Technical Templates

[Se7en]

Good luck to any/all that will be trading in August.
I will be trading with half my normal risk.

Wise decision.
There's not much extended trending value to be had at all which further highlights the dissipating liquidity out there.

The past three weeks have been relatively quiet for me with just the odd nibble shorting pullbacks in AUDNZD & USDCAD + the odd little dabble or two playing the same tactic to the long side in EURUSD & GBPUSD.
I don't anticipate a noticeable uptick in my activity until we see the first shoots of September.

Enjoy the summer (sunshine) guys!

[whipcrack]

The past three weeks have been relatively quiet for me with just the odd nibble shorting pullbacks in AUDNZD & USDCAD + the odd little dabble or two playing the same tactic to the long side in EURUSD & GBPUSD.

If you stay on your toes you can sometimes leg into a prolonged & extended move when liquidity and/or volatility readings become stretched.

Tess sent out a client bulletin mid week commenting that volatility prints were dipping noticeably on the recent euro move up. Implied volatility into end of Q2 was 9.2%. On Tuesday it had slipped further to 7.5%.

Eur/usd is only 130 pips shy of the Q2 1.3420 highs. It might be worth keeping close tabs on the price action if it decides to make a run for that swing high.
Thin markets are notorious for over extending technical runs, especially if they run out of steam & click into reverse gear!!

[jcpfx]

The past three weeks have been relatively quiet for me with just the odd nibble shorting pullbacks in AUDNZD & USDCAD + the odd little dabble or two playing the same tactic to the long side in EURUSD & GBPUSD.

If you stay on your toes you can sometimes leg into a prolonged & extended move when liquidity and/or volatility readings become stretched.

Tess sent out a client bulletin mid week commenting that volatility prints were dipping noticeably on the recent euro move up. Implied volatility into end of Q2 was 9.2%. On Tuesday it had slipped further to 7.5%.

Eur/usd is only 130 pips shy of the Q2 1.3420 highs. It might be worth keeping close tabs on the price action if it decides to make a run for that swing high.
Thin markets are notorious for over extending technical runs, especially if they run out of steam & click into reverse gear!!

Hey Whipcrack,

i would like to ask a couple of "newbie" questions. The first regarding your last observation: are the fast/unexpected pace of some moves during low liquidity/participation environments due to stop orders being hit or due to the fact that it takes less capital to move the market around?

Secondly, during the initial phases of this thread, and sometimes in later posts, there's reference to "momentum high/low" or "momentum levels". I was wondering what the difference was between a momentum level and a normal level, or a momentum high vs. normal high.

Thanks & Good luck!

[whipcrack]

are the fast/unexpected pace of some moves during low liquidity/participation environments due to stop orders being hit or due to the fact that it takes less capital to move the market around?

It can mean both.
The market will go after stops regardless, but it makes life a whole lot simpler if it can drive prices into those orders with minimal effort. So it stands to reason if participation is on the light side & a real juicy zone is in spitting distance it won't take nearly as much traded volume to push or pull the market around.

Once/if stops are tripped the strength of any resulting move will be wholly dependent on the dominant volume of orders resting at & stacked up or down through the level.

during the initial phases of this thread, and sometimes in later posts, there's reference to "momentum high/low" or "momentum levels". I was wondering what the difference was between a momentum level and a normal level, or a momentum high vs. normal high.

It will generally refer to sharp, aggressive directional moves that are generated anywhere from a few hours to a couple days.
If the move then consolidates that high (or low) & begins to show signs of breaking out on a continuation move, all the better!

That's where the hook play is particularly effective, by illuminating lower risk entries at the bottom of a consolidating channel in preparation for an upside (continuation) breakout or illuminating lower risk entries off the top of a channel for a downside (continuation) breakout.

The other scenario when it registers a higher probability play is via divergences, especially bearish divergences within the context of a primary bearish trend where the hook is indicating a lower high failure & vice versa for bullish primary trends.

[jcpfx]

are the fast/unexpected pace of some moves during low liquidity/participation environments due to stop orders being hit or due to the fact that it takes less capital to move the market around?

It can mean both.
The market will go after stops regardless, but it makes life a whole lot simpler if it can drive prices into those orders with minimal effort. So it stands to reason if participation is on the light side & a real juicy zone is in spitting distance it won't take nearly as much traded volume to push or pull the market around.

Once/if stops are tripped the strength of any resulting move will be wholly dependent on the dominant volume of orders resting at & stacked up or down through the level.

during the initial phases of this thread, and sometimes in later posts, there's reference to "momentum high/low" or "momentum levels". I was wondering what the difference was between a momentum level and a normal level, or a momentum high vs. normal high.

It will generally refer to sharp, aggressive directional moves that are generated anywhere from a few hours to a couple days.
If the move then consolidates that high (or low) & begins to show signs of breaking out on a continuation move, all the better!

That's where the hook play is particularly effective, by illuminating lower risk entries at the bottom of a consolidating channel in preparation for an upside (continuation) breakout or illuminating lower risk entries off the top of a channel for a downside (continuation) breakout.

The other scenario when it registers a higher probability play is via divergences, especially bearish divergences within the context of a primary bearish trend where the hook is indicating a lower high failure & vice versa for bullish primary trends.

Whipcrack,

you've just provided handful of really good material there, and believe it or not it clarifies many doubts i've had

Thanks!

[jack mason]

The past three weeks have been relatively quiet for me with just the odd nibble shorting pullbacks in AUDNZD & USDCAD + the odd little dabble or two playing the same tactic to the long side in EURUSD & GBPUSD.

The RBA helped turn that nibble into a veritable feast for you this morning se7en.
All the classic criteria that whipcrack mentioned was in play yesterday on that pair.....continuation move down/pullback/consolidation & dual timeframe hooks at the top of the channel.

You're certainly monitoring the focal pairs this month that's for sure.
Hopefully the mid-week european central bank meets will inject a little volatility into the mix on those two to shake it up for you.

[Carll]

The RBA helped turn that nibble into a veritable feast for you this morning se7en.
All the classic criteria that whipcrack mentioned was in play yesterday on that pair.....continuation move down/pullback/consolidation & dual timeframe hooks at the top of the channel.

He's in illustrious company too because Credit Suisse added another leg down through 1.1430 on that pair earlier & .9220 yesterday on aud/usd.

Citi have been reporting robust orders stacking on their e-platform since early yesterday morning on those 2 + heavy (fresh) orders on crosses, particularly in aud/jpy through 90.50 & 89.80

When it rains it pours!

[midgely88]

I guess they're all pretty much zoned into the same technical pictures Carll, or do you guys receive contradictory feedback from your various contacts re; levels, technical references & order flow info?

[Carll]

It depends on the desks objectives midge.
They're all looking at quite similar tech references ie: moving average s&r guides/trendline, channel barriers, momentum indicators etc, (see a couple of today's chart offerings below) & most of the levels are commonplace, but their order books & specific decision area's will be different.

You get a pretty good forward indication of how a level or zone will react from the various contacts the guys speak to every day, particularly if one or two of the really big institutional firms are targeting a particular level where a slew of client one-way dominant stop orders are residing.
Fortunately the quality of the contacts (including their ex-colleagues) is consistently high.

That kind of stuff will definitely give you a flavor for where the real strength is heading into or out of a level & will obviously assist in the decision making process as price trades into & out of the zone. But it's just another part of the jigsaw puzzle.
You still have to put in your own work by continually (re)assessing & computing risk variables whilst appraising, adjusting & managing your objectives.

What I will say though is the background (& foreground) structures presented here & the way in which the material is directed is designed to place you consistently to the correct side of the generic flows & biases. Which is why the emphasis has always encouraged thread viewers to use an uncluttered, common sense approach majoring on executing clear, directional bias based triggers via a primary & secondary timeframe model paying close attention to the technical swing zones & cyclical price action.

[jcpfx]

are the fast/unexpected pace of some moves during low liquidity/participation environments due to stop orders being hit or due to the fact that it takes less capital to move the market around?

It can mean both.
The market will go after stops regardless, but it makes life a whole lot simpler if it can drive prices into those orders with minimal effort. So it stands to reason if participation is on the light side & a real juicy zone is in spitting distance it won't take nearly as much traded volume to push or pull the market around.

Once/if stops are tripped the strength of any resulting move will be wholly dependent on the dominant volume of orders resting at & stacked up or down through the level.

during the initial phases of this thread, and sometimes in later posts, there's reference to "momentum high/low" or "momentum levels". I was wondering what the difference was between a momentum level and a normal level, or a momentum high vs. normal high.

It will generally refer to sharp, aggressive directional moves that are generated anywhere from a few hours to a couple days.
If the move then consolidates that high (or low) & begins to show signs of breaking out on a continuation move, all the better!

That's where the hook play is particularly effective, by illuminating lower risk entries at the bottom of a consolidating channel in preparation for an upside (continuation) breakout or illuminating lower risk entries off the top of a channel for a downside (continuation) breakout.

The other scenario when it registers a higher probability play is via divergences, especially bearish divergences within the context of a primary bearish trend where the hook is indicating a lower high failure & vice versa for bullish primary trends.

Whipcrack,

since your post, I have been able to progress further down the road of "chart reading" and background planning, and would like to share some considerations that you & the others have probably discovered some time ago.

Focusing on the momentum high/low prints, which sort of "stand out like a sore thumb" when you squeeze more data into your chart, i have been able to create an integrated view of the time frames that build up the market, which has made me feel a lot more secure about what I'm doing. Here is a recent example from DAX which has been behaving well recently.

Dax 1H > 4H > Daily charts





Basically my understanding has now become: the closest momo high/low area on the 1H chart should hold up the 1H trend. Therefore it's legit to look for sub-hourly triggers at the most recent momo high(low) broken to the upside (downside) in an uptrend(downtrend) but also at the most recent momo low (high) even if the technical picture is not as strong. Both solutions would keep the 1H chart trending. ==> trigger could be a sub-hourly hook

If the most recent 1H area is violated, then one shold look to the most recent 4H momo high/low area that should hold up the 4H trend. Therefore it's legit to look for sub-hourly triggers at the most recent momo high(low) broken to the upside(downside) in an uptrend(downtrend) but also at the most recent momo low(high) even if the technical picture is not as strong. Both solutions would keep the 4H chart trending and are both areas that should "rotate" the 1H chart back into trend. ==> trigger could be 1H+sub-hourly hooks

If the most recent 4H area is violated, then it may be that the trend is changing but one can also check this hypothesis with the most recent Daily momo high/low area (which in many cases coincides with the 4H area) to see if it would make sense that the 4H "bounce" off it and continue the uptrend. In these cases, one must wait for a 1H trigger to enter. ==> trigger could be a 4H+1H hook.

To me this makes perfect sense & is a great way to integrate the various time frames into one big picture. If this were the case, I could say that the initial "journey" that myself & my fiancèe started in march 2012 has come to an end and we possess the correct knowledge to understand most of what charts have to tell us.

Love to hear your thoughts on all of this