Home—Online trading—Spread betting explained—Spread betting blog—Another great tramline test for the euro
Sep 03, 2012, 03:00
Posted byJohn C Burford
Today is Labor Day in the USA and markets there are closed, except for the Globex markets. Normally on US public holidays, trading is very muted, but we shall see.
On Friday, I showed my tramline trio that I believed was operating on the hourly chart. At that time, the market was testing my centre tramline. And with Friday’s explosive action later in the day, it rallied to test my upper tramline.
This was another gift for those wishing to short the euro, as I will show.
So let’s see how this tramline fared as resistance.
Here is this morning’s chart:
(Click on the chart for a larger version)
The upper line is my uppermost tramline. The horizontal line is the Fibonacci 38% retrace of the big wave down from the February 1.35 major high, down to the July low that I showed on Friday.
As I noted then, the market rallied to my highest tramline (red arrow), then fell back, and was testing the centre tramline as I wrote.
But in the afternoon, we had a certain Mr Bernanke make another vague pronouncement from on high – and the floodgates opened, especially in the stock market and gold (which I hope to cover this week).
But note exactly how far the rally carried. Yes – to an exact turn at my tramline (blue arrow).
How is that for precision? And a gift for short-sellers.
For newcomers, just take a moment to consider the power the tramline system gives a trader. Last week, I drew in these tramlines. Extending these lines into the future gives precise areas where I should expect support and resistance – and probable turning points.
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Making a short trade near the upper tramline gives you a low-risk short entry point. Why low risk? Simply because if the market breaks above the tramline, it shows the lines are no longer working (resistance has been overcome) – and I want out! Placing a close stop just above the line gives you that litmus test.
Trading in between tramlines is a higher-risk proposition as stop placement is more problematical. It can be done, but you need to be aware of the higher risk.
I like to focus most of my trading around tramlines, and I would advise any trader starting out to do likewise.
A long trade was indicated last Friday, as the market was lying on the centre tramline (support).
So, in one day, there was a possible winning long trade, and then a short trade.
Before I go, the market is testing the underside of the Fibonacci 38% line, having broken below it late on Friday.
It will be interesting to see if this line – now resistance – holds.
• If you’re a new reader, or need a reminder about some of the methods I refer to in my trades, then do have a look at my introductory videos:
The essentials of tramline trading
Advanced tramline trading
An introduction to Elliott wave theory
Advanced trading with Elliott waves
Trading with Fibonacci levels
Trading with 'momentum'
Putting it all together
• Don't miss my next trading insight. To receive all my spread betting blog posts by email, as soon as I've written them, just
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Published in Spread betting blog
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(04 September 2012, 12:22PM)
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John, thanks for your articles on eur/usd.I use your techniques in combination with more detailed Elliott analysis. We appear to be in the final stages of the final C-wave of a Wave-iv circle correction. Note also that we are within a whisker of a long term trend line joining Wave-2 highs since may 2011.Wave-C's are 5 wave moves and one interpretation is that we have completed or about to complete wave 4. If this is correct we need just one more push for wave 5, which could be on your tramline although it would leave wave c being a little short. If wave 5 was an ending diagonal it would be easier to spot.However the final wave 5 forms, the next wave v-circle down should be a huge opportunity.Thanks and regards,LJN
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The trades on this blog are all 'closed', past trades. These aren't trades for you to copy, they are there to teach you some useful trading tactics for your own spread betting. And always remember: spread betting carries a high risk to your capital as you can lose more than your original stake.
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