Can't handle the heat? Get out the kitchen.
'A pullback is a temporary reversal in the price action of an asset or security before a continuation of a larger trend.'
When you're trading with a larger trend, lower timeframe pullbacks are inevitable. You will always hear us say the phrase, 'a run on one timeframe is a trend on another.'
As emotionally unsettling as they can be, if you're in this for the long term, then you need to fully accept that pullbacks are a big part of making consistent profit. Whether you're a swing, hybrid, or day trader, pullbacks on lower timeframes will develop the run you are attempting to catch, so learn to accept them.
It's crucial to understand the difference between a pullback and a trend change. Without developing this distinction, you'll have no consistency in where you target, where you put your stop loss or how you manage an open position.
If at first it doesn't work, try, try again.
Last week, we shared a textbook setup on the currency pair AUDUSD. Fantastic higher timeframes, with multiple possible entries that developed. After initially moving in our direction price reversed against us and went on to form a new high.
As we entered this week, the higher timeframes still showed a very clear trend, and a daily bearish wave three continuation was firm in our main watchlist.
Several opportunities developed and offered clean entries. We are now running large profits with a good portion locked in, protected by our stop loss. We expect this bearish momentum to continue next week, playing out the deeper weekly pullback that is needed.
AUDCAD also offered several similar entries that we took advantage of. The bearish momentum flew price in our favour, and if you haven't already hit your profit target, you will have closed the week very close.
JPY: this week offered several bullish Yen opportunities, as we covered off in last week's newsletter. We are currently in several bullish Yen trades and expect the bullish momentum to continue next week, seeing the daily wave 3's play out.
GBP: with a failure to meet a deal with the EU for Brexit by the deadline set by Boris of 15th October 2020, we expect bearish momentum to continue for the pound. Several weekly charts have confirmed double tops and daily breakdowns.
USD: strength seems on the cards for the USD. We saw the FXCM Dollar Index chart end the week with printing a higher low on the daily, and closing above the daily 50EMA. On AUDUSD and EURUSD, we saw lower highs develop, confirming the daily trend change and the next wave of
bullish dollar momentum.
Equity tops printed?
The leading US indices are painting us a picture of what is likely to follow next. This week we have seen both the S&P500 and DJI rally back to recent highs. We have closed the week off nearing on double tops on the daily timeframe and doji candlesticks on the weekly, showing deceleration at recent highs.
If price continues to decelerate at these levels next week and confirm the daily double tops, the technical picture will be painting that it could be time for the next equities sell-off. Several other sector indexes are showing similar double top patterns, including but not limited to; Technology (XLK), Financials (XLF), Consumer (XLP), Healthcare (XLV).
Last week we spoke of four tech giants, Amazon, Microsoft, Google, and Shopify. The higher timeframes are still decelerating, so keep an eye out on breakdowns entering into next week.
Click here to access last week's Insights episode (Big Tech on Lookout) - as it's still highly relevant to where we're at today. Another new episode is coming up Oct 23rd with our founder, Irek.
Member Interviews - Alan Lowe!
We have now launched our member interview section on www.tradingmasterclass.com/interviews.
As a team, our number one principle is 'collaboration over competition'. We strongly believe working together, sharing knowledge, experience, wins, and losses will lead us to the most optimal result.
This principle stands true for our members as well. We believe hearing the stories of others can only be beneficial to all, and because of all of you, we are lucky enough to have a platform to share these incredible journeys. Make sure to go through all of the interviews as they are not only inspirational, but each is also unique.
One of our most recent features is none other than Alan Lowe. Alan opens up and gives us insight into his journey so far, sharing all his highs, lows, and everything in between. The depth that Alan goes into will be valuable for all to read and his story is something to use as motivation!
Coming up this week:
Monday, October 19, 2020 @ 1pm PT
Market Update - lead by Jonny Godfrey
Tuesday, October 20, 2020 @ 1pm PT
TMC Club Relaunch - lead by Irek Piekarski
Wednesday, October 21, 2020 @ 1pm PT
Market Update - lead by Jonny Godfrey
Friday, October 23, 2020 @ 1pm PT
Insights - lead by Irek Piekarski
All the best for the week ahead - we'll see you in the club!
Jonny Godfrey & the TMC Team
Ps. 1.5 hours of fresh video content was published this past Friday - head over to the Chronicles section of your members' dashboard for access.