For educational purposes I am going to look at a S1B setup on the NZDUSD. I say educational, because even if it was a nice setup, I wouldn’t be able to trade it because it is now less than 36 hours to tonight’s FOMC announcement.
Let’s assume for a minute that there was no FOMC announcement tonight:
- NZDUSD in a S1B environment – according to the STAM dashboard
- The weekly momentum is bullish.
- It is not a strength (10-14 points)/weakness (0-5 points) combination. USD is on 4 and NZD is on 8. However it is possible to trade medium (6-9 points) against weak if the rest of the setup looks great.
- Is the pair in a bullish trend on the D chart? No it is not. On the D chart it is in a sideways pattern. See the chart below.
- There was a retracement of 110 pips (more than the 80 required). The retracement did make a lower low – not a clear break of the trend, but not an ideal sign.
- Following the retracement, there was some bullish price action on the 4H chart – a bullish engulfing candle. And as a bonus this came directly out of a demand zone (my own one and OTA’s zones overlapped). On the 15M and 1H timeframes, price put in clear double bottoms within the zone.
- A further bonus is that, on the primary 4H timeframe, momentum is oversold and there has just been a bullish crossover.
Thus on the whole, there is no trade because:
- There isn’t a clear trend on the D chart
- That aside, the setup would be good enough to overcome the strength/weakness requirement in this instance.