WARNING: This text is a word-for-word transcription of Mac’s daily forex trading video. That means the writing will reflect the way he speaks, if anything seems out of place, please refer to the forex video on the page.
All right, everyone. Well, we are looking at the British Pound on a weekly bar again. Now you remember, we were talking about the possibility of the market making a little dipper push back into this prior area of resistance, and now that price has broken through, what was support now becomes resistance, and we just need to keep our eye on price attempting to push through and, also, the follow‑through. Now, what we might wind up seeing ‑ and I’ve been talking about this for at least a little while ‑ what we might wind up seeing is the market essentially working itself into a bottoming process. And if you remember, I’ve talked about this before. A bottoming process is where the market will make pushes down. Usually, you’ll see whipsaw trades on the bottom. Eventually, the market will kind of make a support area while at the same time pushing and making whipsaws to the upside as well.
Basically, what is going on is the players in the marketplace are all trying to conceal their actions. So if the buyers are coming in, they’re not making it easy. They’re letting people sell it off. They’re pushing the price up and selling against their own position. It’s just a very confusing and chaotic time. And so what we’ve really got to keep in mind here is this is a countertrend trading market which, if you go into the quick start videos, you’ll get the checklist for that type of market.
And until we get a clear move to the downside ‑ let me see if our ‑ we’ve been working on our data here. For some reason our daily bars were kind of screwed up. Let’s pull this down, down. See, it’s still screwed up. So let’s go to the four‑hour bars. When we go to the four‑hour bars, what that will enable us to do is to see over time how this market has been performing.
Now you can see lots of little bars, right? Little ranges, little ranges, market being pressured. So we’ve got this area here we have got to watch out for as far as a support level, and coming up onto the upper side, onto some of these higher prices, we’ve got an area that looks something like that. So let me go ahead and get my square tool. And we’ll draw it again. OK. Right there.
OK. So now we’ve got our support area and our resistance area both. Let me move this up just a tad. There we go. So, how do we trade this? Well, we’ve got a fairly wide area in between, and all we’re expecting is that if the market gets down into or close to this squared‑off area at the bottom, which on the topside ‑ again, this isn’t ‑ we’re not trying to get this into a pinpoint accuracy. But when the market gets down to about 5590, 5600, we need to start looking for signs of a reversal, and when the market starts to push up towards about 5720, 5750 or so, we need to look for signs of a…
Those signs are going to show up in the form of patterns. You can see here on the hourly now we’ve got the very beginnings of a pennant pattern. That’s the compression we need to see for a possible breakout. And we might push up, we might push down. So for now, we’re looking for a short under 5686 to the downside.
You’ve only got about a 30‑pip run before you start to get into support here and over here, so keep that in mind. We might get a very quick run down, and then boom, the market just pops right back up on you. On the upside, though, we need to be looking at going long, 5710. But really, getting above this high point is going to be the most prudent, 5719. But then also keep in mind you’re coming right into resistance.
Like I said, countertrend trading. If you want to play the countertrend trade, then it’s going to be a matter of letting the market trade down, waiting for a little dipper back up towards 5700, and then getting in on the market moving down. For the downside, then, it would be only waiting to go long once the market gets back down, again, to our squared‑off area that we’re looking at on the four‑hour bars.
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