Friday, March 22, 2013

E7 Trade / Week of Mar 17 to Mar 23

The Euro dropped significantly Mar 17th as a result of the Cyprus banking crises. As of Sunday night when Globex reopened, price descended then rallied forming a nice demand zone.

Longer term time frames have the Euro correcting, possibly bottoming out. It remains however in a downtrend. It should be noted that there is current divergence between the US equity market and the Euro, where previously it was positively correlated.

Trade #1 - Long E7 (mini Euro)

Grade the Trade - +1/2

The trade plan is to get long the Euro on a retest of the demand area on the 60 min chart.

The trade was entered but quickly stopped out as price traded below the defined risk. The original demand zone was already a retest of another zone just clustered to the left.  It would stand to reason that demand is weakening and price would further decline on subsequent retests.

The original demand zone was not clean (retested, time at the level extended). A strategy is to place a buy order in the stopped out area, knowing that the second retest of the zone will probably further drive price lower, and the market would naturally have many SELL orders. One might as well take the other side of those novice sell orders.

Moving on, the Euro eventually recovered and proceeded to rally toward the originating gap.  The overall strategy was correct, but the stop placement incorrect.

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