We continue to publish materials on the analysis of the reversal models of the forex market on the EURUSD pair.
This is a continuation, see the articles in the articles – “Reversal models in the forex market” and “Forex reversal models on currency pair EURUSD (part 1)”.
Consider models 16 through 31 for the period from August 2015 to June 2016. On the hourly chart below, we see the essence of the flat. After a downward turn in figure 16, the price finds support at the long-term level – figures 17 and 19 and a value of 1.10800.
The price of 2 times tests the mirror resistance of figure 16 near the value 1.14500. And both times are unsuccessful, as a result of which we see the reversal figures 18 and 20. Always look at the levels of resistance and support as the zones behind which traders put their stops. You will understand why the turn is always connected with the penetration of the level – stops are knocked out. And why there is a retest? Traders continue to trade in the direction of the previous trend on the first rollback and close positions in the turn area when they realize that the price will not make a new high or low. Therefore, retests can go deep into the reversal zones.
They are joined by traders who fell into a trap and were at a loss. For them, this is a chance to close in the break-even and this intensifies the opposite movement. They are joined by traders who saw a possible reversal. Notice how quickly the price unfolds in figures 18 and 20, which indicates the strength of the sellers. In the end, the price breaks through the support of figures 17 and 19 at 1.14500 and leaves below. Look at H4 – the price breaks through two levels and goes very far. And all decisions of traders in this analyzed period are tied to long-term levels (yellow zones).
The price comes out of figure 21 with a strong news candle, but still, in the breakdown of resistance figures, the price of one candle rolls back to the level and makes a retest. Buyers went into this movement, giving it additional acceleration. A strong upward movement at the end of the 25 figure pierces through 24 figures, but in the breakdown of the resistance of 24 figures makes a rollback of one candle to the resistance of the figure. Also, in case of breakdown of the long-term level at a value of 1.10800, buyers meet sellers. On the graph above, these situations are marked by light green arrows. After bulls winning, the level of 1.10800 becomes a mirror support, from which the price rushes to the figure 26.
Inside the 26 figures, you can select one more reversal zone. There’s Low after which the price makes a new High. But this is not obvious. The last retest in figure 27 comes exactly to the support of the figure, but does not break it. The reverse impulse sends the price in a very strong trend (see H4) to 28 reversal figures.
A sharp exit up from the 29 reversal figures without a rollback is a news candle on very bad Non-farm data. Figures 29, 30, 31 are again a flat between two long-term levels and figures 29 and 30 and again operate long-term levels (yellow zones). The sharp last yield of the price down from the 30 figure is also a news candle on the Fed’s decision. But there was a small price rollback just at the resistance level of 31 figures.
Continuation – Forex reversal models on EURUSD (part 3)