----- Original Message -----

Sent: Wednesday, December 27, 2006 7:35 PM

Subject: [Divergence] EUR/JPY 15 MINUTE; 12/27/06

This note and attached 15 minute chart continues the discussion regarding the above pair.

The earlier comments regarding the daily period suggested this pair was probably at the top of W3 since price reached Fibonacci expansion (FE) 161.8 the predicted high for W3 in the daily period.

The 15 M chart uses two Fib. retracement and two expansion studies.

Point zero is identified on the left side of the price chart. This is the beginning of W1 as shown on the AO chart. This chart locates all five waves. The price chart is also numbered 1 through 5.

When price closed above W1 high we have confirmation of the beginning of W3. At this time we place the first Fib. expansion study on price. The point of beginning is point zero, the end point is W1 high. The result is 3 Fib. expansion lines the high of which is 161.8. Price ultimately reached the predicted FE 161.8 level and thereafter started corrective W4. At this time we add Fib. retracement study starting at point zero low and ending at price W3 high. This study measures the strength of this up cycle by measuring the amount of retracement observed. In this study price corrected to 61.8 which suggests the up cycle is weak.

The W3 high made a double top at the FE 161.8 level. At this time all three indicators traced classic negative divergences prior to commencement of W4. At W4 low only RSI traced a classic positive divergence while price formed a double bottom. Subsequently W5 commenced, the high of which was approximately equal to W3 high. This suggested that W3 was probably an extended W3, thus accounting for the truncated W5 (failure of W5 to close higher than W3).

W3 and W5 highs are virtually identical and again produce classic negative divergences with all three indicators.

Starting at W5 high Fib. expansion study begins moving to A low. The result is three lines predicting FE 161.8 price low below 155.35.

All three indicators trace reverse negative divergences as shown on the chart. A/D continues to trace RNDs as indicated while the other indicators are blind to these events. A/D is valuable because it is not range bound like RSI and secondly because it is a lagging indicator. As a lagging indicator A/D continues to make higher highs while price falls thus identifying reverse divergences. This is an important feature at reversal points.

The shorter 15M chart price and indicators appearance is likely to appear similar in larger time periods and in particular the daily. In the daily period we may anticipate that price will retest 156.35 high following W4 retracement. This high will likely be a truncated W5 high.

The last Fib. retracement study begins at W5 high and moves to price low, 155.40. The most recent retracement of the down cycle is between 38.2 and 50.0 which suggests the down cycle is medium strong and should easily exceed 155.40.

Weekly and monthly chats are consistent with this study, which means those periods should also be examined incident to a complete analysis.

Loren

__._,_.___

Messages in this topic (1) Reply (via web post) | Start a new topic

For archives of Experts and Indicators from the MetaTrader Experts and Indicators Group
See http://www.lightpatch.com/forex

Change settings via the Web (Yahoo! ID required)
Change settings via email: Switch delivery to Daily Digest | Switch format to Traditional
Visit Your Group | Yahoo! Groups Terms of Use | Unsubscribe