Not much of a correction in the EURUSD, huh?
The EURUSD has moved below the 1.3000 with more conviction after doing what it should have done on the correction. The high water mark on the correction could only get to 1.3028 well below the “Correction Zone” outlined in the previous post (SEE: https://www.forexlive.com/blog/2014/09/04/eurusd-bounces-after-a-quick-look-below-1-3000/ ). Sellers remained in FIRM control and the break back below the 1.2995-1.3000 level triggered additional stops. The trend move remains in place. The sellers are in charge. The buyers are NERVOUS and hoping for a rebound.
EURUSD’s correction off the 1.3000 support was weak and sellers came back in.
What now?
When good support holds (within 5 pips at the 1.3000 level), corrects and then breaks, that gives the shorts the ability to bring down risk defining levels. In the chart below, I moved the Fibo retracement to the high price AFTER the initial plunge (at 1.30516) and extended to the new low (see chart below). The reason is, the sellers have proven they want to be short by not losing control. They kept the price fell below the “Correction Zone” from the first wave lower.
Now we have a second wave – those traders who got in after the initial plunge. Those traders are proving that they want to sell, by pushing to new lows. They are in control and happy to be short, sell new lows and force buyers to prove they can take back some control.
Who is not in control? Most buyers today are not in control. Most buyers today are losing money (or losing the ability to make more money because they took profit).
EURUSD 5 minute. Measure the second wave of sellers.
So now, lets test to see if buyers can move the price above the 38.2-50% of the LAST WAVE ONLY. Let’s define a risk level against the 38.2-50% of the last leg down from 1.30516. If the buyers cannot get the price above this area, are they taking back any control. NO!
If the price corrects above that level, it does not mean the buyers are fully in control, it just means they won a small battle. The market has found a neutral level where buyers and sellers are more balanced (for now).
However, if on a correction the 1.2992 to 1.3003 level finds sellers from traders who are thankful for the opportunity to get out of the longs (or new sellers who just want to be short(er)), then it shows the sellers remain firmly in control (and any longs are even more nervous).
It is about defining risk and defining control as well. If you know both, you are in control too and you know where the pain is and where the happy faces are….