the daily.

FXSCALPER2 · Sep 6, 2008

trader_dante said:
This pin bar on the weekly started the whole move (chart 1). It's not the benefit of hindsight, I called it and traded it as it occured in my other thread MMT. They don't work all the time when you get them at nothing but an "extreme" but all you need is one to go 2,000+ pips to pay for the ones that don't. This happens much more than most people would believe.

Now we have one on the weekly Eur/Gbp (chart 2). Perhaps this will be the top too. I am already a bear from the bearish engulfing on the daily.

Exactly, my point. That 'pin bar', God help us, explains exactly nothing. TA is a trading methodology to control risk, hence the very good point that "2,000+ pips to pay for the ones that don't". The reason TA looks stupid is, even in hindsight it is completely vacuous in cases like this.

Whereas, looking at the housing market and the economy the fundamental explanation is obvious. I did say this in my room when cable was above 2.00. Cable had to go down because it was at stupid levels. Trying to catch the top with a 50 pip stop based on fundies is a bad idea which is where TA comes in. But TA never explains anything in the long term and for moves of this magnitude. If the UK economy wasn't in such bad shape and the US didn't look better than people expected (rightly or wrongly), cable would not have fallen so much so quickly, pin bar or no pin bar.

trader_dante · Sep 6, 2008

FXSCALPER2 said:
Exactly, my point. That 'pin bar', God help us, explains exactly nothing.

I disagree. It's pretty obvious what it shows in terms of price and value as deemed by market participants.

FXSCALPER2 said:
TA is a trading methodology to control risk, hence the very good point that "2,000+ pips to pay for the ones that don't". The reason TA looks stupid is, even in hindsight it is completely vacuous in cases like this.

But, nonetheless, it works.

FXSCALPER2 said:
If the UK economy wasn't in such bad shape and the US didn't look better than people expected (rightly or wrongly), cable would not have fallen so much so quickly, pin bar or no pin bar.

You see that's the other thing people always say to me. If Nigerian militants kidnap and kill another 10 workers, your pin bar on oil is going to mean sweet FA. What I find funny is that there is never a rampaging Nigerian when these disprovers need one

trader_dante · Sep 6, 2008

At any rate, the thread concerns whether any of us saw any signs to get short. There was my sign and I was short and I made money.

Not as much as I could have done admittedly but money nonetheless.

Paul71 · Sep 6, 2008

trader_dante said:
I disagree. It's pretty obvious what it shows in terms of price and value as deemed by market participants.

I repped you for this one, TD. Great call. If a trader isn't with the money, they are dust.

Nice one, mate.

FXSCALPER2 · Sep 6, 2008

You are missing my point Dante. Basically, cable fell for obvious reasons and it has nothing to do with pin bars. Too obvious really. You have the right personality and aptitude to make a good trader though. If you are not analytically sharp, TA is a great tool.

Paul71 · Sep 6, 2008

FXSCALPER2 said:
You are missing my point Dante. Basically, cable fell for obvious reasons and it has nothing to do with pin bars. Too obvious really. You have the right personality and aptitude to make a good trader though. If you are not analytically sharp, TA is a great tool.

The funny thing is FX, it has everything to do with pin bars. I wouldn't look too much into the actual terminology, call the technical formations what you want, they still work.

TA is a refinement of FA.

The cable may have fell for a reason, FX, but i need more than what the fundamentals are offering to make a living, i need some precision.

Good trading, FX.

trader_dante · Sep 6, 2008

FXSCALPER2 said:
You are missing my point Dante. Basically, cable fell for obvious reasons and it has nothing to do with pin bars. Too obvious really. You have the right personality and aptitude to make a good trader though. If you are not analytically sharp, TA is a great tool.

With all due respect FXSCALPER, I think you are missing MY point. I have no doubt that Cable fell for fundamental reasons but the pin bar alerted me to the fact that the fall was going to happen when it did.

I like to keep abreast of fundamentals but markets are irrational and knowing "fair value" means sh*t. Price action is everything. I believe all news shows up in the price and if you believe that then fundamentals can take a back seat.

I had a long talk with an excellent analyst that uses fundamentals the other day. I was introduced to him by the head of my firm. He told me how fundamentals pointed to a fall in the Australian Dollar. Once again, so did the weekly pin.

I've had a lot of people scorning pin bars - "ahhh, bless you, you think you can make money trading pin bars...come on...it's all about the order flow...recognising the mistakes of others...and how the strong hands take advantage...understand the volume....the complexities of market dynamics...and forget these silly little bars."

And I've still not seen one of them call a 1500 pip move like this did...

But each to their own.

ampro · Sep 7, 2008

FXSCALPER2 said:
You have the right personality and aptitude to make a good trader though. If you are not analytically sharp, TA is a great tool.

I nearly p*ssed myself when I read that.

I guess if you say so, then it must be ok then?!

I guess Mr Dante (& anyone else who fits your stamp of approval based upon the criteria) can skip thru Sunday with a renewed surge of enthusiasm?

Talk about delusions of grandeur.

Once again, another potentially interesting thread being fcuked around & kicked into the dirt.

fibonelli · Sep 7, 2008

Some really good contributions to this thread which I hope any newbie will use as a learning resource.

I'm not at all convinced that it was the fundamentals (funnymentals? :jester

that triggered the major drop. Though it is important to keep abreast of the big picture in terms of future movements in interest rates, economic growth rates and fund flows.

The charts (ie TA) were illustrating the change in demand and supply by the market participants well before the major drop from 1.98. KISS!

The bearish PinBar on the weekly chart as described by TD.
I spotted a Head and Shoulder top with two shoulders on the weekly.
The Head and Shoulders chart pattern, if it works out in theory, is a measured move. Therefore, technically there was potential for a large move of 1700 points ($2.11 to $1.94). Yes, price did reach this objective of $1.77. The H&S TA pattern did work.

Trendline breaks on GBPUSD and GBPJPY described by SLBF.

I spotted a Wedge Pattern on the Daily with a Steep Ascending TL with a sequence of lower lows. Suggesting a major move upon pattern completion.

Tons of evidence on the 4hr chart as Ampro described. I can find 11 bearish price actions prior to the major drop (see attached).

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