LONG: FIBONACCI RETRACEMENT AND EXPANSION CLUSTER ON EURUSD (Closed)

The region covered by the green horizontal lines is the Potential Reversal Zone (PRZ) formed by the combination Fibonacci retracement and Fibonacci Expansion tools. Since precision is invaluable if one is a fan of tight Stop Loss (though, I sometimes feel like I could set a tighter Stop), trend line (thick black trend line) was drawn using the close of candle sticks from 4-Hour time frame; and another was drawn (thin black trend line) using the close of candle sticks from 1-Hour time frame. A confluence between the cluster and the trend lines is a best spot to go long.

A long legged doji formed the confluence which is good enough reason to go Long. A buy order was triggered at 1.1184 with a Stop Loss at 1.1149 ( 34 pips) below a swing low which I profess is a safe haven since price would have to work its way through the trend lines and the cluster to get to it; and Target at 1.1321 (138 pips). A trailing stop --34 pips -- was set.Liquidity has dried out in this pair owing to that it is past its session, so I expect price to break downward into the PRZ after which it may begin to rally.

Price level 1.12064 had held price different times in the past and could serve as a resistance now. Likewise, 4-Hour trend line and 1-Hour trend line (thick and thin Indigo lines respectively) could act as resistance.

EVENTUALLY

As I predicted, price dipped into the Potential Reversal Zone and as a result formed a bullish divergence and rallied. It broke the 1.1204 resistance level and came back for a retest indicating that a resistance had turned into a support. I flawed somewhat in this trade in that I completely omitted the Fibonacci Retracement tools in my analysis while considering levels that could bounce price against me -- perhaps a testament to that I am yet to get back into rhythm after a lengthy break (though I doubt that).

When price bounced off the trend line from 4-Hour time frame (thick indigo line), the bounce was hindered by support level at 1.1204 after which price resumed its upward move. When it tested the 1-Hour trend line (thin indigo line), Dojis formed. That spot is a confluence between the Fibonacci cluster and the 1-Hour trend. I was wary of that position. But I had to wait for formation of a Market Structure High (MSH), so I waited (in accordance to my Exit Rules).
It never did form. After, price broke through the trend line and aimed higher. I exited the trade after Stochastic signaled a bearish divergence. This is in line with my third Exit Rule; and it proved priceless owing to that price declined heavily as if pulled by gravity.

Profit/Loss: + 77 pips

About Moshow

Oseni Moshood ( Moshow) is a physicist, a blogger and a spot trader with years of experience. He trades only price actions partly because he thinks Economics is boring; or, probably because he failed Economics; and he loves fine artistic works.