The last 2 day’s US market open have been followed by an unusual pattern – an immediate lateral break off the EUR Trak rails. In yesterday’s case it was a fade down off an upslope Trak, in today’s case it was a rally off a downslope Trak. Today’s case was also accompanied by a 75% downslope Trak and I’ve mentioned previously that such severe declines (or inclines) are not sustainable and that savvy traders need to ready to skedaddle once the Trak is violated and the Knock setup is voided.
The Dipper setup was foiled by a sudden pre 3:00 surge that generated a BUY signal at 3:00 that was almost immediately closed by our 15 pip stop loss. That’s one problem with auto execute trades, for had I been awake at that time I would have clearly seen what was happening and entered short at 4:00 when the downtrend became apparent. Needless to say, this Dipper setup failure dramatically illustrates the need for stops in order to preserve capital.
While many traders are looking for a 145 EUR/USD short term, yesterday and today’s action suggests a likely pullback to the Ledge before the big push. Monday’s we’ll close out the Knock series and look at another tool for capturing short term gains while controlling risk exposure.