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Trading setup: Immediate retest of broken support and resistance level

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Very often, on twitter or forums, I see people posting some simple trading setups, and give them some odd names, then call it their inventions. Laughable indeed. Anyway, kudos to them for providing some amusements.

One of the most commonly seen setup is Immediate retest of broken support/resistance level. Well, regardless of the names given by “traders”, let’s have a look at it a little b it closer.

If I really wanna trade the immediate retest, there are three conditions I wanna see before establishing a position:

Strong level

Immediate retest of a level works, when it is against a strong level. It could be a horizontal support and resistance level, or diagonal trend line. A strong support or resistance level is the one that was formed by multiple touches in the inverse direction before it is broken. For example, a strong support is a level that was formed by a broken resistance level where there were multiple resistance points, in other words, multiple swing highs. Vice versa  for strong resistance level.

So, for the first condition, I want to see a break of level which was constituted by at least 3 swing points (or 2 with other confluence factors)

Strong breakout

Secondly, I want to see a strong break of the level. A slow grinding movement is avoided. Often times, it might turn out to be a false breakout. So, a STRONG breakout bar is what I would like to see.

Continuation pattern

A continuation pattern can be as simple as a small consolidation price cluster following a strong breakout. The basic idea is to have Breakout -> Consolidation ->Breakout scenario.

Here are some charts to demonstrate this setup.

AUDUSD immediate retest explain
AUDUSD immediate retest explain (click for bigger chart)
EURUSD Immediate retest explain
EURUSD Immediate retest explain (click for bigger chart)

So, here is the simple support resistance setup. Of course, this is not a complete trading strategy. Just some tips for you to consider before taking an immediate retest setup. Err… Shall I also name it as Butt Kiss Setup!

 

From the desk of TraderGav.com

Weekly Review of GOLD (XAUUSD) 30 JUL 2013

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GOLD XAUUSD Daily chart
GOLD XAUUSD Daily chart

In my previous post, we have identified the potential resistance zone around 1335. We are right there now. I would like to see a turn at this area, and projected target is at 1000 should the selling resumes.
But, it is not as simple as it sounds. There are road blocks in front of us.
let’s zoom into H4. I expect to see some good support around 1300. A break of H4 uptrend line (golden line in the chart) and 1300 support should provide some ‘feel good’ factors for bears to initial shorts again.
First target for the short side is the last swing low around 1180 , and 2nd is the completion of ABCD formation at 1000. Maybe the targets are over ambitious, but who knows? That’s the plan for now.

GOLD XAUUSD 4-Hour chart
GOLD XAUUSD 4-Hour chart

On the other hand, in case failed to ignite the selling engine, next resistance level is seen at area of 1527. Have a look at the weekly chart below. The ABCD projection is definitely hypothetical and extremely ambitious. We will review the price action later.

Gold XAUUSD Weekly chart
Gold XAUUSD Weekly chart

That’s all for now. What do you think? Let me message at the comment section.

From the desk of TraderGav.com

Waiting for the nobrainer trades AUDUSD USDJPY

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AUDUSD

Aussie remains trapped within the trading range. You can trade your range play strategies, I prefer to wait for nobrainer setups. 0.93 is still the key level to watch for any bullish movement. 0.9030 is the immediate support area to watch. A break of these levels will interest me.

AUDUSD 4-hour chart
AUDUSD 4-hour chart

For short term intraday trading, there are some levels to watch within the range. 0.9230 is the support level I watching. As a personal preference, I like to trade the reversed level, in other words, I prefer the break of support and initiate a short position at the pull back.
The next immediate support is seen at 0.9170 ish, and 0.9110.

Here is the hourly chart of AUDUSD with key levels marked.

AUDUSD 1-Hour chart
AUDUSD 1-Hour chart
USDJPY

The false break at the 98.25 level as mentioned in my previous post did not happen. USDJPY did not manage to close above the level. Instead we are likely to head to 97 now.

Here is the H4 chart of USDJPY with key levels marked.

USDJPY 4-hour chart
USDJPY 4-hour chart

And here is the H1 chart of USDJPY

USDJPY 1-hour chart
USDJPY 1-hour chart

That’s all for now. More later. Remember, it is NFP week, so keep trading if you want, and be cautious.

Chart Review GOLD (XAUUSD) 17 Jul 2013

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I always prefer to look at GOLD chart at the bigger time frame. It gives me a better picture. Let’s have a look at Spot GOLD (XAUUSD).

Here is the Daily chart of Spot GOLD (XAUUSD). It is trading slightly below 1300 area. My immediate upside target is around the 1337ish which is also the 61.8% Fib retracement with confluence of the upper band of daily channel and previous support turns resistance level.

GOLD D1 17Jul2013
17Jul2013

In the perfect scenario (which rarely happens..), I am looking at the resume of downtrend at the resistance zone mentioned above, and continue moving to complete the 1 to 1 projected movement (as shown in the green lines)

Let’s look into more detailed H4 chart.

A potential harmonic pattern is observed in H4. At the same resistance zone around 1337, as observed from Daily time frame, a bearish Gartley is forming. Although it is important to note 1300 will provide some pretty good support should GOLD break up from here.

GOLD H4 17Jul2013
GOLD H4 17Jul2013

 

That’s it, we have marked down some important levels to watch, and potentially do some businesses. Let’s “wait and see” now.

About the old SIMSCI trading journal

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Just thought I would write a quick post here. Although I have moved to TRADERGAV.com a few years ago, I am keeping my old blog (Better Trading Blog) alive.

The recent change of hosting server has caused some problems , such as loss of images etc of the old blog posts, particularly, the SIMSCI trading journal.

So, if you are looking for my old SIMSCI journal, the old blog is the best place to be. And for your convenience, the address is now simsci.tradergav.com.