Market Commentary 23/02/16

EUR/USD – Bearish Pin Bar Stop Run

 

Yesterdays move lower continued today, a stop run setup also presented itself.bearish pin bar signal also appeared early this morning.

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The reason this stop hunt took place was due to the bullish pin bar marked with an X.

During the time this candle was forming it would have looked like the market was rapidly moving lower, reactive traders saw this and began selling in order to capture what they thought was a new down-move.

When they placed their trades the most likely location for their stop-loss was the high where I’ve drawn the blue line.

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Looking at the graph we can see how the stops built up around the 1.10400 – 1.10500 level.

When the market ran the stops, the resulting drop created a bearish pin bar.

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Looking at the 15 minute chart we can see the entry into this bearish pin was on the significant bearish engulfing candle seen as the market ran up into the stops.

Since then the market has rebounded somewhat, for trading opportunities I would still keep an eye on the resistance level marked in the first image, if the market manages to break the supply zone its current reacting off, a move back up to this resistance could be a good place to look for a short entry .

 

USD/JPY – Continuation Lower

USD/JPY was another currency which suffered a heavy drop today.

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I mentioned yesterday how we need the market to move more in order to create new structure for us to trade, the drop today has formed a few new places where we can look for trading opportunities

The most likely one of these is the supply zone marked above, this zone has confluence with a resistance level which has been touched frequently over the past week, if the market manages to return to this zone within the next 24 hours it coupled give us another entry short.

In addition to this we also have another level to watch for setups, the lower resistance level marked in the image could be a place where we may see a pin bar or engulfing candle, personally though i think the upper supply zone with the resistance running through it has a far better chance of turning the market than this lower level.

AUD/USD – Bearish Pin Bar On The Daily Chart

 

After the big up-move yesterday AUD/USD has declined slightly from the highs made earlier today.

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This decline has created a bearish pin bar on the daily chart, whilst this may look like a good trade I’m not convinced its going to push the market significantly lower.

Aviary Photo_131007336970594614The reason why lies in the fact that professional traders who would have been buying before the up-move are likely now taking profits because of the large move higher the market made yesterday.

Think of yourself if you were in the same position, after a large one directional move in which you would have made a significant amount of money the first thing you would want to do is take some of the profits off your position.

The bank traders can only do this when they have others trader enter the market, the move up seen today is retail traders buying because they believe the up-move is likely to continue, the buy trades these traders place will give the pro traders the ability to take some profits off of their positions as they need the additional buy orders from these traders to act as a counter party for their take profit orders.

As far as tomorrows concerned, I would keep an eye on the demand zone marked above.

Its likely the market will drop lower form its current location in order to move down to the support level marked in the image with a blue line, look for an entry long around this point.

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