Friday 26 February 2010
We have not been involved with the currencies, of late. Many of the moves
have begun in the overnight trading hours, and the risks of taking a position
during the U.S. trading hours was too much. We still keep an eye on the
currencies, and both the Euro and the Pound are at an interesting juncture.
Today’s focus is on the Pound.
Let us start with a few broadstroke observations. The dotted horizontal line
delineates the half-way retracement of the 2009 low-to-high range, about the
152.75 area. From the 19 January 2009 low to the 3 August 2009 high, there
is a 28 week time frame. Counting 28 weeks down from the high, price made
a low, last week, second bar from the right, and the last bar marks week 29.
It is also worth noting that the 28 week decline that has stopped at the
half-way point is a relative show of strength in that the decline is giving back
less territory than the rally.
We wrote an article on price and time, S & P – Price And Time, [click on
http://bit.ly/9l72AJ]. Gann was the most prominent proponent in discussing
the importance of time and price balancing, and also when time comes into
balance with a previous move. What the Pound is showing is a degree of
symmetry in a time factor, 28 weeks between market turns, and that Time
factor arriving at a 50% retracement level.
Anytime you see separate measures converging, it can often be a turning
point. Nothing is exact, for price is already in week 29, and it has already
marginally exceeded the half-way mark, but it is an alert to watch for a
potential change in price direction.
Also contained in the chart is a trading channel. The upper line is drawn
from the high, connecting to the 16 November 2009 retest high, and
extended forward in time. We have drawn in a Reverse Trend Line, [RTL]
which is parallel and drawn from the intervening low at 12 October 2009,
and extending forward in time. Right now, the Pound is just below this RTL,
and that indicates price is oversold.
Add an oversold condition into the mix of Time and Price, [28 weeks and 50%
retracement], and we have yet another factor converging at potential support.
It is called potential because it has not yet been confirmed, and until it is
confirmed, it is not worth acting upon unproven information. Remember, an
oversold condition is relative. It can become MORE oversold, so relying on
some mechanical indicator can lead to needless risk.
Should the British Pound begin to show signs of holding support and even
some kind of rally, WHERE the starting point of a rally may occur will be in an
area of interest that would be more than just random, for reasons cited.
The Pound is on a “watch alert.”
