An Analysis Example

 BarroMetrics Views: An Analysis Example

Today, I am sharing a post that yesterday, I sent to a graduate, and friend.

Let’s call him, ‘Jim’. Jim know his stuff but suffers from two barriers that, so far, have prevented him for attaining the success deserves:

  1. His fear of missing out; and
  2. His preference to go short rather than long – despite any evidence to the contrary.

I sent him the post below with a view to suggesting an analysis template. Tomorrow, I’ll post the emails I sent him last night when I executed the trade.

———————-

Well, I was wrong about what the House of Rep would do (see blog); but I was spot on about the the relief rally.

The AUDUSD appears to be setting up nicely for my sell. I attach four charts and present them in the order my mind works

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1) The Daily: this shows where I would place my stop if I sell the AUDUSD: acceptance above the 33% (top of value ) would suggest a move to at least the 21.4% (1.0778) and probably the PSZ. Hence a straight stop above 1.0610 and below 1.0780 is where I’d be looking to place it.

Given that 1.0668 is the last high, my stop would be 1.0673 (straight stop) or an acceptance bar above 1.0616. I expect the latter to be below 1.0673 and would be the catalyst for my exit. That said I use 1.0673 for my Reward:risk calculations.

2) Given the move up today, has my reason for selling the AUDUSD still valid?

Short answer, yes, because:

Firstly, I am looking to sell the AUDUSD because of the 13-w Triangle formation. I recognise that the Tri is merely how I have chosen to view the data. We may well see highs above the point (1.0585) I have labelled ‘E’.

As long as the 1.0585 holds, my reason for wanting to sell is intact.

Secondly, there is nothing in today’s bill that will affect the main problem the US is facing – reduction of the debt ceiling. Indeed, it will raise the deficit (see blog).

So, the reasons for selling are still valid.

3) Where do I want to sell the AUDUSD today?

1.0489 (Gann Fan, 60-minute close) and 1.0513 (bottom of wave 1; 60-min Ray Wave).

Notice that my original zone was 1.0423 to 1.0398 BUT that zone I discarded because of the price action.

4) What’s my setup?

(from 60-minute Gann Fan). The AUDUSD needs to have a bearish close below the 1×4 before I start looking to sell.

Ideally we will see the close below the 1×4 without seeing a close above 1.0510 (Blue Pivot), and preferably without seeing a close above the 1×4.

In my mind I see a sideways move till 8:00 am EST, then a sharp drop below [and bearish close (on 15-min basis)] 1.0460  – with the bearish close supported by the VBI.

5) My trigger

A bearish conviction bar below 1.0460 on the 15-min, supported by the VBI.

[NB: clearly the setup and trigger are subject to change as new info comes in between now and the US close today).

6) Reward:Risk

My worst case entry is 1.0447 (if my trigger bar is below that price, I’ll wait for a rally). My stop is 1.0673. My reward is .9807 (core profit bottom of Triangle), giving a R:R of 2.83:1

(note because the stop is so wide and I want to keep my loss below 1% of capital. I am entering with 1/3 normal size). If I can enter substantially above 1.4447, I will increase my position size to a maximum of 50% of 1/2 normal size.

7) What has to happen for me to go long today?

Nothing would induce me to go long today. BUT, I would move to a neutral stance if I see a close above 1.0610.

Hope all this helps. I would love to see 2013 be the turning point for you.

audusd-13w-tri.png

FIGURE 1 13w

audusd-daily.png

FIGURE 2 Daily

audusd-60-min-gf.png

FIGURE 3 60-Min Gann Fan

audusd-60-min-rw.png

FIGURE 4 Ray Wave

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