Clear Doji Sell Signal for US Dollar Index

Jun 10, 2009: 1:07 AM CST

Are lower prices ahead for the US Dollar Index?  Let’s look at a possible powerful sell-signal example as price has formed a classic retracement into resistance, formed a doji candle, and plunged lower off this signal.

US Dollar Index Daily:

I’ve mentioned a few times on the blog in the past regarding the Bear Flag setting up and completing on the daily chart.

We’ve gotten an expected bounce off the price projection lows of the flag (price slightly exceeded its downside target actually).

The bounce was a sharp, quick reaction back to the 20 EMA which formed a long-legged reversal gravestone doji candle which triggered an aggressive short-sell signal.

Today, we see the downward inflection off this clear sell signal and odds now favor a test of the lows in June or below.

The larger trend is down, the moving average structure is in the most bearish position possible… but there is a positive momentum divergence so you probably should take that into consideration as well (meaning, don’t expect price to go screaming down off this level).

Let’s follow this pattern out and perhaps use it as an educational example of how trend, candles, and moving averages combine to set-up powerful, low-risk opportunities.

Corey Rosenbloom, CMT
Afraid to Trade.com

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7 Comments

7 Responses to “Clear Doji Sell Signal for US Dollar Index”

  1. dumbpainter Says:

    getting oil shorts ready…

  2. Corey Rosenbloom, CMT Says:

    A retest of the lows would be the minimum expectation.

    There's also the possibility that we're in a fractal 4th wave up awaiting a fractal 5th wave down to new lows.

    But, crude at $70 might prove irresistible to probe a short in there perhaps. We'll see.

  3. Bob Says:

    Love the doji! A strong indicator to a reversal; possibly a start to a fifth fractal down In USD price(???) does look possible.

    Viewing the past price action, the chart landscape points to resistance levels around $78.40; $76; $72.

    The US Dollar is THE leading global indicator; One could argue everything is tied to the US currency, some moving in direct concert to, others moving inversly to the dollar.

    Inverse relationship – downward price action of the US dollar pairs well with the observation of the bull flag waving on the canadian currency price chart (a recent blog). Affirmation of a probable price move up there. Are the EW counts similar there too??? I'd bet they might be.

    Direct relationship – Potash, a Canadian company you recently blogged about, generates a significant amount of revenue from US sales ( in US Dollars) and has been following the US dollar down. For POT, currency conversion will be painful and negatively impact balance sheet revenues. This will be an added burden and drag on price.

    Recognizing such relationships and how they influence other stocks, currencies or sectors can be a powerful trading advantage. Looks like you've already keyed in on this!

    Cheers!

  4. SteveH Says:

    Probably being a tad simplistic here, but a bit of sideways action instead of a retest could set up an inverse HNS.

  5. Corey Rosenbloom, CMT Says:

    A retest of the lows would be the minimum expectation.

    There's also the possibility that we're in a fractal 4th wave up awaiting a fractal 5th wave down to new lows.

    But, crude at $70 might prove irresistible to probe a short in there perhaps. We'll see.

  6. Bob Says:

    Love the doji! A strong indicator to a reversal; possibly a start to a fifth fractal down In USD price(???) does look possible.

    Viewing the past price action, the chart landscape points to resistance levels around $78.40; $76; $72.

    The US Dollar is THE leading global indicator; One could argue everything is tied to the US currency, some moving in direct concert to, others moving inversly to the dollar.

    Inverse relationship – downward price action of the US dollar pairs well with the observation of the bull flag waving on the canadian currency price chart (a recent blog). Affirmation of a probable price move up there. Are the EW counts similar there too??? I'd bet they might be.

    Direct relationship – Potash, a Canadian company you recently blogged about, generates a significant amount of revenue from US sales ( in US Dollars) and has been following the US dollar down. For POT, currency conversion will be painful and negatively impact balance sheet revenues. This will be an added burden and drag on price.

    Recognizing such relationships and how they influence other stocks, currencies or sectors can be a powerful trading advantage. Looks like you've already keyed in on this!

    Cheers!

  7. SteveH Says:

    Probably being a tad simplistic here, but a bit of sideways action instead of a retest could set up an inverse HNS.