How bizzare? Is it? Let me explain.

Author: Greg Michalowski | Category: Education

What I really mean when I say....

In a post, toward the close yesterday, I was reviewing  some of the major pairs, I looked at the AUDUSD and noted that the 0.7500 had been a technical stall point.  Specifically, I wrote:

"The AUD was the strongest currency in trading today ahead of the RBA rate decision.  This is the 2nd day in a row with decent upside gains.  The high price for the AUDUSD peaked at 0.74975 - just short of the 0.7500 level.  Natural resistance, and a trend line on the daily chart helped stalled the pair (see chart above)."  

I then followed with the following line:

"If the AUDUSD is going higher, the price needs to get and stay above the 0.7500 level."

In the comment section, Marcus wrote:

I often use that terminology in my analysis.  You may wonder...""Isn't that obvious Greg?"  

The answer is "Yes.  Of course, the price has to get and STAY above 0.7500 to get to 0.7501, 0.7502, 0.7510, and 0.7600".  

However, the true meaning of that phrase is to emphasize the importance of that level. It is a key level because it is a natural price level, and the trend line on the daily chart cut across there.  It also was a high for the day.  

By my stressing "the price needs to get and stay above the level", is my way of putting in the traders mind, that if it does not stay above on a break above, don't hang around.  It's not really bullish.  In fact it can be more bearish on the failure.  

In trading (and in my analysis), there are technical levels that are more important than others.   If those levels are broken, they need to stay above to legitimize the break.  

Bizarre analysis?  I understand why you might think that. However, hopefully I explained what I really mean... 

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