A technical analysis educational example from real life
The GBPJPY is coiling like a snake that has not eaten in a month. It is time for a kill. It is time to make a move.
Snake = GBPJPY
Looking at the hourly chart, the pair’s range is narrow. The 100 and 200 hour MA are converged. Today, the high trend line was broken – no momentum. The downside trend line was broken – no momentum. The market is non trending and non trending transitions into trending. That is an important clue that traders can use to their advantage.
Something will lead to the snake striking and the price breaking. What will be the progression?
- Getting outside the yellow area, and staying outside the area is step 1.
- If that is broken, the green floor/ceiling will be the next step.
- Finally getting below or above the red extremes will be step 3.
On any break, that area becomes support (on a break higher) or resistance (on a break lower). Remember we will be looking for momentum and a trend like move . So be on alert.
FOREX TRADING EDUCATION: When the market consolidates likes it is, with the 100 and 200 hour MA converged, going sideways, and the price right along with it, I call it “Three’s a Crowd”. Like the saying, “Two’s company, Three’s a crowd.” one of the three has to go away.
In trading it is always the price that gets pushed away.
Who pushes the price away?
Whoever takes control. It could be the buyers? It could be the sellers? (right now neither is taking control but someone will)
The price action will tell who’s winning and often times, the loser joins the winner and helps push the price in the direction of the break -with momentum. So, if you are a GBPJPY trader, this is your moment. This should be the time to look for a strike and a trend move away. Be on the lookout.
Technical Analysis: GBPJPY coiling like a snake
PS Sorry to those with snake phobias. They are nasty creatures. ; )
Update: This eventually broke to the downside to kickoff a 900 pip drop in just three weeks.