BUY EURUSD: “PRZ” FORMED UNDER FIBONACCI RETRACMENT-EXPANSION CLUSTER (MISSED TRADE)

I longed this setup twice and none seem to be fruitful. The first went bad (though I am confident I did everything right). However, about the second, I didn’t do wrong by much – obviously, I did wrong enough to miss a smooth rally. I was consumed with setting tight stop (35 pips isn’t so tight though). I could have loosened it a bit since my plan can accommodate 40-45 pips SL. My entry and exit plans  were on the spot as price rallied soon after it traded inside the “PRZ”; and declined after testing a Fibonacci retracement-retracment cluster (also formed bearish divergence).

It’s an uptrend on 4-hour time frame; I did good to spot a Fibonacci retracement-expansion setup.  Fibonacci retracement tool was drawn from swing “1” to swing “2”; and Fibonacci expansion tool was drawn from swing “2” to “3” and then to “4”. The region covered by the green lines is the resulting Fibonacci retracement-expansion cluster.

On 1-hour time frame, Harmonic pattern formed. It was really small but it was more than enough. Fibonacci retracement tool was drawn from swing “X” to swing “A”; another was drawn from swing “B” to swing “A”; and a third Fibonacci retracement tool was drawn from swing “B” to swing “C”. The resulting “Potential Reversal Zone” is the region covered by the red lines.

Buy limit was placed at 1.0857, and SL at placed at 1.0822 (35 pips - below the most recent swing low) and Target was placed 1.0992 (133 pips - trend line support from 4-hour).

Thick trend line and horizontal line at 1.0935 are places where price could bounce. Also, Fibonacci retracement tools were drawn from swing “A” to “D” and another was drawn from swing “C” to swing “D”. The resulting clusters are possible prices that could bounce price.

 

EVENTUALLY

Sadly, price didn’t pick my order as it missed it by a few pips and rallied higher. I closed the order after this development and monitor the setup however.

As it turned out, price made it past the thin trend line but couldn’t make it past the last Fibonacci retracement-retracement cluster as it formed a Hanging Man (and bearish divergence) soon after testing it.  In line with my exit rule, I would have exited at this point and it would have been priceless as declined heavily after the bounce.

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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.