Comdoll Weekly Replay (Feb 14-17, 2011)

Good day, my friends! Welcome to my first ever Comdoll Weekly Replay! Waking up on a late Saturday morning after a busy Friday night always puts in me in a bright mood, so I decided to do another one of my favorite things – analyzing comdolls! Here are a few economic events that rocked the comdolls’ socks, as well as my best comdoll setup for the week.

Why spend time looking at past trade setups?

That’s a good question. You know what they say… Life ain’t always easy, but everyday we’re survivors – wait a minute, those are the lyrics to Jay Sean’s 2012. What I meant to say was that past price action is said to be an excellent indicator of future price movement, hence the saying “History tends to repeat itself.” By looking at perfect trade setups in hindsight, I can train myself to be more aware of similar setups in the future and have a better chance of catching some pips.

Besides, I’ve been reading up on the importance of deliberate practice from Dr. Pipslow’s trading psychology blog. As he points out, traders should actively observe price action in order to improve their performance. This involves recording how price behaved, noting which levels it reacted to, and figuring out how you could’ve played that move.

To illustrate, here’s an example of an excellent trade setup that occurred for AUD/USD this week:

AUDUSD double bottom

AUD/USD bounced from the previous week low of .9961, which is just a few pips away from the minor psychological support at .9950. Also, a bullish divergence formed when the pair made slightly lower lows while the oscillator showed higher lows. Had I caught that bottom and went long, I would’ve been up by more than 150 pips by now!

To maximize my profit potential, I could’ve added at the break of the neckline of the double bottom formation. See how that bullish flag formed right below the neckline which was around another minor psychological level (1.0050)? If I added a half position there and used a 50-pip trailing stop on this trade, I would’ve had a 4:1 reward-to-risk ratio until the 1.0100 handle. What’s more is that the pair seems to be aiming for the previous week high of 1.0190. *sigh*

What did I learn from this could’ve-been-profitable-trade?

First is that I should keep an eye out for previous week highs and lows, especially if they are closely in line with psychological levels. Another is that, even if I missed the initial bounce, I could’ve jumped in on the uptrend by watching out for continuation chart patterns, such as the bullish flag in this case.

Of course I’ll be sure to keep track of the dominant market themes as well. After all, what good is a solid technical setup if it doesn’t have the fundamental analysis to support it, right?

What moved Comdolls this week?

Well, Comdolls started off on the wrong foot when New Zealand printed a disappointing retail sales report early in the week. Retail sales in New Zealand fell by 1.1% in December, which supports naysayers forecasting a double dip for its economy. The RBA also spread bad vibes when its members said that the current interest rate of 4.50% is appropriate for a medium-term outlook.

Comdoll sentiment started to shift around the middle of the week when the FOMC minutes encouraged appetite for high-yielding currencies. Traders shrugged off mixed economic reports from Australia, Canada, and the U.S. when the FOMC upgraded its growth forecast from 3.0%-3.6% to 3.4%- 3.9% for 2011. Apparently, FOMC members recognize that risks to growth and inflation have lessened even though the labor market is still giving them headaches.

Happy bubbles then kept coming the comdolls’ way for the rest of the week even when trouble in the Middle East threatened risk appetite. The announcement that Iran is sending two warships down the Suez Canal didn’t tickle the funny bone of Israel, and the tensions made some risk-lovin’ investors jittery. Oil prices rocketed though, which provided comdoll bulls an excuse to continue their rally.

All right, that’s it for me this week! I’m running late for my Saturday brunch! I hope you gained a few helpful tidbits with my post. I’m thinking of writing another one for next week, so hit me up with comments and suggestions on the content!

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Till next week! :)

  • foricks

    As always, thanks for the insight into the mind of an active trader. Any thoughts of a retracement for the AUD.USD this week? I think the aussies should be ready to take a breather after this run up…

  • foricks

    As always, thanks for the insight into the mind of an active trader. Any thoughts of a retracement for the AUD.USD this week? I think the aussies should be ready to take a breather after this run up…

  • happypip

    Hmm, it looks like the rally is overdone already since AUD/USD is dropping pretty fast. For now it’s tough to tell whether it’s a retracement or reversal, but that rising trend line on the 4-hour chart is still holding so the uptrend could still be intact. Are you gonna trade this pair this week?

  • happypip

    Hmm, it looks like the rally is overdone already since AUD/USD is dropping pretty fast. For now it’s tough to tell whether it’s a retracement or reversal, but that rising trend line on the 4-hour chart is still holding so the uptrend could still be intact. Are you gonna trade this pair this week?