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Confirmed Head And Shoulders Top In The Euro


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On October 23rd, I wrote about a possible head and shoulders top forming on the Euro continuous contract. That week ended with a close below the neckline confirming the pattern. The downside target is 1.1330. Here's an updated continuous chart.

Now for some additional analysis. This downside pattern was confirmed during a time frame which saw an ECB meeting, an FOMC meeting, a new Fed Chair nominee, and an unemployment report. This recent downward move has stayed intact and increased in strength. Looking at the chart of the December futures contract, first we got a double top confirmed late September. Its target was reached last week. Second, the double top neckline has turned from previous support into current resistance. This change of polarity is bearish. Third, off the double top pattern, we have a dominant measured move with a shallow retracement (under 50%). This supports a bearish move. Fourth, we are in the process of possibly creating a second measured move pattern with another shallow retracement. We would need a move below 1.1604 before reaching above 1.1762. Fifth, we are currently trading below the 10, 20, 50, and 100 DMA's. Finally, the Euro tends to see seasonal weakness in November.

However, there are some downside obstacles worth mentioning. First, there's the monthly S1 pivot @ 1.1550. Second, the double top pattern, the dominant MM pattern, and the possible supporting MM pattern together create a Fib projection support zone starting @ 1.1479 and extending down to 1.1165. Inside this zone, you also have the monthly S2 pivot @ 1.1418. Next up, there's the 50 WMA ~ 1.1393, then the 100 WMA ~ 1.1340. The head & shoulders top target is just below @ 1.1330 and gets heavy volume @ price support between 1.1160 and 1.1275.

In summary, this market is shaping up nicely for a downside move into the 1.1165 to 1.1479 zone. I would expect to see a bounce higher from these levels.



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About the author


I'm currently a middle office analyst for a proprietary trading firm with a BS in finance from the University of Illinois (Champaign-Urbana). I have 20+ years of experience in this industry ranging from working on the trading floors of the CME and CBOE, working in back-office operations, managing a clearing department, trading equities for a prop firm, and trading futures for my own account.  I analyze 30 different futures markets on a daily basis in the following sectors: grains, softs, meats, metals, energy, indexes, interest rates, and currencies. All of my market analysis is technical-based and looks for key areas of support and resistance that could either provide solid reward to risk trades or identify areas for profit-taking.

If you are interested in more of my market analysis, then please visit my blog @ http://tbillstrading.blogspot.com/.  I also provide a subscription-based daily newsletter called "Technically Speaking".  Please contact me @ tbills.trading@gmail.com for more information.

Disclaimer: There is a high risk of financial loss in stocks, futures and options trading. Past performance is not necessarily indicative of future results. Nothing in this newsletter is intended to be a trading recommendation for you to buy or sell stocks, futures, or options. 

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