Respect the Market Trend

The USD/CAD is a perfect example of why the Directional Bias must be respected. The Directional Bias – if you haven’t already heard or read about it – is the market trend or psychology of the daily chart. I choose the daily for this because I feel it is the most well-followed and therefore most psychologically relevant time frame. Some time frames (and price levels) are simply important because they are well-watched.

The USD/CAD has certainly had a negative sentiment which organized into bearish momentum BUT DID NOT transition the market back into a downtrend. (IF however you/I determined it was a fresh transition – one that was newly formed – taking a bearish Directional Bias would be aggressive.) Pull of a daily chart of the USD/CAD and view it within a one-year lookback which means you include 52 weeks within the chart view. The angle of the 34EMA Wave while angles slightly downward would not qualify as a “four to six o’clock” angle and therefore the Directional Bias is not bearish but rather in a distribution market trend.

Respecting the market trend means – for me – that I will consider my entries only after I have identified the Directional Bias and then identified the specific time frame’s market trend that I want to set up for a potential trade.

In the case of the USD/CAD I have been very leery about taking swing shorts on anything but the shorter-term intraday time frames like the five, 15, and 30-minute charts. This is because the distribution market trend on the daily increases the likelihood that prices will bounce as they near prior support between 0.9849 and 0.9836, which were the January 12 and 18 lows respectively.

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In distribution, price action often begins to exhaust at prior floors and ceilings so with the daily’s Directional Bias indicating distribution, the closer prices got to 0.9849 – 0.9836, the closer to potential support the pair got. This effectively limits the potential downside for any longer-term short. This includes the 60, 240-minute, and daily time frames.

Today’s USD/CAD is fueled by, well, fuel. Energies, specifically. With the dollar’s strength pushing commodities prices lower, including crude oil, the loonie has little reason to strengthen and add to that the dollar’s rally and the loonie falls behind. It’s a perfect storm for a USD/CAD comm-doll which works off the loonie-greenback-crude oil triangle.

The idea behind my “hesitant” shorts which would be taken only on the short-term time frames is so that when prices bounce sharply higher as they are doing today, quick(er) adjustments can be made. Of course, the daily itself was ripe for a distribution fade entry long but I realize that this aggressive entry style is not for everyone. As an alternative, consider the “Between the Greens” entry for the five-minute to take advantage of today’s USD/CAD strength

By the way, ignore the lows of a distribution market trend and, well, just take a look at what the USD/CHF already did…

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  • ANIROODH

    Hi Cleopiptra

    Can you please define me “four to six o’clock” angle?

    Advance Thanks

    PIPCORN

  • ANIROODH

    Hi Cleopiptra

    Can you please define me “four to six o’clock” angle?

    Advance Thanks

    PIPCORN

  • PortlandPipster

    Hi Cleo,
    I’m trying to understand the trending angles as well and was wondering at what point you start measuring a trending angle. A good example right now is the Guppy.
    If the center of your clock is at the point where the downtrend switched and started moving up (around Jan. 8th) it looks like it’s right about at 2 o’clock.
    However, if you take the angle on a more recent flattening (somewhere between Jan. 24-30) it doesnt haste the momentum yet.

    Thanks for all your posts and keep up the great work!
    — The Portland Pipster

  • PortlandPipster

    Hi Cleo,
    I’m trying to understand the trending angles as well and was wondering at what point you start measuring a trending angle. A good example right now is the Guppy.
    If the center of your clock is at the point where the downtrend switched and started moving up (around Jan. 8th) it looks like it’s right about at 2 o’clock.
    However, if you take the angle on a more recent flattening (somewhere between Jan. 24-30) it doesnt haste the momentum yet.

    Thanks for all your posts and keep up the great work!
    — The Portland Pipster

  • http://www.ragheehorner.com Queen Cleopiptra

    Look at the angle of the 34EMA Wave on the chart within the lookback appropriate for the time frame. The “four to six o’clock” angle designates a downtrend. I have a ton of updates and videos about this process. Google “34EMA Wave” and you should get the details you need.

  • http://www.ragheehorner.com Queen Cleopiptra

    The lookback is key to the perspective. I admit there is of course some subjectivity (chart sizing, etc) but if you keep to the lookback you will gain consistency in your charting analysis. I trade of the 15, 30, 60, and 240minute time frames. The respective lookbacks for each are three days, one week, two weeks, two months, and one year.

  • http://www.ragheehorner.com Queen Cleopiptra

    Look at the angle of the 34EMA Wave on the chart within the lookback appropriate for the time frame. The “four to six o’clock” angle designates a downtrend. I have a ton of updates and videos about this process. Google “34EMA Wave” and you should get the details you need.

  • http://www.ragheehorner.com Queen Cleopiptra

    The lookback is key to the perspective. I admit there is of course some subjectivity (chart sizing, etc) but if you keep to the lookback you will gain consistency in your charting analysis. I trade of the 15, 30, 60, and 240minute time frames. The respective lookbacks for each are three days, one week, two weeks, two months, and one year.

  • Javy

    Basically draw a “cross” with center on the close 34EMA, the angle according to the clock handles should be evident with more or less strength. It is advisable that you support this trend with a longer view (e.g. a 100EMA) which if underlying the waves it signals the strength of the uptrend and if acts as a roof, it confirms the downtrend already in progress.

    For more information, I have just started a blog on this subject which I have studied for the last 6 years. (sorry for the publicity :)
    http://blogtrendforex.blogspot.com/

  • Javy

    Basically draw a “cross” with center on the close 34EMA, the angle according to the clock handles should be evident with more or less strength. It is advisable that you support this trend with a longer view (e.g. a 100EMA) which if underlying the waves it signals the strength of the uptrend and if acts as a roof, it confirms the downtrend already in progress.

    For more information, I have just started a blog on this subject which I have studied for the last 6 years. (sorry for the publicity :)
    http://blogtrendforex.blogspot.com/