How I Identify Powerful Setups Using Symmetry?

I am often asked what I mean by the term "symmetry" in my work. I can attempt to define with words what it means to me in the market but the following charts (visuals) will probably illustrate the concept more accurately. Symmetry is essentially similarity and sometimes equality in the market. Actually, I just used the thesaurus and came up with Balance, Equilibrium and Proportion as synonyms. 

Let's start with an example of "symmetry" in both price and time! The first example is on a 15-minute Nasdaq futures chart below. (I had a ball with this one with my subscribers as it started to unfold.) The overall trend on this chart at the time of this "potential trade setup" was bullish. If this trend was going to remain intact, we wanted to consider entering the buy side after a corrective decline terminated. What helps us determine when a corrective decline might terminate? SYMMETRY!

In this particular case, I saw the decline that was playing out in Nasdaq futures approaching the 100% price projection of the prior decline into the 1770 swing low. This prior decline lasted 87 points. If you projected the measurement of this decline and subtracted from the 1918 high, you came up with 1831 for this projection and potential support level. The June contract ended up making a new low for the move from the 1918 swing high at 1831 which was exactly 87 points down from that high. Besides this, just eye-balling the chart, I saw symmetry in time. As I checked the "time count" of the corrections, I found that this low made at EXACTLY 100% in price of the prior decline, was also made at 100% in TIME of the same prior decline (22 bars & 22 bars). This is definitely an argument against RANDOM market theory!!

At this point, I had to call this a pivotal low. If we saw price hold above here, we wanted to consider the buy side against it. Although I was not extremely confident that this low would hold, due to the bearish price action going into this low, I watched it carefully. The result was a continued hold above the 1831 low and a initial rally that took this contract to 1992! 

In the next chart, we are looking at the 5-minute June S&P contract . Notice the similarity in both the price and time of the corrective declines shown marked with the red lines. They are not EXACTLY the same, but are very similar in both price and time! I constantly watch for similar corrective moves in a market to potentially enter with an "edge" in the direction of the main trend. In this case, the trend is defined on a 5-minute basis! Ideally, we want to see the higher degree time frame trend, agree with the lower. (For example, we want to see the daily, 60-minute and 5-minute agree, all showing higher highs and higher lows.).

When projecting my key price cluster zones, I will lean towards trading against a zone that INCLUDES a 100% projection of a prior decline. Why? Because of the "symmetry." This projection along with a healthy confluence of other Fibonacci projections, tells me to focus on those price clusters that include symmetry. In this case, I saw the 100% projection of the prior corrective decline came in at 1906. Coincidentally, a beautiful cluster of Fib retracements and extensions overlapped this key 100% projection, and gave us a key price zone to consider a trade against (1902-1909***). In this particular case, a low was made at 1909. The rally in Nasdaq futures resumed almost immediately after testing this zone, that included "symmetry."

How about the Nasdaq cash index ? Note that a very important price projection I will be watching for "potential" resistance and/or termination of the rally from the April 4, 2001 low in this market, includes the 100% projection of the prior corrective rally into the Jan. 24 high.
 

What does symmetry mean to us when we are looking at it as an indication of trend? It can be very helpful in indicating a change in trend, therefore in tell us when to exit a trade and/or initiate a trade in the opposite direction. For example: In the 60-minute Nasdaq futures chart below, when we "violated" the bearish symmetry (we rallied more in time and price than the prior four corrective rallies) it signaled the potential termination of the decline we were experiencing from the 1777 swing high. In this case, after this "symmetry" was violated, buying a pullback to the last low was a "winning strategy." I see this happen over and over again in all markets.

 

Although using "symmetry" is a wonderful addition to our "technical tool bag," I feel compelled to show you an example of a "break in symmetry" that did NOT result in a trend change. This is just to remind you, that although these methods work extremely well and produce positive results more often than not, when a market does not start the play out as expected, your discipline should be to stop yourself out of the trade in question in order to preserve capital!!

If you begin to study the markets with these concepts discussed above in mind, you have the potential to greatly improve your bottom line in trading.

By Carolyn Boroden | TradingMarkets.com

How to trade triangle breakouts

When prices fluctuate in a smaller range over time a triangle formation occurs. Triangle patterns are some of the best trading opportunities in financial markets. Our favorite aspect of triangles is that they usually retrace beyond the standard 61.8% Fibonacci retracement level and hurt traders. By Elliott Wave terms, we also see a “wave E” break of both trendline resistance/support and the 61.8% Fibonacci level.  

This does two things. First it hits stops and sees a surge in breakout buying. Second, that mass movement by the market sets up the reversal point in “wave E” which then catches the market wrong footed again. Fun! Identifying triangle patterns usually only comes about near the apex in “wave E” so experienced traders know to be very cautious as whipsaw movement is the standard for these formations. Interestingly, the currency markets currently have two major pairs in long term triangle patterns. Let’s look at each of these.

First is USDJPY which we believe is going to see a typical “false breakout” in “wave E of IV” in this triangle formation. That would likely mean a move to 1.24/25 (just above the 61.8% Fib of the wave C to D decline). Then a sharp reversal over the first several months of 2007 as the JGB market declines rapidly in line with a move higher in rates. We will look to buy JPY once we reach “wave E.” When prices fluctuate in a smaller range over time a triangle formation occurs. Triangle patterns are some of the best trading opportunities in financial markets.  

Our favorite aspect of triangles is that they usually retrace beyond the standard 61.8% Fibonacci retracement level and hurt traders. By Elliott Wave terms, we also see a “wave E” break of both trendline resistance/support and the 61.8% Fibonacci level. This does two things. First it hits stops and sees a surge in breakout buying. Second, that mass movement by the market sets up the reversal point in “wave E” which then catches the market wrong footed again. Fun! Identifying triangle patterns usually only comes about near the apex in “wave E” so experienced traders know to be very cautious as whipsaw movement is the standard for these formations. Interestingly, the currency markets currently have two major pairs in long term triangle patterns. Let’s look at each of these.  

First is USDJPY which we believe is going to see a typical “false breakout” in “wave E of IV” in this triangle formation. That would likely mean a move to 1.24/25 (just above the 61.8% Fib of the wave C to D decline). Then a sharp reversal over the first several months of 2007 as the JGB market declines rapidly in line with a move higher in rates. We will look to buy JPY once we reach “wave E.”  

USDJPY fundamental picture is very much in line with the technically bearish descending triangle formation, supporting our forecast of near term yen weakness followed by a sharp rebound. After years of quantitative easing and months of Zero Interest Rate Policy, the Bank of Japan had finally taken a first step toward removing the extreme accommodation and raised interest rates to 0.25%. However, the month of August saw nothing but negative economic data from Japan. Among the most notable figures were a decline in Q2 GDP from 0.8% all the way to near-recession levels at 0.2%, a drop in new housing starts from nearly 7% to 4%, and finally a shortfall in core CPI from 0.6% to 0.2%. As a result, speculation over further central bank tightening has diminished significantly with both currency and JGB markets seeing declines in yen and a rally in bonds. Years of “free money” have set up a climate of inevitable recovery, however just as the central bankers from Japan have warned us, that recovery will be far more gradual than the impatient markets were expecting.  

Another major pair putting on the finishing touches of “wave E of IV” is EURGBP. This is a bullish triangle formation from the May 2003 highs and has the classic EW “ABCDE” count in what is typically a “wave IV” consolidation. While a bit unconventional, we prefer to buy near the “puke point” in “wave E” which is the May ‘05 “wave C” low at 0.66. That means traders should buy here this week at 0.6740 (s/l @ 0.66 and target at 0.77) for a 7:1 reward to risk ratio.  

Fundamentally, we find a comparable to Japan windfall of deterioration in economic data coming in from the UK to be just as compelling. Sharp declines in manufacturing and industrial production were followed by data showing diminishing inflationary pressures. After a surprise rate hike last month, the Bank of England monetary policy committee will restore its conservative approach to monetary policy with a hold on interest rates at 4.75% on September 7.  

The euro side of the EURGBP coin is far more attractive. After a slight stumble in the ZEW survey as measured by industry analysts, the more reliable business manager sentiment IFO index showed a slight improvement. And while this week’s ECB decision is unlikely to produce another rate hike, we expect central bank Governor Trichet to maintain the accelerated tightening pace and to once again signal further removal of accommodation at the next meeting in October. Jes Black is the fund manager at Black Flag Capital Partners and Chairman of the firm’s Investment Committee, which oversees research, investment and trading strategies. You can find out more about Jes at BlackFlagForex.com. Prior to organizing the hedge fund he was hired by MG Financial Group to help run their flagship news and analysis department, Forexnews.com. After four years as a senior currency strategist he went on to found FxMoneyTrends.com - a research firm catering to professional traders.

EURUSD Intraday ( 10 Nov )

Breakout happened and yesterday give a new bounce.
See how new pattern of channel created.

It seem the price couldn't break 38.2 and try to break the resistence at 1.5020.
And it will break 1D channel resistence at 1.5062 ?

What do you think?

EURUSD Intraday ( 08 Nov )

EURUSD , get sideway pattern for 2 days ago... I wish this could be good breakout entry point.

USDJPY - Intraday ( 08 Nov )

This week channeling pattern seem unbreakable... the market movement so weak and the last NFP had no enough power to breakdown the support at 89.23.
Now , the asian market open look like disagree with the last movement of NFP.... I wish you have take this chance for profit and wait for better vision of golden ratio.

USD/JPY - monthly-weekly Analyst

USDJPY have strength downtrend pattern when the price had no power to breakthrough into 50% of last swing pattern.The Confirmations to continue the trend make it completely the bouncing time is offer and starting to continue the trend.

EUR/USD Monthly-Weekly analyst

This week , the pattern in consolidate for the next trend journey after uptrend at long week. As we seen in channeling preview the last pattern seem cross through 50% of last swing this give 2 options for next trend "Channeling" or "Ranging".

The last bounce price at 76.4 and yesterday resistence created at 23,6.

Intraday will clearly show when the price breakup the resistence and for middle term it need confirmations at 1.5059.

For me , I waiting for clearly vision and find better confimation candles to entry or try levitation system trading just for my best Risk and Rewards Ratio.