Not all wicks are created equal - UJ and EU comparison

In the last week both EU and UJ had significant lower wicks on their D charts at identified support levels, typically you'd expect them to go up? In this case EU fell and UJ went up.

Apart from saying the US$ was strong, after the fact, most indicators (other than divergence) would not have alerted to a possible direction change on a D chart and even if they did which trade do you take? Buy one of them perhaps picking the wrong one, buy both and getting a winner and loser? Lots of potential risk for little reward.

I believe price action itself would have alerted the way (we had a 42 pip successful trade buying UJ and did not trade EU down, see the useful link my trades at forex factory).

 

On the D charts, on 21 May both pairs have shown their 2nd significant lower wick in and around proven support/resistance areas. Giving good reason to expect moves up on 22nd May. If we take our general trade analysis viewpoint neither pair has validated a change of D trend, no 3 - 7 day reversal pattern with a close above the 8lwma, RSI either not crossed above signal line or unconvincing, RSI below 50 level, no engulfing 3 bar reversals closes (close above the previous 2 candle closes).

So for us any buys would need our counter trend rules to apply. This revolves around reversal candle patterns at proven support/resistance areas and W pivots.

So the D charts on 21 May suggest a move up. We need to focus on the 1hr price action on 22nd May for buy signals.

EU 22 May, at London open it makes a higher low, following the D candle a strong signal indeed that there is a buy. However 2 doji's then a 3 bar reversal (close below the 2 previous candle closes) follow at the Asian session high 1.3685, see the left arrow down. If we had been buyers this would give us serious concern. Firstly according to our D trend rules we have not got a confirmed change in trend to buys, we remain below our 1hr blue moving average that is angled down and now the 1hr flow up has failed. The higher low did not follow through and gave a lower high/double top. From there the lower high lower low flow continues giving another sell signal on 23 May.

In contrast the move up in UJ to 101.60 on 21 May breaks the lower high lower low flow on 1hr. There is a higher low in the Asian session and from there the higher high higher low flow continues easily seen with price action above the blue moving average which is angled up.

In summary then the 1hr price action that follows the D candle gives good clues on how to trade after the D lower wicks.