Chart Analysis for Beginners

[Pip Daddy]

Learn the confusing art of reading a chart.

http://www.babypips.com/forex-analysis/forex-chart-analysis.html

Easy to understand chart analysis for EUR/USD, GBP/USD, and USD/JPY.

 

[Pip Daddy]

The charts have been updated. A trading psychology and macroeconomics section has been added as well.

 

[Scaramanga]

For a novice like me, it looks interesting. Cheers!

 

[Pip Daddy]

The analysis has been updated.

http://www.babypips.com/forex-analysis/forex-chart-analysis.html

 

[Pip Daddy]

The Chart Analysis page has been updated. Here's an excerpt:

The big event this week is definitely when Big Ben Bernanke aka Triple B testifies before Congress on Wednesday and Thursday.

 

[Pip Daddy]

The Chart Analysis page has been updated for this week. If you haven't already, I'd recommend you read my “Da Skinny on da Dollah fo’ 06” report which covers the major issues influencing the foreign exchange market right now.

 

[Pip Daddy]

GBP/USD 4-Hour

Notice how the top of the channel was previously a resistance level but now it has become the pair’s new support level. A classic example of a resistance level becoming a support level after a breakout.

Also check out the consolidation area which I’ve highlighted with a pink box. Look how tight that consolidation was! This was basically guaranteed money. Notice the big move after it closed out of the consolidation area. All you had to do was wait for the pair to close either above the consolidation area’s high or below the consolidation’s low and you would’ve pretty much hit the jackpot. It’s very rare for the pair to trade in such a consolidated range like that. You want to try and take advantage of such opportunities because of their scarcity and high probability of success.

If you missed it, that’s too bad. Don’t worry there’s always next time. =)

Okay, so I like I said earlier, the top of the channel is acting as support for now. I predict that this pair will rise and test its new resistance around the 1.7600 level again. If it’s able to break above this, the next stop is its previous high around the 1.7800 level.

Trade Idea:
I’m going to buy this pair now at 1.7498. My stop will be below its most recent low (1.7460) which I will place at 1.7458. My profit target will be 1.7600. I like this trade due to the double bottom tweezers of the last two candles. But at the same time, it’s kind of risky since 1.7500 seems to be acting as temporary resistance right now. But I like my 2.5 reward-to-risk ratio. I’m risking 40 pips to make 100 pips.

 

[Pip Daddy]

EUR/USD 4-Hour

This is the same 4-hour chart from last week. As you can see, the pair finally broke out its sideways trading. It seems to have found temporary support on its 76% Fib extension line and temporary resistance at its 62% Fib extension line. The pair has consolidated between these two Fib lines for now.

I should also point out that the pair has also risen above its purple 200 SMA. These are all bullish signs. If the pair can close above its 50% Fib extension line, I look for it to rise up to 38% Fib line around the 1.2100 level. If the pair closes back under the 76% Fib line, it will likely retest support on its 100% Fib line around the 1.1950 level.

Trade Idea:
Buy the pair at 1.2020 or cheaper. Place your stop below that last spike low. I’m placing mine at 1.1990. Take profit at 1.2100.

 

[neil]

Pip Daddy

This is the same 4-hour chart from last week. As you can see, the pair finally broke out its sideways trading. It seems to have found temporary support on its 76% Fib extension line and temporary resistance at its 62% Fib extension line. The pair has consolidated between these two Fib lines for now.

I should also point out that the pair has also risen above its purple 200 SMA. These are all bullish signs. If the pair can close above its 50% Fib extension line, I look for it to rise up to 38% Fib line around the 1.2100 level. If the pair closes back under the 76% Fib line, it will likely retest support on its 100% Fib line around the 1.1950 level.

Trade Idea:
Buy the pair at 1.2020 or cheaper. Place your stop below that last spike low. I’m placing mine at 1.1990. Take profit at 1.2100.

Great charts and commentary - Much appreciated by many here. Keep up the good work

 

[Uphios]

Seconded.
It's not just the getting it correct that is so interesting, it also the explanation of where to enter and why and where to put stops and way.

 

[Pip Daddy]

USD/JPY 4-Hour

Here’s another short trade setup I found for today. The pair has hit resistance on its 62% Fib line. There is also hidden bearish divergence with price showing lower highs while the oscillator is showing higher highs. Also notice that the pair has reached the overbought region in RSI and has turned down which is usually a bearish sign.

Trade Idea:
Sell the pair at 117.49. Your stop loss will above the most recent high (118.74). I’m placing mine at 117.79. A safer stop loss would be above the natural 118.00 resistance price level like 118.09. My profit target is the 38% Fib line at 116.80. Off course I’ll keep an eye on this trade and if I’m feeling greedy, I might exit half my position on 116.80 and try to go for the 24% Fib line around 116.30.

 

[Pip Daddy]

I am still in this trade. I came within 4 pips of being stopped out but thankfully the pair dropped back down. I shorted at 117.49 so I’m currently at breakeven. My stop loss and profit target stays the same. The 118.00 is acting as strong resistance level. For now. I’m kind of nervous about this trade. I have a feeling the dollar might strengthen against the yen. The RSI provides a little a bit of comfort as it seems to have broken below its rising trend line.

 

[Pip Daddy]

USD/JPY Daily

The pair has hit resistance at the top of its descending channel. It looks like it’s headed back down at least to its top Fibinnel line. Look at the RSI. Notice how RSI temporarily broke above its falling trend line. It looks like RSI is falling back under the trend line which leads me to believe this pair is headed south.

But not so fast! Japan’s central bank starts a two-day meeting tomorrow to discuss whether to abandon their “quantitative easing” (QE) policy they adopted way back in 2001 to prevent a humongous bank crisis and fight worsening deflation. If this policy is removed, it brings Bank of Japan a step closer to also abandoning their current ZIRP (zero interest policy). That’s right, if you didn’t know Japan’s interest rate is at 0%. I need to get a BOJ credit card.

Anyways, we all know what happens when interest rates are set to rise or at least the perception of rising…the currency strengthens. This is why the Yen has been rising the past week. And if BOJ does decide to end their QE policy, look for the pair above to drop like rock. BUT, all of this stuff going on right now is pure speculation.

The market has even priced in a strong possibility of a policy shift. Boy oh boy, if nothing comes out of this week except “we’re keeping things the same”, look for this pair to skyrocket! I’m predicting at least back up to the 120.00 level. Maybe more. Think about it, if most people are already in a short position (like me), and yen negative news comes out, who else is left (buyers) and think about all those sellers who either want to get the hell out of their trade or get stopped out. All this activity will just push this pair upward.

 

[hmenke]

great insight thanks

Did u learn everything with experience?

 

[Pip Daddy]

Not just experience...evaulated experience.

 

[Pip Daddy]

USD/JPY 4-Hour

Put a fork in this trade because it’s done. I shorted at 117.49 and I was eventually stopped out at 118.09 during the craziness when the BOJ announced they agreed to stop their quantitative easing policy. I actually expected the Yen to strengthen after such news but was dumbfounded when it weakened instead. You gotta love the forex market.

Anyways, do you see this pair forming a regular bearish divergence? Price is forming higher highs while the oscillator is forming lower highs. This is usually a bearish sign but if you look closely at the chart, you’ll notice that the pair broke through all the Fib retracement levels which leads me to believe it wants to at least re-test its swing high level. Especially since a positive NFP report from the US is coming out. Then maybe, just maybe, it will fall back down. I prefer to sit on the sidelines for now. I don’t know if this pair is going to up or down. But with the news of the QE policy change fresh in the market’s mind and the possibility of more BOJ remarks, this pair could make big moves up and down!

 

[Pip Daddy]

This trade is still open. Remember, I had shorted at 1.2005 and as of 9:11 pm EST, I’m up 108 pips. I’m moving my stop once again to 1.1955 which is right behind the most recent high. This will lock in a 50 pip profit. My profit target still remains at 1.1800. Hopefully, the NFP report is dollar bullish enough for us to achieve this target. If not, I might close out this trade since I usually prefer not hold trades over the weekend. You never what could happen. Martians might attack the United States and we’d see the US dollar fall 5,000 pips.

Check out my chart analysis page for a preview of tommorrow's market activity.

 

[Pip Daddy]

EUR/USD Daily

This has also formed a nice head and shoulders pattern. This is a freaky version since this specific pattern has two left shoulders. Eww! How gross! So how do you trade a head and shoulders pattern? Well you would look to sell the hell out of this pair if it closes below the neckline and buy if it closes above the falling trend line. We’ll keep an eye on this chart and look for a possible trade when a good setup appears.

 

[Pip Daddy]

USD/CAD 4-Hour

Bearish divergence on this chart. I'm shorting at 1.1610 or 1.1600. My stop loss will be 1.1660 which is above the recent hight. My profit target will be 114.80., just above the 200 SMA and 50% Fib line.

 

[Pip Daddy]

USD/JPY 1-Hour

It looks like the pair has bounced off support off its pink 50 EMA so here's a good long trade. Buy at 118.80. Place your stop loss behind the 24% Fib line. The pair will have to go through both the 50 EMA and this Fib line before being stopped out. Nice safe stop placement. Cash out at 119.10.