jack mason wrote:Prices have dipped virtually 5 figures from the previous legs descent at last weeks high without taking a breath.
Shorting the rallies still appears to be the sensible option.
Yes, it’s due a relief rally isn’t it.
I mentioned in a post last Wednesday that the 1.6090 zone was an area of prior support (current resistance) & likely to harbour mixed orders.
That zone marked the weeks highs & sent prices tumbling to current levels. It’s rare that prices move almost exclusively in one determined direction without testing & probing for counter move stops/reversal appetite.
What usually happens is groups or bunches of ‘short’ trailing stop orders will begin moving down on a typical leg like we’re currently witnessing on the gbp/usd. They’ll lock in profits & then begin to also attract staggered layers of ‘long’ or counter reverse stop orders to try & catch an aggressive & extended reverse move back up.
That’s what often causes spiky, erratic price action for a while until the dominant order flow reasserts itself.
If the orders are stronger to the upside, prices will retrace quickly & aggressively until they find larger stacks of offers or fresh ‘shorts’…..if the ‘long’ or trailing stop orders are weak, they’ll become more easily absorbed by those waiting continuation ‘short’ or offer triggers.
Supply & demand simply going about it’s normal business!
Add into the mix the Option contracts, M&A fund requirements, regular commercial activity & sovereign dealings, & you have a potent cocktail of ongoing volatility to contend with!
The 4 hour chart highlighting last weeks high level clearly annotates not only that prior zone of support at the 1.6090, but also the move down & subsequent pullback test. It's levels & zones such as this that offer up very consistent opportunities to partake in high value, low risk trading entries.
Well worth identifying & paying close attention to!
