Scouting for Long Term Setups


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Video Transcription:

Hello, traders. Welcome to the Pro Trading Course and the seventh module Trading Like a Pro.

Today, we’re going to scout for long term setups. And what we’re going to do here, we’re going directly to the charts, and we’re going to look at the U.S. dollar/Japanese yen. Now, I’m going to add a few indicators, and I’m going to create a template that we are going to use for long-term trades. In this template, we’re going to have the monthly high and lows, maybe the weekly highs and lows. We are going to also have the monthly and the weekly pivot points.

And as you can see here, well, I have added the pivots, the weekly, the monthly pivots with the weekly resistance and the monthly resistance, the weekly supports and the monthly supports. We have also added the weekly highs and lows. This green line is actually the weekly high. We have the green line right here confluencing with the weekly low, because right now, we are in the first, well, the second week of the month, but we made a new monthly low this week, which means that the same monthly low is the same weekly low. And we have the current monthly high and the monthly pivot.

Scouting for Long Term Setups

Now, basically, what we’re going to do here just by looking at price action breaking through all these levels, we know that we are in a down move. So we’re going to start by looking at this structure by drawing some trend lines, all right? And well, you can see that this trend line was actually very well supported here until we broke [inaudible 00:00:46] resistance. We are going to see if this…well, if this structure is going to hold. I think that this is good enough for the channels.

Now, what I’m going to do here is I’m going to…well, to save the template. And I’m going to save it as a long-term template, all right? You can name it whatever you want. This is what I’m going to name it. Because we’re also going to be looking at the pound/dollar, and when I want to look at the pound/dollar, I’m just going to look at the, well, the template that we just created, all right?

Scouting for Long Term Setups1

Now, let’s go ahead and look at what the U.S. dollar/yen has been doing on the daily. And on the daily, we are still in a very strong down move, all right? What we want here is we want to find some areas of support that price has tested on the daily, all right? And we are going to use horizontal lines, and I’m going to keep the green because of the color structure that I have been using with the other indicators. And we are going to use this one right here. So basically, this is the area of support that we are looking on the daily. Maybe we can find something on the four-hour chart that’s better suited for our trading, okay? I think that this is a strong area of support that we need to be looking at. Well, you can see that it was tested right here. Remember that we want the tests, the breakouts, and the retests, all right?

Now, this is basically the area. And you can see that this area was tested once, twice. And when we started to break it down, we started to, well, to chop in a very ranging market, which means that there’s a lot of buyers and sellers fighting for this level. Buyers were trying to hold this level and move price up, and sellers were trying to move price down. But the fundamentals on the yen were pushing price up, all right?

Scouting for Long Term Setups2

Now, remember that when we were trading U.S. dollar/Japanese yen, our higher U.S. dollar/Japanese yen means a lower Japanese yen. And a lower U.S. dollar/Japanese yen means a higher yen. So if the yen is strong, you’re looking for a bear market. And right now, we are in a bear market. And I’m going to show you. We have been since these highs at around 127. And now, we are trading at a 108, which means that we are almost 2,500 pips down from the highs, which means that the fundamentals are helping the yen go lower.

Now, what we’re going to do here is, well, we have found the area on the daily. But remember that this is just an area. We need to look for possible harmonic patterns on the hourly. And as you can see by the structure of price, there is really not very strong…well, there’s not structures that resemble harmonic patterns at this time. Now, what we are going to do with our four-hour chart, we are going to go back to the hourly. And well, I’m going to go back the four-hour chart. and then I’m going to show you what did.

Scouting for Long Term Setups3

What I did here is that I just put on a horizontal line at this level that was heavily tested before we broke to the downside, okay? At this moment in time, there is absolutely no trade to be made on the U.S. dollar/Japanese yen. And the reason there is no trade to be made on the U.S. dollar/Japanese yen is because right now, as you can see, we are about to break or we are just breaking this down structure. Now, I think I’m going to change the look on the trend lines to a solid line.

Now, what we’re doing is here is, well, we are in a down structure. But I really, really, really think that we are going to go up. And the reason I think we are going to go up is because of this zone right here. But, well, this zone is the monthly low, of course, right here. But it is very, very, unlikely that we are going to get a very good long opportunity. And in fact, because of the strength of the move to the downside, you can see that just from these highs to the lows, we have moved more than 600 pips. It is unlikely that we are going to go for the long side of this market. So what we’re going to do is we’re going to wait for a test of price to our levels.

And what do we have here? We have this level that was tested right on the four hours. If you remember correctly, this is the level that was tested. If we zoom in a little bit, I think that we can pinpoint it even better with a horizontal line here and here. We tested it once. We tested it twice. And then we tested it again before breaking down. And what we’re going to do here is we’re going to look at what the market is telling us.

Scouting for Long Term Setups4

So what the market is telling us right now is that, well, we do have some buyers coming in into this area, right? Because we do have this zone between the 108.226 and 107.411, which is kind of a big 80-pip area of support, but it’s actually supporting price. And what we want here is a retest of this previously broken area of resistance, which correlates perfectly with the weekly resistance 1 and the monthly support 1.

Now, we’re going to grab some Fibonacci tools from the monthly pivot, which is also…well, not the monthly pivot, but we always want to have the monthly Fibonaccis. And the monthly Fibonaccis are going to be drawn from the monthly high to the monthly low in a down move or the monthly low to the monthly high in an up move. Right now, we are in a down move, so we are going to grab this Fibonacci. And as you can see, we are exactly at the 61.8 right here.

Scouting for Long Term Setups5

So this is becoming a very interesting zone for us, because not only we have the monthly support 1, the weekly resistance 1 and the previously, well, the previously broken area of support now that we are hoping price is going to test as resistance. But we also have the 61.8 from the entire move to the downside, not the entire move to the downside, but from the monthly move to the downside, because we measured the Fibonacci retracement level from the monthly high to the monthly low.

So what we have here is very, very interesting, guys. And I am going to say that what we need to do is wait for price to come to this level right here, a few pips below. I would think that the level that I would like to enter at is this one right here, at the blue line with a stop loss above this level. Now, this is perfect, guys, because what we are going to do here is we are going to wait for price to test these highs again, well, our previous lows or previous base, and then go short for a continuation and a break of this area of support.

We should also remember to actually go to the four-hour chart and look at the entire market structure, because we are actually coming from a very strong down move. So let’s cross a couple of trend lines to see where we are at in the four-hour chart if we are looking down, all right?

Scouting for Long Term Setups6

Well, we are going to grab this high, and then the next high is the high that we made right here before breaking to the downside. And as you can see, it is very plausible that price is going to come up and test this area that confluences perfectly with the trend line on the four-hour chart. Now, if we zoom in a little bit, you can see that we do have two important trend lines in play right now, okay?

And, well, the most important trend line right now is the one that we just draw, this one right here, from this high to this low. It is very plausible that price is going to break. Well, it did already break with the one hour channel and come all the way to the monthly support 1 and weekly resistance 1, 61.8 previous base and trend length, to test all of these levels where we are going to find sellers to get an excellent risk to reward trade to the downside ourselves for a break below the 108.26, 107.411 area of support.

So this is the level that we are going to try to trade. We are not going to try to go long, because of how strong of a bear market we are trading in. And basically, this is how you’re going to be scouting for trades, for long term trades, on the one-hour chart, the four-hour chart, and levels for the daily.

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