Oct 282009


I am going to be away for a month on holidays. So will catch up with you when I return. In the meantime, here are two quick updates that you might find interesting. One is on GBP/USD and the other on AUD/USD.

As for India’s Sensex, I think we have seen a near term top. Use recoveries to 16,600 plus levels to get out of any stale longs that you still have, as we will likely decline to under 15,000 in the coming days. Early support lies at 15760 area.

GBP 28 Oct 2009AUD 28 Oct 2009

Oct 182009

GBP 18 Oct 09On 5th October 2009, I posted an early warning to traders of Sterling Pound (GBP/USD)that there is something fishy about the decline from 1.6742, and we are likely to see another rally in the Pound. Trouble is, it is so damn hard to believe such calls, and when the rally eventually shows up, many of us just freeze. Some traders would have continued to pick tops, and lost lots of money. One mistake that many interbank traders continue to make, (and I am no exception to this folly !) is they fail to switch their minds from intra-day charts to daily charts when something unusual happens. My post of 5th October was a bigger-picture call and was based on the daily chart. The moves we have seen in the last two trading days fits in to such a time frame. The update of 12th October (which I called a real-time update on sterling) showed a one-minute chart and also a TIC chart. This latter post was for intraday trades, and it called for a decline in GBP to 1.5685. The actual low was 1.5705. If a trader sold at the first resistance when the Pound jumped from 1.5705, he can be excused, because one can never be sure whether the bounce was corrective or not. He/she would have been quickly stopped, as I too was! But when the move continued higher, an alert trader would have considered if the big picture was changing too. If you have been a careful reader of the GBP/USD updates posted here over the last few months, then this lesson is very valuable indeed.

The next question is how high can the bounce go? There is one ‘secret’ that many practising wave analysts tend to forget. Elliott reckoned that a correction will have two dimensions: time and space. A typical move tends to follow the fibonacci summation series. If a rally has moved up 3 days and remains bid, you can continue to look for it to last 5 days. Beyond 5 days it should last for 8 days. If you look at the daily chart, you will see that we have had FOUR  “up” days. So one more day of rallying is very likely. I offer 1.6467 as a first target, and beyond that we could well see 1.6545.

One can make lots of money in these markets provided one has the appetite for risk, and one is willing to follow the rules of the game. A key rule concerns money management. It is OK to lose on a trade, but be sure that you don’t lose so much money on any one trade that you are unable to come to the table again. Good luck and bifn. Ramki

Oct 072009

gbp 7 oct 09The intra day charts looks like we could be staging a rally later today, especially if we dip towards 1.5860 a second time. The formation is clearly looking like an expanding ending diagional triangle, usually a pretty powerful indicator of a imminent reversal. So there is a low risk opportunity looming ahead. Good luck. Ramki

Oct 052009

GBP 5 Oct 09aGBP 5 Oct 09b
Fans of Eliott Wave analysis know that a trader has to be alert to correctly interpret new signals as they emerge. This is the ONLY way one has a chance to make money in any market, particularly in the forex market. The latest puzzle that faces us is actually in the big picture. The decline from 1.6742 does not have the personality of a third wave. Sure, we made lots of money trading both sides of the market. We accurately predicted the decline to 1.5800 area twice, as well as the recovery to 1.6125. But in the big picture, there is something wrong. When I get this feeling, I tell my friends in the forex market to take a break. Yes, we could still see some moderate weakness. But the end point of that weakness is less clear. More importantly, when we get a bounce, it could be sharp. On balance, it is time to step back and wait for more clues. Maybe we should turn our attention to the EUR/YEN and USD/YEN now!