The Eurodollar, as I mentioned in my weekly ranges article, has already made 5 down waves in a zig-zag formation/configuration. It has already gone, “down-up-down-up-down” off the monthly chart and is hovering over the daily 1,000-moving average and weekly 200-moving average, in addition to Gann support levels. This “catch-a-falling-safe” charting method is the same one I applied to the gold low noted in a July weekly ranges article, and that low held until last week.
This reversal signal set is actually in more perfect form than the gold low was, but it is on the 4-hour chart as a pilot or lead for the daily chart or higher time frames. There is no guarantee that this is the low, either, because monthly-chart traders could envision a final wave 6-7, up-down and short here, but, if they do and are wrong, the bounce from short buybacks plus new initiate trades giving up on the short side would be magnanimous to buyers.
I am considering how to play the setup. I like small trades in a defined-risk context. Think or Swim allows sophisticated option spreads such as calendar or diagonal spreads that use this week’s and next week’s options, thus giving the trade ten days to cook/work and defined risk. My Gain Futures account allows some options spreads, too. Interestingly, I placed a $26.00 binary options paper trade on the Nadec using the weekly’s strike prices, but that is using the strike price of the euro/U.S. dollar (EUR/USD) currency pair correlate pair and is for practice. Knowing that a V-bottom reversal is a more-rare event than a messy, choppy, unclear low, a short put spread could allow time decay in a context of some price cooperation at various, sporadic intraweek times.
No advice rendered, and this is an exercise in sharing my charting techniques as much as making a market prediction or trade call, which are much less important than practicing one’s skill set.
The above chart Eurodollar futures reversal chart grid in the 4-hour timeframe. Left charts show the ADX-MACD compression-expansion pattern I highlighted with a triple-CCI study’s fanning upwards in positive divergence. Note that MACD energy bars went green on the low, also. The middle chart shows an impeccable Mass Index reversal signal as the symmetrically-even hump crosses over the 26.50 threshold level. Money Flow Index and OnBalance Volume support the middle chart signal. The Volume Spread Analysis markings over the middle chart low candles are sell signals, so I can’t rule out a down-whoosh in price here. The far right chart is my own work after too many years of charting, I observed this 45-degree halfway-down and final reversal pattern in the Bollinger Band Percent study that forms a perfect 45-degree angle up, crosses over and continues the line. The vertical lines I drew reflect the halfway down price level and the low area, which is here/now in the Euro. Source for Chart: Think or Swim