(Click on image above to enlarge it.)
The previous Ocean analysis of the 2 week and weekly charts showed us that the week ending 9/26 was of key importance for a setup and possible entry. This discussion of the STX will demonstrate not only its effectiveness as a stop mechanism, but some additional pieces of Ocean information not shown previously.
This is a 2-day chart of the EURUSD, revealing that there was an NMC/NXC combo Zero Hit that formed on 9/23, with a delay bar into 9/25, right in the time window suggested by the weekly and 2 week charts. As you know, the simultaneous NMC/NXC setup is one of the most reliable formations that we advocate as an entry opportunity.
The entry from this time frame occurred on Monday 9/29, in conjunction with the entry from the weekly Ocean setup discussed previously. The entry price on Monday from this timeframe was slightly better than the weekly entry price, and more importantly, the initial risk required to enter the trade could have been reduced by about 25%. This multiple timeframe approach available with the Ocean tools has three main benefits: 1) It increases the likelihood of success, 2) often allows for a better entry price, and 3) usually reduces the initial required risk.
Here we see that on 9/29, the bar that confirmed the three timeframe entry (labeled "2 week, weekly, and 2-day entries"), the STX was violated from above, and quickly began to operate as an effective stop. The STX stayed just above the highs of the bars throughout the cascading decline until being violated on an intra-bar basis on 10/31 (the last bar on the chart).
As we've discussed in other STX examples, when the market appears to be overbought/oversold via the traditional Ocean tools, it's often an indication that moving to a lower time frame will allow us to use the STX to capture more of the available open equity. In this example I've tried to keep the inclusion of other Ocean tools to a minimum to stress the behavior of the STX.
However, towards the end of October, both the NMC and NXC became oversold by exceeding their lower standard deviation and oversold thresholds (labeled "Oversold" in NMC and NXC sub-graphs). This was a suggestion to move to a lower time frame to consult the STX. Let's move to a EURUSD Daily STX chart now to see the STX performance through the decline.
|
