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Flip Flop Market Conditions

Today setup some interesting price action on the EURUSD. After yesterdays climb up to resistance three from the purple line of 1.3642, we were trying to figure out what would happen next. Usually when you see a big move late in the trading day, where most traders are not active, can lead you to think something is happening overall. We watched price climb up to resistance three on three different occasions. This occurred over the course of about 14 hours. Although the move was only 40 to 50 pips, it still showed signs of weakness. Every time the price tried to make a new high, it pulled back. On the third time, price action tried to make the new high and dropped all the way down to the pivot level. This is when we decided to take our put option.

Using redwood options today, we noticed the price was starting to climb up after the push down. Although we got in this put option before the 1.3642 level, we were comfortable with the trade coming back down. Price eventually touched the 1.3642 and immediately dropped on the five-minute candle giving us a nice three pip winner for Tuesday. Although the markets were completely up and then completely down, you never know what might happen when conditions exist like this. Sometimes you have to wait for the US markets to get opened or a news event to trigger price to move in a direction.

Today we are using a different type of chart to explain this trade. Notice that last night, the markets jumped off the 1.3642 level and formed two wicks at resistance three. Over the next few hours price came down to resistance two, only to challenge the highs of that night. Price did make a new high, but pulled back once again. Price then challenged one more time at these highs and failed. Notice how price action dropped off heavily after the failure, moving all the way down past the lows of the day, all the way to the pivot level. Price action did turn back up and this is where we took our retracement trade. Price was coming close to 1.3642 level and we entered our put option. Price went against us for about 2 minutes and then dropped off three pips in our favor. You can see the green arrow is on a 15 minute chart. Usually we have five many candles, but this make the same point. Notice how price is trying to climb back up to the highs of the day once again. It will be interesting to see what happens going forward and how it might play out on the markets. If we do break the highs of the day we could see one 1.37. If not, we may see 1.37 tomorrow. A put option near the highs may be a decent area for a put as well.
Using 15 Minute Charts

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