Optimist: [op-tuh-miz-t]; noun An individual who begins a new diet the day before Thanksgiving.
Two years ago I wrote (and last year I quoted) my Monday forex article for SFO magazine saying:
“While markets likely will lack normal liquidity, that isn’t to say there won’t be significant movement. Last year [2010] the euro/dollar (EUR/USD) gave us a 260 pip candle the day before thanksgiving, while Black Friday 2009 gave us a candle with a 186 pip range.”
Two years ago the euro sold off nearly a 200 pip the day before Thanksgiving, took a breather and then experienced an additional 115 pip selloff the day after. And last year we saw a convincing 160 pip directional move on the long side in the euro Thanksgiving day and the day after.
The moral of the story is while many institutional traders are out eating themselves into food comas this week, historically we have experienced significant directional movement the day before and after Thanksgiving.
Last year, we saw what turned into a fairly significant bull flag break Thanksgiving week. While inter day moves can be choppy in low liquidity situations, this isn’t to say larger daily moves don’t still respect technical levels.
What does that mean for us?
First thing is: I’ve been writing articles long enough to quote myself. But second, the euro appears to again be consolidating on the daily / 4 hour chart. This most recent move long from about 1.329 appears choppy and countertrend. (Be careful because flags and consolidation patterns are a little difficult to read in forex as a counter trend consolidation pattern often turns into a full on trend reversal, but you read a pattern as it develops and still trade entries off levels.)
Currently however, we’ve stopped on the 50% Fib retracement of the prior daily selloff. We are confined by the 50 day moving average on the north and the 100 day moving average on the south. A convincing break of either should give the astute trader an indication of future direction. For the week, I would be careful finding myself buying the tops before the euro gives up its next direction. If we break the 50 day moving average, look for the .618 retracement to provide the next level of resistance. On the down side, if we get a break of the 100 day moving average, look for the prior lows around 1.329 then the fib extension and 200 day moving average below as the trade develops.
If the past is any guide for the future, volatility should pick up either the day before or after Thanksgiving.
Happy Turkey day, I’m going to go hit the gym!
